By  on August 25, 2011

Signet Jewelers Ltd. was able to offset steeper gold and silver costs with higher prices, which helped the midtier jeweler beat Wall Street estimates and boost second-quarter profits by 71.3 percent.

The company’s stock was up 3.5 percent to $36.40 in New York Thursday.

Michael Barnes, chief executive officer, told analysts on a conference call that fashionable merchandise as well as an improved in-store experience helped the company raise prices — second-quarter average unit selling prices increased 13.5 percent in the firm’s U.S. division and 5.3 percent at the U.K. unit.

“We’re very careful and prudent with [price increases], and it is something we have to do on an ongoing basis, given the pressure on commodity costs, but we’ve been very able to successfully more than offset the commodity price increases,” he said.

Barnes sees more changes ahead for the sector.

“We’ll continue to see some consolidation in the industry,” he said. “It obviously slowed as the economy got better. Who knows where the economy is going right now based on all the volatility?”

Gold reached record levels of above $1,900 an ounce this month. Although it has since stabilized to between $1,700 and $1,800 an ounce, the yellow metal’s volatility is still a cause for concern across the industry. And silver prices have doubled over the past year to about $41 an ounce.

For the second quarter ended July 30, Signet net income rose to $66.3 million, or 76 cents a diluted share, compared with year-ago income of $38.7 million, or 45 cents. This beat analysts’ predictions of 59 cents a share.

The operator of Kay Jewelers, Jared, H. Samuel and Ernest Jones said net sales rose 10.8 percent to $797.6 million from $719.7 million.

By division, U.S. sales grew 11.3 percent to $643 million, while sales in the U.K. rose 8.8 percent to $154.6 million.

In the U.S., at midtier chain Kay, which generates about half of Signet’s overall business, comparable-store sales increased 13.5 percent. Comps at Jared, the jeweler’s upscale brand, rose 12.6 percent.

In the U.K., same-store sales at H. Samuel rose 3.3 percent, but Ernest Jones saw comps dip 0.7 percent.

“We expect Signet to gain additional share as it cements its position as the leading consolidator in a highly fragmented and weakened industry,” said Lazard Capital Markets analyst Jennifer Davis, who pointed to the firm’s strong balance sheet and large marketing budget. “Signet should grow at a rate faster than the industry over the next several years.”

Signet also declared its first-ever dividend of 10 cents a share, which will be payable Nov. 28 to shareholders of record as of Oct. 28.

Competitors Tiffany & Co. will report quarterly results today, while struggling midtier jeweler Zale Corp. will report results Wednesday.

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