Asteria Colored Diamonds

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Leibish & Co

Thursday, August 25, 2011

Signet Q2 Same Store Sales Up 10%, Total Sales Up 11%

Kay Jewelers brought in $367.5 million in the second quarter for its parent company, Signet Jewelers.

Signet Jewelers Ltd., the world’s largest specialty retail jeweler, reported that year-over-year same store sales increased 9.9 percent and total sales rose 10.8 percent to $797.6 million for the second quarter of 2011. Total income before taxes jumped 82.4 percent to $99.8 million for the period ended July 30. Net income for the period increased 71.3 percent to $66.3 million.

The Hamilton, Bermuda-based company owns some of the largest jewelry retail chains in the U.S. and the U.K. that total 1,850 stores. Its shares trade on the New York Stock Exchange.

“I am pleased to announce record results for the second quarter reflecting the ongoing success of our strategies to present differentiated and sought-after product ranges, develop compelling branded offerings, provide a superior in-store customer experience and execute inspiring marketing campaigns,” said Mike Barnes, Signet CEO. “This powerful combination drove a … 430 basis point increase in operating margin and a 68.9 percent rise in diluted earnings per share as compared to the second quarter last year. During the quarter, our branded jewelry initiatives drove strong US same store sales performance and assisted our UK division’s sales to outperform a challenging retail marketplace. I would like to thank all team members at Signet who contributed to this great performance.”

In the U.S., which accounted for 80.6 percent of group sales in the second quarter, sales rose 11.3 percent to $643 million. Same store sales for the period increased 12.2 percent. In the U.S., Signet owns 1,314 stores that include Kay Jewelers, Jared The Galleria Of Jewelry, and a number of regional names. Kay Jewelers led the way with $367.5 million in the quarter. It’s average selling price per unit was $391. The more high-end Jared chain reported total sales of $213.8 million, with an average selling price per unit of $834.

In the U.K., which accounted for 19.4 percent of total sales for the second quarter, sales were basically flat, rising 0.1 percent to $154.6 million at constant exchange rates. At reported rates, sales increased 8.8 percent. Same store sales rose 1.4 percent for the period. In the U.K., Signet owns 536 stores, including the H.Samuel, Ernest Jones and Leslie Davis jewelry retail chains. H.Samuel reported $81.4 million for the period and an average unit selling price of 62 pounds ($101.50) sterling. Ernest Jones had sales of $73.2 million and an average unit selling price of 276 pounds ($451.60).

In a conference call Thursday morning, Barnes said website sales increased 50 percent and that it will be upgrading its websites prior to the holiday season. "That’s where the world is going now and we will focus on investing in it in both in the U.K. and the U.S. markets."

Free cash flow for the period was $153.8 million (26 weeks ended July 31, 2010: $240.2 million); non-GAAP measure, see Note 3. Free cash flow for Fiscal 2012 is estimated at $175 million to $225 million, an increase from the previous estimate of $150 million to $200 million. At July 30, 2011, Signet had no long term debt (July 31, 2010: $229.1 million) and cash and cash equivalents of $440.2 million (July 31, 2010: $485.4 million).

In the second quarter, Signet’s gross margin increased 24.3 percent to $294.8 million. Signet’s gross margin rate increased by 400 basis points to 37 percent, compared with a gross margin rate of 33 percent for the second quarter of 2010. The U.S. division’s gross merchandise margin was up 110 basis points, benefiting from selective price increases and reduced discounting, which more than offset higher commodity costs. The U.K. division’s gross merchandise margin declined by 40 basis points, with the impact of an increase in the cost of commodities and a higher value added tax rate, being largely offset by a number of price increases.