Bridal strong but Signet UK sales fall 8.5% in Q2

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Same-store sales decrease £2.2m as closures impact retail performance.

Sales fell at H. Samuel and Ernest Jones in the second quarter of 2013, according to the latest financial results from Signet Group.

The Q2 figures released today for the 13 weeks ending July 28 2013 reveal a sluggish market for Signet’s operations in the UK, total sales of $139 million (£89.6m) in the second quarter, down $12.9 million (£8.3m) or 8.5% compared to Q2 2012.

Same-store sales across H. Samuel and Ernest Jones decreased 2.4% compared to an increase of 2.1% in the second quarter of 2012. Signet said the total sales decline was "primarily due to a same-store sales decrease of $3.4 million (£2.2m), the impact of closed stores of $5.6 million (£3.6m) and currency fluctuation of $3.9 million (£2.5m)".

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The number of transactions at Ernest Jones increased in Q2, driven primarily by strength in branded bridal and watches, excluding Rolex. Ernest Jones sales totalled $66.5 million (£42.8m) in the 13 weeks to July 28, though the stores recorded a fall in the average transaction value, primarily due to the impact from Rolex being offered in fewer stores.

H. Samuel sales totalled $72.6 million (£46.7m) in the second quarter. The number of transactions declined in Q2, primarily due to store closures and lower traffic. This resulted in lower sales across many product categories, partly offset by strength in branded bridal jewellery.

With a view to particular product lines, Signet reports that sales in both Ernest Jones and H. Samuel were impacted by lower charm bead transactions.

Signet’s UK e-commerce operations recorded a sales increase of 5.4% to $5.9 million (£3.8m), compared to $5.6 million (£3.6m) in Q2 2012.

The UK division’s operating loss was $0.8 million (£515,660) compared to $0.3 million (£193,326) in Q2 2012. Signet’s income tax expense was $37.1 million (£23.9m), an effective tax rate of 35.5%.

Signet closed 12 stores in Q2 and opened one, bringing its total store presence to 500 in the UK.

Total sales and US sales
Signet Group’s total sales for the second quarter hit $880 million (£567m), up $26.3 million or 3.1% compared to $853.9 million (£550m) in the 13 weeks ended July 28, 2012.

Same store sales increased 3.6% compared to an increase of 7.1% in the second quarter of 2012, while Signet’s total e-commerce sales were $31.2 million (£20.1m), up 28.9% on Q2 2012.

In the US division, Signet’s total sales were $741.1 million (£477m), up $39.2 million or 5.6%.

Same store sales increased 4.9% compared to an increase of 8.2% in the second quarter. US sales increases were driven by particular strength in bridal, coloured diamonds and watches. Signet’s Kay and Jared stores experienced increases in both transaction counts and average transaction value. Its US e-commerce sales grew by 36% to $25.3 million (£16.3m) compared to sales of $18.6 million in Q2 2012.

Signet Group chief executive Mike Barnes said: “We delivered solid second quarter results as expected, driven by same store sales increases of 3.6% overall and 4.9% in the US led by Kay up 5.8% and Jared up 5.5%. All results were, as previously explained, impacted by the Mother’s Day calendar shift. I would like to thank all Signet associates for their contributions to these results.

"We continue to believe we are poised to drive profitable market share with exciting programs in place to achieve this result over the balance of the year. We will focus on our competitive strengths led by our talented sales teams, supported by an exciting merchandise selection, increased advertising impressions that captivate consumers and the strength of our e-commerce initiatives. These combined efforts have us well-positioned for the all-important holiday season and to meet our objectives for the year.”

2014 Guidance
Looking ahead to Q3 2013, the company expects same store sales to increase in the low-single-digit range.

For the full Fiscal 2014 year, Signet anticipates approximately 80.4 million to 80.8 million weighted average common shares outstanding. Its capital expenditure is forecast to be in the range of $180 million to $195 million, which includes costs related to the opening of 75 to 85 new Kay and Jared stores in the US and store remodelling, as well as improvements to its digital and information technology infrastructure, and outlet channel capital spending.
 

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