UPDATE 3-Signet Jewelers beats Street; high-end sales soar

* Q2 EPS 47 cents vs Street view 41 cents

* Q2 same-store sales up 4.5 percent; up 5.9 pct in U.S.

* Signet shares rise 3.2 percent; Tiffany up, Zale down
(Adds details from conference call, byline; updates share
activity)

By Phil Wahba

NEW YORK, Aug 26 (BestGrowthStock) – Signet Jewelers Ltd (SIG.N: )
(SIG.L: ) beat Wall Street earnings forecasts on strong sales at
its upscale Jared chain and higher selling prices, sending its
shares up 3.2 percent.

Signet, which operates chains including Kay Jewelers in the
United States and H. Samuel in Britain, had particularly strong
sales growth in the United States, where sales at stores open
at least a year, or same-store sales, rose 5.9 percent. Its
U.S. division accounts for more than 80 percent of total
sales.

U.S. same-store sales were led by a 14 percent increase at
the Jared chain.

But Chief Executive Terry Burman said the outlook for the
rest of the fiscal year remains uncertain, given the state of
the U.S. and British economies.

Signet, which said in June it had a 9.1 percent share of
the U.S. specialty jewelry market in 2009, said it has won
business away from weakened U.S. rivals that survived a wave of
industry bankruptcies in 2008.

Vendors have grown more willing to give Signet first crack
at their best merchandise because of its cash position relative
to struggling rivals, Burman said on a conference call.

Signet reported net income of $40.7 million, or 47 cents
per share, for the second quarter ended July 31, up 47.5
percent from $27.6 million, or 32 cents per share, a year
earlier. Sales rose 1.6 percent to $722.8 million.

Analysts on average were expecting 41 cents per share on
sales of $725.5 million, according to Thomson Reuters I/B/E/S.

Companywide same-store sales rose 4.5 percent. Same-store
sales slid 0.5 percent in Britain but rose 2.6 percent at Kay.

In the United States, Signet competes with Zale Corp
(ZLC.N: ) in the so-called “middle” jewelry market that falls
between discounters like Wal-Mart Stores Inc (WMT.N: ) and
high-end jeweler Tiffany & Co (TIF.N: ).

Zale, which operates the Zales chain, has been grappling
with sales declines, cuts in advertising and liquidity
problems. In May it got a cash injection from a new investor.

Signet shares were up 88 cents to $28.30 in morning
trading. Tiffany shares were up 1.5 percent, while Zale was
down 3 percent. Tiffany is due to report quarterly earnings on
Friday, and Zale is due next week.

BIG SPENDERS RETURN

Signet said the performance of the Jared chain — which
accounts for a quarter of the company’s sales — reflected a
recovery in spending among wealthier U.S. households. The
average item at Jared sells for twice as much as the average
item at Kay.

Signet got a boost from higher selling prices and lower
diamond costs, which make up more than half of the company’s
cost of goods sold. Those factors offset higher gold prices and
the British pound’s decline against the U.S. dollar. Gross
margins were up 2 percentage points to 33.2 percent.

To increase market share, Signet said it would ramp up
television advertising and line up more exclusive jewelry. For
example, it is testing a line of pricier diamond rings by
celebrity designer Neil Lane. [ID:nN02109564]

Signet operates 1,345 U.S. stores and 548 stores in
Britain. Burman said the company would be willing to open more
U.S. stores but said there were few suitable spaces available,
given the slowdown in new commercial developments.

Burman, who is retiring in January, said the search for his
successor was progressing but declined to give details.
(Reporting by Phil Wahba; editing by John Wallace, Dave
Zimmerman)

UPDATE 3-Signet Jewelers beats Street; high-end sales soar