Charges Lead Signet Jewelers to Loss

Signet Jewelers Ltd., parent to Kay Jewelers and Jared the Galleria of Jewelry, is upbeat about recent activity in stores.

The weakening business environment and accounting quirks took their toll on the fourth-quarter results of Signet Jewelers Ltd., parent to Kay Jewelers and Jared the Galleria of Jewelry.

This story first appeared in the November 10, 2008 issue of WWD.  Subscribe Today.

Also on Wednesday, Delia’s Inc. reported a fourth-quarter profit, largely from the sales of its skateboard catalogue business, and Citi Trends Inc. reported higher profits for the quarter and also named David Alexander, president and chief operating officer, to succeed Ed Anderson as chief executive officer upon Anderson’s retirement April 4.

In the three months ended Jan. 31, a $516.9 million charge to write down the value of legacy acquisitions led Signet to a net loss of $424 million, or $4.97 a diluted share, versus year-ago earnings of $143 million, or $1.65. Based in Hamilton, Bermuda, Signet changed the way it handles its books after switching the primary listing of its shares to the New York Stock Exchange and adopting U.S. generally accepted accounting principles, or GAAP. Most of the goodwill that was written off related to acquisitions made in 1990 and before.

For the quarter ended Jan. 31, sales fell 18.9 percent to $1.12 billion from $1.38 billion.

For the full year, Signet’s losses of $393.7 million, or $4.62 a diluted share, compared with earnings of $219.8 million, or $2.55, a year earlier. Sales dropped 8.8 percent to $3.34 billion. U.S. sales accounted for $2.54 billion of the total.

“Given the very challenging environment, the group has made an encouraging start to fiscal 2010,” said Terry Burman, ceo. “In the U.S., same-store sales for the first seven weeks were down 2.7 percent….In the U.K., same-store sales for the first seven weeks were down 3.8 percent.”

The relatively upbeat assessment of sales in the new year helped to lift shares of Signet $1.22, or 10.8 percent, to $12.50.

While charges threw Signet to a loss, the sale of its CCS skateboard catalogue business to Foot Locker Inc. allowed Delia’s Inc. to more than triple its fourth-quarter profits.

Net income for the three months ended Jan. 31 soared 275.8 percent to $22.6 million, or 73 cents a diluted share, compared with $6 million, or 19 cents a share, in the year-ago period. Excluding the aftertax impairment and restructuring costs related to the sale of the CCS business on Nov. 5, the firm registered a net loss of $873,000, or 3 cents a share. Revenue grew 0.1 percent to $67.2 million, from $67.1 million a year earlier. Retail sales increased 6.9 percent to $33.9 million, while direct sales fell 6 percent to $33.3 million.

For the year, the retailer had net income of $17.2 million, or 55 cents a share, versus $2.3 million, or 8 cents a share, in 2007. Net sales rose 7 percent to $215.6 million, from $201.6 million.

Value-priced retailer Citi Trends posted a 20 percent leap in fourth-quarter profits. Net income moved to $10.1 million, or 70 cents a diluted share, versus $8.4 million, or 59 cents a share, in the year-ago period. Net sales grew 8.9 percent, to $146.6 million from $134.6 million, but fell 1.9 percent on a same-store basis. Analysts were looking for earnings per share of 55 cents on sales of $146.6 million, according to Yahoo Finance.

For the year, net income grew 22.3 percent to $17.4 million, or $1.22 a share, compared with $14.2 million, or $1 a share, in 2007. Revenues increased 11.6 percent, to $488.2 million from $437.5 million.

Following his retirement, Anderson will remain with Citi Trends as executive chairman as well as chairman of the company’s real estate committee.