The last thing a jewelry retailer needs is a severe snowstorm in the days leading up to Valentine's Day.
Unfortunately for specialty jewelry retailer Signet Group
In its conference call, management sounded optimistic that clearer skies await the company. The stock is actually up 17.8% from a year ago and there are multiple positive aspects to owning this stock. For income investors, Signet has an impressive dividend yield of 3.3%, especially when compared with other jewelry retailers such as Tiffany
Overall though, Signet did see a drop in operating profit despite a 10.9% increase in sales for its Q1 on a year-over-year basis. The company attributed the decline in operating profit to increased commodity costs and a slight decrease in gross margin.
Going forward, Signet shareholders can expect the retailer to continue to face resistance from higher commodity costs as well as rising gas prices that have accompanied an already generally challenging market for U.S. retailers. With that being said, Signet has two important trends specific to the jeweler's operations that will work in its favor to mitigate resistance and hopefully reap the benefits of the its plans to expand its U.S. store space by 8% to 10% during the fiscal year.
One trend is the 5% increase in average transaction value that the company experienced when comparing its 2007 Q1 to the prior year's Q1. The other trend crucial to the company's long-term success is the continued growth in Signet's Jared chain, which targets a wealthier clientele and typically sees average transaction value double that of Signet U.S. mall stores. Taken together, these developments will go a long way in melting away the icy conditions that this stock experienced in its Q1.
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