Signet's EPS Beats, Rev Misses - Analyst Blog
Signet Jewelers Limited ( SIG ) - a leading jewelry retailer - recently posted its fiscal third-quarter 2013 (ended October 27, 2012) financial results. The quarterly earnings of 43 cents a share surpassed the Zacks Consensus Estimate of 37 cents and reflected a 43.3% increase from 30 cents earned in the comparable quarter in the prior-year.
Total revenue for the quarter inched up 0.8% to $716.2 million from $710.5 million in the year-ago quarter, driven by a 1.4% increase in comparable store sales. However, total revenue missed the Zacks Consensus Estimate of $729.0 million. E-commerce sales witnessed year-over-year increase of 35.2% to $19.6 million from $14.5 million in the last-year quarter.
Region-wise, the U.S. division revenue was $575.6 million, reflecting a rise of 2.2% from $563.0 million in the prior-year quarter, mainly due to 1.2% hike in comps. UK division revenue witnessed a fall of 4.7% to $140.6 million from $147.5 million in the fiscal third-quarter of 2012. However, comps increased 2.3% for this division in the quarter.
Gross profit for the quarter climbed 2.4% to $235.4 million year over year from $229.9 million, whereas gross margin expanded 50 basis points to 32.9%. The improvement in gross margin was driven by an expansion of 70 basis points in the U.S. division, partially offset by a 30 basis points contraction in UK division.
Selling general and administrative expenses, as a percentage of revenue, increased 20 basis points to 31.1%, attributable to cost incurred to implement strategic initiatives as well as acquisition costs.
Increased gross margin along with increase in total revenue, led to a year-over-year surge of 23.5% to $52.5 million in operating income from $42.5 million in the year-ago quarter. Operating margin expanded 130 basis points to 7.3% from 6.0% in third quarter of 2012.
Other Financial Details
Signet Jewelers ended the quarter with cash and cash equivalents of $166.0 million, down from $349.6 million at the end of prior-year quarter. The fall was mainly due to dividend payments and share repurchases made during the year. Inventories at the end of the quarter rose 6.7% to $1,508.5 million from $1,414.0 million in the year-ago period.
Signet Jewelers does not have any long-term debt while shareholders' equity as on October 27, 2012 came in at $2,150.1 million compared with $2,148.2 million as on October 29, 2011.
For the fourth quarter of fiscal 2013, Signet Jewelers anticipates comparable-stores sales to increase in low-single-digit including the impact of one additional week, whereas earnings are expected to fall in the range of $1.95-$2.10 per share. Excluding the extra week, the company forecasts low-to-mid single digit rise in comps. Capital expenditure for the fiscal 2013 is expected to be between $155.0 million and $160.0 million.
At the end of the third quarter 2013, the company had 1,857 stores (including 1,337 stores in the U.S. and 520 stores in UK) compared with 1,860 stores (including 1,324 stores in US and 1,324 stores in US and 536 stores in UK) at the end of the prior-year quarter.
The company further plans to operate 1,952 stores including 1,445 stores in the U.S. and 507 stores in UK at the end of the fiscal 2013.
Signet Jewelers, which competes with Zale Corporation ( ZLC ), carries a Zacks #3 Rank, implying short-term Hold rating on the stock for the upcoming 1-3 months.
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