Two leading jewelry chains reported contrasting quarterly results Tuesday as Signet Jewelers Ltd. swung to a profit while Zale Corp. tallied a deeper loss.
For the third quarter ended Oct. 30, Signet’s net income landed at $6 million, or 7 cents a diluted share, compared with a year-ago net loss of $8.7 million, or 10 cents a share. Net sales for the period grew 5 percent to $641.8 million from $611.4 million in the comparable 2009 quarter.
Sales in the U.S. expanded 8.8 percent, to $497 million from $457 million, but in the U.K., Channel Islands and Ireland, sales slumped 6.2 percent to $144.8 million.
Wall Street expected a loss of 3 cents a share on revenue of $618.5 million.
Comparable-store sales jumped 7.2 percent, led by a 9.7 percent comp increase in the U.S. which was offset by a 0.6 percent decline in the U.K. Quarterly gross margin expanded to 30.2 percent of sales versus gross margin of 26.7 percent a year earlier. The increase was buoyed by “price increases, lower average diamond inventory cost and reduced price discounting” in the U.S. Margins in the U.K. remained unchanged, the firm said.
The environment is “challenging” in both the U.S. and the U.K., according to Signet chief executive officer Terry Burman, who singled out bridal merchandise as a strong performer at its U.S.-based stores, Kay, Jared and Pandora.
The ceo said the company would continue to emphasize marketing going into holiday, which would result in an increase in its advertising spend in the fourth quarter.
“The 9.7 percent U.S. same-store sales increase was a very good performance, which drove strong operating leverage and a return to third-quarter profitability,” Burman pointed out.
For the nine months, Signet more than doubled its net income to $95 million, or $1.10 a diluted share, compared with income of $41.6 million, or 49 cents a share, in the year-ago period. Net sales grew 4.3 percent to $2.17 billion from $2.08 billion in 2009.
Zale’s first-quarter net loss escalated to $97.9 million, or $3.05 a diluted share, from a loss of $59.7 million, or $1.87 cents a share.
Sales receded 0.7 percent for the quarter to $327 million, from $329.2 million, as quarterly comparable-store sales fell 1.1 percent. Analysts polled by Yahoo were looking for a loss of $1.79 a share on sales of $323.8 million.
A “higher level of warranty revenue” helped to lift gross margin to 50.5 percent of sales from 48.6 percent a year earlier, according to Zale.
“As we enter the holiday selling season, we remain focused on our multi-year turnaround,” executive vice president and chief financial officer Matthew Appel said on the company conference call. “We intend to strike the appropriate balance between sales and margin to allow us to continue to deliver gross margins above 50 percent to fuel the recovery of the business.”