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Signet Jewelers 3Q Earnings Miss Expectations

Nov 24, 2015 9:34 AM   By Rapaport News
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RAPAPORT... Signet Jewelers reported that third-quarter earnings were below expectations as sales were driven by lower-margin Kay stores and lower prices at Zales.

Mark Light, Signet’s chief executive officer, noted that earnings were affected by a modest margin impact due to a shift in its sales mix from the higher-value Jared stores to Kay. The company registered adjusted earnings of 33 cents per share for the three months that ended October 31, compared to 21 cents a year ago. However, that was below its guidance given in August of 36 to 40 cents per share.

Signet shares fell by more than 4 percent in early morning trade in New York.

The company expects earnings of $3.4 to $3.6 per share in the all-important fourth quarter, which would signal growth of 11 percent to 18 percent from last year. It also expects same-store sales growth of 3.5 percent to 5 percent in the current period.

The company expects to see some benefit to its margins from lower gold prices during the fourth quarter. Opportunities in the diamond market lie in the higher quality VS goods which have declined due to weaker demand in the Far East, but which Signet doesn’t use at this point, Light explained. “We’re more focused on the lower quality I1-I2 clarity polished,” he added.

Light said he’s encouraged by the start made by Jared and Zale in November driven by its “innovative merchandising and marketing programs” implemented for the holiday season. He added that the Ever Us two-stone ring campaign launched in October has been well received so far.

Light reported that sales growth in the third quarter were driven by Signet’s branded bridal lines. Group sales rose 3.3 percent to $1.22 billion in the third quarter with same-store sales up 3.3 percent compared to 4.2 percent growth registered in the same three-month period last year. Net income rose to $15 million from a loss of $1.3 million a year earlier.

The Sterling division, which consists of Kay and Jared and the regional brands, saw sales rise 5.9 percent to $733.5 million. Sales at Kay increased 9 percent to $462.9 million with same-store sales up 7 percent, and sales at Jared rose 2.2 percent to $232.5 million while same-store sales fell 2.7 percent.

Branded diamond and select diamond jewelry performed well across all of Sterling’s store brands, the company reported. Light singled out the Forever Diamond, Neil Lane and Vera Wang as its strongest bridal lines, while diamond solitaire earrings and bracelets were strong in fashion jewelry. The average transaction price rose 3 percent while the number of transactions slipped 0.7 percent during the quarter.

Sales at Signet’s Zale division fell by 0.5 percent to $329.9 million although same-store sales grew 2.6 percent. The average price achieved across Zale’s jewelry division dropped 2.9 percent and the number of transactions increased 2.9 percent. Sales across its H. Samuel and Ernest Jones stores in the UK dropped 1 percent to $149.4 million but rose 5 percent at constant exchange rates, while same-store sales increased by 4.9 percent.

Signet reported that its e-commerce sales grew 12.7 percent to $50.5 million.

Light stressed that the third quarter is the company’s smallest quarter and it was focused on preparing for the holiday season.

"We are currently experiencing an encouraging start to November particularly at Jared and Zales,” Light said. “The implementation of store operations initiatives in the third quarter combined with significant investment in our recently launched innovative merchandising and marketing programs have positioned Signet for a strong fourth quarter.”
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Tags: diamonds, Jared, Jewelry, Kay Jewelers, Rapaport, Rapaport News, Signet, sterling, zales
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