A Cheap Jewel?

Specialty jewelry retailer Signet Group (NYSE: SIG) reported solid half-year numbers yesterday, but the results have done little to lift its stock price, which presently trades near a 52-week low. Trading at less than 12 times profits and sporting a 3.7% dividend yield, this stock is starting to become an attractive value play in comparison to Tiffany (NYSE: TIF), Blue Nile (NYSE: NILE), and even Zale (NYSE: ZLC), each of which trade at significantly pricier valuations.

For the first half of its fiscal year, Signet reported a 5.1% increase in EPS, on a 9.2% rise in total sales. Same-store sales increased by 3.2%, and operating profits rose by 4.1% year over year. These improvements enabled the company to increase its dividend by 7.5%. On the downside, the company realized a slight decrease in its gross margin rate, which felt the pinch of rising commodity costs and a change in sales mix.

The company did note in its earnings release that it is uncertain on its outlook, but it's aiming for a big Christmas season, as sales from the holiday contribute heavily to yearly results. Its Jared chain, which has been performing quite well, is moving from local network advertising to national network advertising for its 2007 Christmas season. Signet as a whole is planning to expand its total retail space by 10% in the upcoming quarters, including the opening of 96 new stores.

Given the seasonality of its business, the upcoming holiday season will be crucial to the company and its shareholders. A rocky start to its fiscal year makes the next few months all the more critical.  It would be understandable for potential investors to wait to see how the next two quarters play out for Signet. Then again, by then, shares might no longer be trading at rock-bottom prices.