I considered including British jewelry company Signet Group (NYSE:SIG) in our recent international stock report, Around the World in 80 Minutes. After all, retail stocks have been fertile ground for many of our Foolish newsletter picks. But ultimately, I was concerned about the outlook for consumer discretionary spending (or rather, Wall Street's outlook on that outlook), and I didn't see quite enough room in the stock price. I wouldn't say that Signet's stock performance since early May vindicates that view -- after all, the whole market has gotten smacked -- but it nonetheless affirms the perks of being cheap.
That said, the company behind mall and strip-mall concepts like Kay Jewelers and Jared seems to be running smoothly. Sales were up nearly 14% as reported, and nearly 3% on a same-store basis. Margins compressed a bit, but operating income still rose more than 9%, and pre-tax profits climbed 10% as reported.
Results, though, continue to be quite different between the U.S. and U.K. operations. In the U.K., comps were down a bit (0.7%), and the company continued to post operating losses. In the U.S., though, revenue grew more than 18% (more than 9% on a constant currency basis) and same-store sales were up nearly 4%. Adjusted for the timing of Mother's Day, same-store sales growth would have been closer to 7%.
Of course, the jewelry retailing space is crowded. Blue Nile (NASDAQ:NILE) sells it online, Zale (NYSE:ZLC) sells it in the malls, and everyone from Wal-Mart (NYSE:WMT) to J.C. Penney (NYSE:JCP) sells it, too. But Signet does seem to have carved out a pretty good brand (or two) for itself, along with a cash-flow positive business model.
Signet's stock has actually held up better over the last six months than any other jeweler, including high-end retailer Tiffany (NYSE:TIF). And though the valuation doesn't lead me to think it's a screaming bargain, it does seem to at least be worth a look for those seeking to add some bling to their portfolios.
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Fool contributor Stephen Simpson but has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
