Signet Q1 Profits Suffer From Poor U.S. Results
June 08, 08
Signet Group posted a sharp drop in pre-tax profits at the end of a quarter that saw U.S. operations fall while UK sales grew. The poor U.S. results, representing about 74 percent of Signet's business, harmed group results across the line.
Group total sales rose by 1 percent to $822.5 million, while like-for-like sales decreased by 2.5 percent. Pre-tax was down by 24 percent to $38.6 million and operating profit fell 18.9 percent to $43.8 million, bringing Signet's operating margin to 5.3 percent.
“The results of the price increases implemented in the U.S. in February and March remain encouraging, although a full evaluation will only be completed during the summer," CEO Terry Burman said.
Total U.S. sales were flat at $631.1 million. Like-for-like sales decreased by 4.7 percent in the economically depressed market, though good weather over Valentine’s Day offset the downturn somewhat.
The company raised unit prices in an attempt to "at least" maintain a full-year gross margin percentage at last year’s level. As a result gross margin was up 50 basis points during the quarter.
UK sales rose 4 percent at constant exchange rates, 5.1 percent on a reported basis. Like-for-like sales rose 5.3 percent, resulting in an operating profit of $2.7 million compared with a $1.9 million loss in the comparable period last year.
The gross margin was up 40 basis points, with selective price increases more than offsetting the increased cost of gold and mix changes.
According to Burman, "Given the increasing pressure on consumer expenditure in the UK and demanding second quarter comparatives, like-for-like growth is not expected to continue at this level.”