Signet Jewelers Limited (SIG) posted third-quarter fiscal 2014 bottom-line results of 42 cents per share that came in line with the Zacks Consensus Estimate but fell from the prior-year quarter by a penny. Excluding the acquisition costs of Ultra stores, earnings per share was 45 cents.
Quarterly Highlights
Signet posted net sales of $771.4 million in the quarter, up 7.7% from the prior-year quarter driven by healthy performance of stores in the U.S. division. Total revenue came below the Zacks Consensus Estimate of $778 million. Comparable-store sales climbed 3.2% as against an increase of 1.4% in the prior-year quarter. E-Commerce sales grew to $22.8 million, up 16.3% on a year-over-year basis.
By division, sales in the U.S. grew 9.8% to $632.1 million on the back of strong performance in the bridal, colored diamonds and watches collections. Comps rose by 4.2% while e-Commerce sales grew 11.7% to $16.2 million.
Sales in the U.K. division fell 0.9% to $139.3 million due to strong performance of bridal and diamonds, offset by lower sales of watches. Moreover, comps dropped 0.9%; whereas e-Commerce sales grew 29.4% to $6.6 million.
Consolidated gross profit for the quarter increased 1.6% to $239.2 million, while gross margin contracted 190 basis points to 31% due to the incorporation of Ultra stores results. Consolidated operating income was $51.6 million, down 1.7%, while operating margin shriveled nearly 60 bps to 6.7%.
Other Details
Signet ended the quarter with cash and cash equivalents of $87.8 million, net receivables of $1,123.5 million, while accounts payable were $244.9 million. Moreover, net cash (used in) provided by operating activities was ($80.4) million.
In the quarter, Signet bought back 371,713 shares at an average price of $67.26 per share. As of Nov 2, 2013, the company has $300 million worth of shares remaining under the share repurchase authorization.
As of Nov 2, 2013, the company operated 1,478 stores in the U.S. and 496 outlets in the U.K., thereby bringing the total store count to 1,974 across the U.S. and U.K.
Guidance
Signet now projects fiscal fourth-quarter 2014 earnings to range between $2.30 and $2.40 per share. The current Zacks Consensus Estimate for fourth-quarter 2014 is $2.33 per share. Comps are expected to increase in the low to mid single-digit range while gross margin is anticipated to remain the same as in the prior year.
For fiscal 2014, Signet expects capital expenditure to be around $180 million to $185 million, which includes expenses related to the launch of 75–85 new Kay and Jared outlets, store remodeling, enhancing digital and information technology infrastructure as well as outlet channel development.
Signet currently has a Zacks Rank #3 (Hold). Some better-ranked retail stocks that look promising and are expected to continue with their upbeat performance include Hanesbrands Inc. (HBI), DSW Inc. (DSW) and Five Below, Inc. (FIVE). While Hanesbrands has a Zacks Rank #1 (Strong Buy), DSW and Five Below carry a Zacks Rank #2 (Buy).
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