Higher advertising costs squeezed Signet Jewelers Ltd.’s fourth-quarter net income 8.7 percent, as flagging sales in its U.K. division offset sales gains in its U.S. stores.
The jeweler noted a continuation of this trend in the current quarter, as U.S. same-store sales are up 11.4 percent, and comps in the U.K. are down 4.6 percent. The company also said Wednesday that it plans to reduce the size of its fleet, mainly in the U.K.
For the fourth-quarter ended Jan. 29, profits totaled $105.4 million, or $1.21 cents a diluted share, compared with year-ago income of $115.5 million, or $1.34 a share. Excluding items, the company said net income was $1.55 a diluted share.
Revenue increased 6.2 percent to $1.27 billion, from $1.20 billion a year earlier. Analysts were looking for EPS of $1.54 on sales of $1.27 billion.
Quarterly comparable-store sales rose 8.1 percent, led by an 11.4 percent jump in U.S. comps, which was offset by a 2.9 percent comp decline in the U.K. Gross margin for the quarter improved to 40.8 percent of sales compared with year-ago margin of 36 percent. Selling, general and administrative expenses jumped 19.1 percent to $336.7 million.
Bridal jewelry, as well as branded and exclusive merchandise at the firm’s Kay and Jared chains, propped up U.S. sales 10.2 percent to $1 billion. Sales in the U.K. slid 6.8 percent to $263.5 million, due in part to pressure on discretionary spending related to the government austerity program, which includes an increase in the value-added tax rate.
On the company conference call, Signet, which operates 1,317 U.S. stores and 540 U.K. stores, said that U.S. and U.K. economies have “become increasingly divergent,” and that it sees “stabilization in the U.S. jewelry market.
Although the company is balancing store growth and closures, chief executive officer Mike Barnes said he has “not closed the door on any other expansion opportunities and to other geographies,” but that the company isn’t pushing for it
In 2010, Signet’s net income rose 27.6 percent to $200.4 million, or $2.32 cents a diluted share, compared with year-ago income of $157.1 million, or $1.83 cents a share. Sales rose 5 percent to $3.43 billion, from $3.27 billion.
This year, Signet said it would close 22 U.K. stores and 36 U.S. stores. However, the jeweler added that it would open a total of 25 U.S. stores, or 21 Kay stores and 4 Jared stores.
Shares rose 30 cents, or 0.7 percent, to $45.10 in New York Stock Exchange trading Wednesday.