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Signet's Sales Rise 7%, Earnings Jump 49%

Retailer Increases Prices, Tightens U.S. Debt

Mar 22, 2012 8:11 AM   By Jeff Miller
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RAPAPORT... Signet's sales during its fourth-fiscal quarter, which included Christmas season and ended on January 28, 2011, rose 6.5 percent year on year to $1.35 billion while cost of sales increased 5.1 percent to $790.6 million. U.S. division same-store sales rose 8.3 percent, led by a 9.1 percent rate of growth at Kay Jewelers. U.K. comparable-store sales improved 1.2 percent in local currency.

Gross margin increased 80 basis points to 41.6 percent in large part due to an improved U.S. debt ratio and price hikes due to higher commodity prices.  Net earnings for the quarter jumped 48.6 percent to $156.6 million,  or $1.79 per diluted share. signet jared kay

Fiscal-year 2012 revenue rose 9.1 percent year on year to $3.75 billion and cost of sales increased 5.3 percent to $2.3 billion. U.S. division same-store sales rose 11.1 percent, led by a 12.1 percent increase at Jared. U.K. same-store sales were up 0.9 percent, but overall sales were flat in terms of local currency.

Gross margin increased by 210 basis points to 38.3 percent as Signet leveraged store occupancy costs and improved U.S. debt. Price increases offset the impact of higher precious metals and diamond prices. Net earnings surged 62 percent to $324.4 million or $3.73 per diluted share.

In review of Signet's fiscal-year, the company observed that branded jewelry and exclusive products drove sales. In particular, the retailer stated that Neil Lane Bridal, Charmed Memories and Tolkowsky Diamond brands performed very well. U.S. division sales were also higher due to "compelling merchandising initiatives" as well as higher prices. Furthermore, its U.S. net bad debt to sales ratio fell to 3.4 percent from 4.2 percent in fiscal-year 2011. Signet's retail brands also increased customer financing to 56.1 percent from 54.2 percent in 2011. Signet closed 24 stores during the year and opened 25 new locations.

In the U.K., branded jewelry along with fashion watches and bridal performed well during the period. Signet closed three H.Samuel and six Ernest Jones locations during the year and opened two of each brand stores, leaving a net closure of five stores.

Looking ahead to fiscal-year 2013, Signet vowed to develop and train employees to consistently enhance the retail experience for customers; grow and develop new and existing brands and categories; drive competitive strengths and infrastructure to reduce costs; optimize the capital structure to manage risk and increase market share while maximizing sustainable profit levels.

Signet expects to maintain its gross margin rate by raising prices to offset higher product costs coupled with  improving store operating efficiencies. Signet expects to spend $145 million to $165 million in the coming year to open 45 new stores, remodel and/or relocate 110 stores and to revamp its information systems in order to support in-store sales technology and global IT operations.

Signet's chief executive, Mike Barnes, said, ''Our long term competitive strengths continued to drive the superior performance achieved during the year. Creating an outstanding customer experience, the strength of our merchandise, our continued advertising investment in support of our store concepts and merchandise brands, and, in the U.S., our customer finance programs, all work together to effectively support our customers’ jewelry purchases.''

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Tags: earnings, financial, Jeff Miller, jewellers, results, revenue, Shareholders, Signet
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