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Signet sees weak holiday sales season

January 10, 2008

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London—Same-store sales at Signet Group decreased 6.8 percent for the eight weeks ended Dec. 29, and total sales decreased 2.8 percent (3.7 percent at constant exchange rates), the company announced today.

Same-store U.S. sales for the period decreased 8.1 percent, and total sales decreased 3.6 percent.

"In the United States, the like-for-like sales performance over the holiday season was clearly disappointing," Signet Group Chief Executive Officer Terry Burman said in a statement. "We remain focused on implementing our proven strategy and on gaining profitable market share."

According to the company, a marginal increase in the average selling price in both Jared The Galleria Of Jewelry and mall brand stores and additional promotional activity within the Journey product category had some adverse impact on gross margin. Overall, however, the decline in gross margin, including the impact of commodity cost increases, is likely to be in line with expectations.

For the 47 weeks ended Dec. 29, same-store sales at Signet Group decreased 0.2 percent, and total sales increased 5.6 percent (3.7 percent at constant exchange rates).

Same-store U.S. sales for the 47 weeks decreased 1 percent, and total sales increased 4.8 percent.

Profit before tax for 2007-2008 is currently expected to be between $330 million and $340 million, according to the company.

Net new store space is expected to have increased by 10 percent during 2007-2008. Bad debts as a percentage of credit sales for the year is anticipated to be at the high end of the range of the last 10 years, reflecting the weak sales in the fourth quarter rather than a material deterioration in the performance of the credit portfolio.

Although the divisional operating profit for 2007-2008 is expected to be below that of last year, the operating margin is anticipated to be close to 10 percent, well above the typical level of the U.S. jewelry sector, the company reported.

In related news, growth in U.S. beneficial shareholder holdings has accelerated in recent weeks. As a consequence, the proportion of voting securities held by U.S. residents in mid December was just below 50 percent, compared with approximately 38 percent in October 2007.

If this percentage rises above 50 percent, as monitored on a quarterly basis, Signet would no longer satisfy the definition of a "foreign private issuer" under the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and would become a domestic issuer for SEC purposes.

In the event of becoming a domestic issuer, Signet would need to meet additional U.S. reporting and accounting obligations. Signet also would continue to file financial statements in the United Kingdom under International Financial Reporting Standards and to meet the obligations of a publicly listed company on the London Stock Exchange.

"In light of the recent changes in the shareholder base of the company, the board will further consider these matters, including seeking the views of its shareholders," Burman said. "There is no certainty as to the outcome of this assessment, even in the event of Signet becoming a domestic issuer."

Signet Group operates 1,971 specialty retail jewelry stores, including 1,402 stores in the United States under the Kay Jewelers and Jared The Galleria Of Jewelry brand names as well as a number of regional names. Signet also operates 569 stores in the United Kingdom, including Ernest Jones, H. Samuel and Leslie Davis.

For additional information on Signet Group, visit its Web site, Signetgroupplc.com.
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