Signet’s UK sales fall 0.9% in third quarter

Signet Jewelers, owner of watch retail chains H Samuel, Ernest Jones and Leslie Davis, continues to report declines in the UK market, having today announced its financial results for the 13 weeks to November 2.

The US-based company’s Q3 results outline total UK sales of US$139.3 million (£86.1m), down 0.9% compared to 2012’s figure of US$140.6 million (£86.9m).

H Samuel same store sales were up 2.2% at US$73.1 million (£45.1m), while Ernest Jones, incorporating Leslie Davies store sales, were up 0.6% to US$66.2 million (£40.9m).

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Same store UK sales decreased 0.9%. The number of store transactions increased, however the average transaction value declined.

While Signet said that Ernest Jones is still feeling the reverberrations from Rolex being offered in fewer stores, it added that non-Rolex watch sales at Ernest Jones were strong.

Both H Samuel and Ernest Jones e-commerce sales increased, hitting US$6.6 million (£4.07m) in Q3 compared to US$5.1 million (£3.15m) in third quarter fiscal 2013, up 29.4%.

As of November 2, Signet was operating 496 stores in the UK, having closed 16 stores and opened one since February 2 this year.

Signet Q3 highlights
Signet Group’s total US and UK sales were US$771.4 million (£476m), up 7.7% compared to US$716.2 million (£442m) in the 13 weeks ended October 27, 2012.

Group same store sales increased 3.2% compared to an increase of 1.4% in the third quarter fiscal 2013 and overall e-commerce sales were US$22.8 million (£14.1m), up 6.3% compared to Q3 2012.

In the US division, total sales were US$632.1 million (£390.5m), up 9.8% compared to the same period last year.

Same store US sales increased 4.2% compared to an increase of 1.2% in the third quarter fiscal 2013. In the US, Signet’s sales increase was driven by particular strength in bridal, coloured diamonds and watches.

Its Kay and Jared stores experienced increases in both transaction counts and average transaction value, and e-commerce sales in the US increased 11.7%.

In the UK, gross margin dollars decreased US$2.2 million (£1.36m), primarily reflecting the impact of decreased sales and a gross margin rate decrease of 140 basis points. The lower gross margin rate was primarily attributed to a 60 basis point decrease in the gross merchandise margin rate due to increased promotional sales and a 50 basis point decline due to lower recovery rates on inventory, with the remaining decrease primarily due to deleverage of expenses on lower sales.

The UK division’s operating loss was US$4.4 million (£2.72m), an improvement of US$1.1 million compared to Q3 2012. Operating margin for the UK division increased by 70 basis points.

Signet chief executive Mike Barnes said of the results: "We are pleased with our third quarter results, led by a Kay same store sales increase of 5.8%. 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."

Signet 2014 projections
For the fourth quarter, the company expects same store sales to increase in the low-to-mid single-digit range and gross margin is expected to be relatively consistent with the prior year.

For the full Fiscal 2014 year, Signet forecasts approximately 80.7 million weighted average common shares outstanding and capital expenditures in the range of US$180 million to US$185 million, which includes costs related to the opening of 75 to 85 new Kay and Jared stores in the US, store remodelling, development of Signet’s digital and information technology infrastructure, and outlet channel development.

Signet’s Q2 figures for the 13 weeks ending July 28 revealed a sluggish market for Signet’s operations in the UK, total sales of US$139 million (£89.6m at then exchange rates) in the second quarter, down 8.5% compared to Q2 2012.

 

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