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RAPAPORT... Signet reported that revenue rose 7.7 percent year on year to $771.4 million for the third quarter that ended on November 2. Comparable-store sales increased 3.2 percent. Cost of sales jumped 10.7 percent to $532.2 million and gross margin as a percentage of sales fell slightly to 31 percent from 32.9 percent. Signet's profit fell 3.7 percent to $33.6 million. Inventory surged 17.7 percent to $1.645 billion in preparation for the Christmas season. Signet's guidance for the fourth quarter shows marginal same-store sales increases of low- to mid-single digits and gross margin in line with current rates. Signet reported that U.S. division revenue improved 9.8 percent year on year to $632.1 million, while same-store sales increased 4.2 percent. The jeweler observed strong sales for the bridal, colored diamonds and watch categories. Kay and Jared experienced increases in both transaction counts and the average transaction value and ecommerce sales rose 12 percent to $16.2 million.  In the U.K., where transactions occurred in pound sterling, store revenue and same-store sales both declined 0.9 percent to $139.3 million. Bridal and diamond sales increased in the third quarter, according to Signet, but the average transaction value declined. Ecommerce sales surged 29 percent to $6.6 million. Signet confirmed that including the sales results for Ultra Stores decreased the consolidated gross margin rate by 60 basis points in the third quarter and the whole U.S. gross margin rate by 80 basis points. Ultra's gross margin is lower than the core business due to lower store productivity and the impact of its integration into the larger company. The lower gross margin rate was also attributed to a gross merchandise margin rate decline of 100 basis points, 60 basis points of which were attributed to Ultra, with the remaining decrease due primarily to the net impact of gold hedge losses associated with the decline in gold prices earlier this year. In addition, lower gold spot prices reduced the recovery on trade-ins and inventory by 40 basis points. Mike Barnes, Signet's CEO, said, "We are pleased with our third-quarter results, led by a Kay same-store sales increase of 5.8 percent. I would like to thank all Signet associates for their contributions. We are excited about our recently announced acquisition of a diamond polishing factory in Gaborone, Botswana. This acquisition will enable us to secure additional, reliable and consistent supplies of diamonds for our customers. It will also help us to achieve further efficiencies in the supply chain, while we continue to strengthen our relationships with our existing vendors. We believe we are well-prepared for the holiday season. Our talented sales teams are well-trained and ready to provide customers with an outstanding shopping experience. Our compelling merchandise assortments will be supported by new, innovative advertising campaigns together with a variety of technology initiatives. Collectively, these competitive strengths have us well positioned for the fourth quarter."
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