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"Retail trading conditions are very challenging," warned Terry Burman - chief executive of jewellery retailer, Signet, with the group's half-year figures. "It's not getting worse, but there's no sign it’s getting better."
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In response the group is aggressively cutting costs to defend earnings which, after adjusting for a $10.5m charge relating to moving the primary listing from London to New York, tumbled 27.8 per cent to $78.7m. Things look especially tough in the US - where three quarters of sales are generated - and like-for-like sales there fell 5.2 per cent in the period. Still, the 10 per cent fall in sterling against the dollar in the last month or so will, at least, leave those dollar-denominated sales worth more from a sterling perspective. And the UK operation, which accounts for the rest of the group's business, looks in better shape - like-for-like sales there grew 2.3 per cent. Overall, though, group sales fell 3.4 per cent on a like-for-like basis.
Prior to these figures, Dresdner Kleinwort expected full-year pre-tax profits of $253m, EPS of 10c.
| SIGNET (SIG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 66p | MARKET VALUE: | £ 1,125.7m | |
| TOUCH: | 66-67p | 12-MONTH HIGH: | 97p | LOW: 43p |
| DIVIDEND YIELD: | 6.2% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 102c | NET DEBT: | 25% | |
| Half-year to 2 Aug | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (c) | Net div per share (c) |
|---|---|---|---|---|
| 2007 | 1.60 | 109.0 | 4.10 | 0.96 |
| 2008 | 1.59 | 68.2 | 2.60 | 0.96 |
| % change | -1 | -37 | -37 | |
Ex-div:24 Sep Payment:07 Nov £1 = $1.79 |
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Signet's shares are actually up on our sell tip (53p, 14 March 2008). But times are tough and, with management admitting that there's no sign of improving conditions, and with the shares trading on a hardly cheap forward PE of 12, we reiterate that advice. Sell.
Last IC View: Sell, 63.5p, 9 April 2008
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