Signet likely to miss year forecasts

28/11/2007 00:12

By Mike Elliott

LONDON (Reuters) - Signet Group , the world’s biggest speciality jewellery retailer, warned it was likely to miss annual profit forecasts, sending its shares sliding to a near five-year low on Tuesday.

Shares in the retailer shed 18.2 percent to 63.25 pence by 3:55 p.m. after it reported lower Q3 profit and a weak start to the fourth quarter. The price was the lowest since December 2002 and valued the group at around 1.08 billion pounds.

Signet, which trades as Kay Jewelers and Jared the Galleria of Jewelry in the United States where it makes 75 percent of its sales, said pretax profit was $2.5 million in the third quarter, versus $8.0 million last year, due to a challenging U.S. market.

Total sales in the quarter to November 3 increased by 10 percent to $678.7 million (328.7 million pounds).

For the nine-month period, pretax profit slipped to $111.5 million from $113.6 million while total sales increased by 9.4 percent to $2.23 billion.

"In the year to date profit before tax was slightly below last year’s level primarily reflecting a more challenging retail marketplace in the United States," Chief Executive Terry Burman said in the results statement.

U.S. sales had weakened further since the end of the third quarter and so far in November like-for-like sales were down around .....continued below

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7 percent, Signet said. There had also been a weakening in Britain as the month progressed.

"Given the backdrop of trading in November, and increased economic uncertainty on both sides of the Atlantic, we believe current analysts’ expectations are unlikely to be met," Burman said.

He added that a wider-than-normal range of pretax profit estimates would be appropriate.

Signet had been expected on average to post pretax profit of around 192.5 million pounds for the year, according to Reuters Estimates, within a range of 183.6-206.0 million. It reported profits of 213.2 million pounds last year.

Signet switched to reporting in U.S. dollars this year.

Investec analyst David Jeary said in a note that the latest fall in U.S. like-for-like sales and slowdown in Britain "points clearly to downside forecast risk".

"Given operational gearing characteristics, if the U.S. remained down 7 percent, this would suggest a full-year pretax profit forecast cut of $30-$35 million, pre any UK cut," Jeary added.

The retailer, which trades as H.Samuel and Ernest Jones in Britain, posted a 3.2 percent rise in third-quarter group like-for-like sales earlier this month, when it said the retail environment remained uncertain.

Shares in Signet have underperformed the general retailers’ index by around 20 percent so far this year.

(Editing by David Cowell)

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