Signet performance up but UK division suffers

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UK stores close as election uncertainty impacts UK confidence.

Total Signet sales rose by 6.2% to $810 (£559) million in Q1 while sales at constant exchange rates in the UK dropped by 1.7 percent showing an operating cost of $1.4 (£1) million

UK sales in Q1 at Signet’s H Samuel stores performed lower at constant exchange rates by 3.1 percent than in the equivalent period of fiscal 2010, though higher-end Ernest Jones improved its performance by 1.4 percent.

Two stores closed in Q1 of 2010 and there are 11 more planned store closures to January 2011, with eight H Samuel and five Ernest Jones stores closing.

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The company attributed the decrease in sales to a drop in consumer confidence resulting from general election uncertainty.

An increase in the cost of gold, a higher VAT rate and the impact of the weak pound against the dollar all contributed to reduced margins, partly offset by price changes. The average unit cost in Signet’s UK division rose by 11.3 percent as a result of higher prices and merchandise mix changes.

The company anticipates that the UK’s gross merchandise margin for fiscal 2011 will be lower than that of 2010, subject to varying conditions.

Total sales were up 6.2 percent for Signet in Q1 with income before income taxes up 85.5 percent to $76.8 (£52.9) million.

Brand Jared performed particularly well with total sales up 19 percent to $203.4 (£140.2) million.

Signet chief executive Terry Burman said: “We are very pleased with our start to the year. Jared and Ernest Jones performed particularly well. Our ability to create differentiated and sought after product, supported by superior customer service and memorable marketing campaigns, is an important driver of sales. We continue to focus on enhancing our sustainable competitive advantages, improving our execution and maintaining a strong balance sheet and financial flexibility. We therefore believe we remain well positioned to gain profitable market share.”

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