Signet announces strong fiscal results for Q4

Results up across the board despite several store closures seen in UK.

Signet Jewelers Ltd yesterday announced its results for the final 13 weeks – Q4 – of the 52 weeks of the fiscal year ended January 29, 2011.

Signet, which operates 1,857 retail jewellery stores has released results for 1,317 stores in the US, where its store include Kay Jewelers, alognside 540 stores in the UK, where its retailers include H.Samuel, Ernest Jones and Leslie Davis.

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A basic overview of results has revealed that same store sales were up 6.7 percent, with income before income taxes sitting at $300.4 million (£186m), up 30.3 percent. Adjusted income before income taxes excluding non-recurring items was $347.9 million (£215m), up 50.9 percent, while diluted earnings per share $2.32, up 26.8 percent.

Mike Barnes, Chief executive of Signet, said: "Fiscal 2011 was an outstanding year for Signet with same store sales up 6.7 percent, adjusted income before tax increasing 50.9 percent and free cash flow of $315.8 million before the Make Whole Payment. I would like to thank all members of the Signet team for their contribution to this great performance."

Barnes added: "We believe that Signet is well positioned to gain profitable market share and improve operating margins as a result of our competitive strengths in the bridal category, the further development of brands that differentiate
us from our competitors, our long term focus on best in class customer service, and traffic generating marketing campaigns that leverage our leading share of voice. These strengths are increasingly setting us apart in the retail marketplace."

For the fiscal year 2012, Barnes said that Signet has already seen an encouraging start to the year, with same store sales in the first seven weeks up by 8.5 percent, compared with 6. percent for the comparable period last year. The UK division, however, was down by 4.6 percent, compared to a decrease of 0.1 percent last year.

A breakdown of sales for fiscal 2011 shows that sales rose by 5.0 percent to $3,437.4 million, with UK sales reaching $693.2m (£429m), 20.2 percent of Signet’s total sales.

For fiscal 2011, income before income taxes was up 30.3 percent to $300.4 million. The charge to income taxes for fiscal 2011 was $100.0 million.

In the fourth quarter Signet’s same store sales were up 8.1 percent, compared to an increase of 5.1 percent in the fourth quarter of fiscal 2010, and total sales rose by 6.2 percent to $1,270.5 million in Q4 to January 29. In the UK, same store sales reached  $263.5m (£163m), 20.7% of Signet’s same store sales.

Of the UK’s 20.2 percent contribution to Signet’s annual sales, the UK division’s sales were in fact down by 5.5 percent to the £429m figure. Exchange rates also affected performancem with sales down 3.0 percent at constant exchange rates.

H.Samuel’s sales reached $373.4m (£231.3m), with an average sale going through the tills at £57. For Ernest Jones, the retailers’ sales were $319.5m (£197.9m), with the average sale at £249.

For Signet’s UK retailers the charm bracelet category continued to perform well, as did fashion watches and the bridal category, including gold rings.  Average unit selling price, excluding the charm bracelet category, increased by 9.2 percent, primarily reflecting price increases implemented to counter pressure on gross merchandise margin. 

The UK division’s gross merchandise margin rate was down by 40 basis points in fiscal 2011 compared to fiscal 2010. The impact of a weak pound sterling to US dollar exchange rate, an increase in the cost of gold and a higher rate of value added tax were largely offset by  price increases. 

Store occupancy costs were tightly controlled.  Selling, general and administrative expenses were also closely managed. For the last fiscal year, gross advertising expenditure increased by 1.8 percent to $16.6 million (£10.2m). The higher level of gross advertising expenditure reflected fourth quarter activity, with both an increased level of television advertising impressions and media inflation.

With a view to store openings and closures, the fiscal 2011 year saw no new openings for Signet in the UK, but did see 12 store closures – nine for H. Samuel and three for Ernest Jones.

Signet have several objectives for fiscal 2012, including the following. In Fiscal 2012, management’s financial objectives for the business are the following: to gain profitable market share; improve gross margin ratio; maintain selling, general and administrative expenses to sales ratio broadly similar to the level of fiscal 2011, flexing primarily with expenses which vary with sales; capital expenditure of $110 million to $130 million; and positive free cash flow of between $150 million and $200 million.



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