US performance and James Allen acquisition boost Signet’s Q2 financial report

Signet had a positive second quarter according to its latest financial results, with same-store sales rising by 1.7%, and sales up 1.5% to $1.42 billion.

In its Q2 report for the 13 weeks ending August 4, 2018, the largest retailer of diamond jewelry which operates 3,500 stores around the world, saw sales rise after a positive same-stores performance in North America and the acquisition of James Allen.

The group primarily operates under the name brands Kay Jewelers, Zales, Jared The Galleria Of Jewelry, H.Samuel, Ernest Jones, Peoples, Piercing Pagoda, and JamesAllen.com.

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Same store sales increased at Zales by 7.1%, and Piercing Pagoda by 11.5%. Jared grew by 1.2%, while Kay same store sales decreased by 2.1%.

eCommerce sales in the second quarter including James Allen were $150.3 million, up 82.8% on a reported basis.

However, despite the strong US performance, Signet did not do so well on an international level.

International same store sales decreased 2.4%, with ATV increasing 6.3% and the number of transactions decreasing by 7.8%.

The same store sales decline was driven by lower sales in fashion watches and diamond jewelry, partially offset by higher sales in prestige watches.

Two figures that stand out as gloomy in Signet’s financial report include a decrease in ‘other’ operating income from $71.9 million in Q2 2017 to just $3.2 million in the same period this year, and a reduction in its GAAP operating income for Q2 from $135.6 million (9.7% of sales) in 2017 to a loss of $58.1 million (4.1% of sales) in 2018.

Signet stresses that this drastic reduction in operating income can be attributed to a number of factors, including: restructuring charges, severance, IT transformation costs, and the impact of the company’s credit outsourcing strategy, which resulted in less interest income earned.

However, such is the severe nature of the reduction that Signet’s directors and shareholders will be keeping a close eye on the equivalent figures for next year.

Signet chief executive officer, Virginia C. Drosos, said: “While it is still early in our journey, we are encouraged by our improving year-to-date performance as we execute against our Path to Brilliance transformation plan. During the second quarter, we continued to see stabilisation in same store sales, and we remain confident that we have the right strategies in place to continue to drive operational improvement over the long-term. To reflect our improved second quarter performance, we are modestly raising our revenue and earnings guidance for the year.”

She added: “For the fourth quarter, however, where a vast majority of our annual operating profit is generated, we are remaining appropriately cautious in our outlook as many of our Path to Brilliance initiatives are being launched later in the year.”

In March of 2018, the company announced a three-year Signet Path to Brilliance transformation plan to reposition the company to be an OmniChannel jewelry category leader.

As per the report, the company said it continues to expect its transformation plan to deliver $200 million – $225 million of net cost savings over the next three fiscal years.

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