QUOTE AND NEWS
SeekingAlpha  Aug 23  Comment 
By Daniel Jones: Before the market opens on Aug. 27, Tiffany & Company (NYSE:TIF) will report revenue and earnings for the second quarter of its 2014 fiscal year. In recent years, the business has done particularly well, as has rival Signet...
DailyFinance  Aug 22  Comment 
TORONTO, ONTARIO -- (Marketwired) -- 08/22/14 -- Stone Investment Group Limited ("SIG") today released its unaudited financial results for the quarter ended June 30, 2014. The full interim financial statements for the period, including...
Forbes  Aug 21  Comment 
Shareholders of Signet Jewelers Ltd (NYSE: SIG) looking to boost their income beyond the stock's 0.7% annualized dividend yield can sell the April 2015 covered call at the $115 strike and collect the premium based on the $4.70 bid, which...
Insurance Journal  Aug 15  Comment 
Indianapolis-based Specialty Insurance Group (SIG) appointed Charles (Charlie) Landrum as underwriting director, with a specialty focus in the sports and entertainment markets. Prior to joining the SIG team, Landrum was the president of T.H.E....
SeekingAlpha  Jul 31  Comment 
By Alex Pitti: Rick's Cabaret International (NASDAQ:RICK) is a small capitalization gentlemen's club company that is undervalued. The company has a large growth potential as it expands the number restaurant and cabaret locations from the 43 it...
DailyFinance  Jul 31  Comment 
BAE Systems announces it has entered into an agreement for the proposed bolt-on acquisition of Signal Innovations Group, Inc. (SIG), a provider of imaging technologies and analytics to the U.S. intelligence and defense...
MarketWatch  Jul 11  Comment 
Scotch whisky producers had been hesitant to connect spirit and sport together as a heritage play — until now.
Insurance Journal  Jul 10  Comment 
Three specialty and risk insurance veterans have launched Specialty Insurance Group (SIG) to provide custom programs for the sports, leisure and entertainment markets. The new Indianapolis-based firm is a member company of Everest Re Group Ltd....




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Signet Group plc (NYSE: SIG) is the world's largest specialty jewelry retailer with over $3.3 billion in sales in fiscal 2010.[1] The company operates in the United Kingdom and the United States, where it owns jewelry chains such as Kay Jewelers and JB Robins Jewelers. The US Bureau of Economic Analysis (BEA) estimates that Signet has approximately 4.4% of the $58.8 billion total jewelry market.[2]

Despite being the world's largest specialty jeweler, Signet only earned a 8.3% operating margin,[1] considerably lower than some of its competitors, including Tiffany's. This is because of the relatively low price points Signet sets for its jewelry, placing it in the "affordable luxury" space. The company's goal is to provide value and pass along cost savings to shoppers, which appeals to the middle-income consumer. Signet's low gross margin is also partially because the company buys polished diamonds directly, rather than finishing rough diamonds in-house.

Signet's sales are split geographically roughly 75% and 25% between the U.S. and the U.K., respectively. This gives the company a small source of revenue from abroad, but not enough to effectively protect it from downturns in the U.S. economy. Additionally, the company is especially vulnerable in weak global economic times as consumers cut back spending on luxury items. As a result of the sluggish global economy, the company's net sales fell by 1.6% and same-store sales fell by 0.4% in 2010.[1]

Company Overview

Signet Group is a U.K. based specialty jeweler operating multiple chains of jewelry retail stores in the United Kingdom and the United States. In the U.S. Signet operates Kay Jewelers and Jared The Galleria of Jewelry as well as other regional chains such as JB Robinson Jewelers, Marks & Morgan Jewelers and Belden Jewelers. In the U.K. Signet operates H. Samuel The Jeweller, Ernest Jones The Diamond & Watch Specialist, as well as a few other regional stores. Signet is an "affordable luxury" retailer as it targets middle-income consumers by providing jewelry at lower price points than jewelers like Tiffany. Although these lower prices open up Signet's stores to a wider range of customers, it keeps Signet's profit margins low and leaves the company exposed in times of economic distress when middle-income consumers cut back on unnecessary spending.

Business Growth

FY 2010 (ended January 30, 2010)[1]

  • Net sales fell by 1.6% to $3.29 billion. Company wide, same store sales decreased by 0.4% as the weak economy slowed the demand for luxury items. Same store sales increased 0.2% in the US and fell 2.4% in the UK.
  • The company reported a net gain of $164 million an improvement over the $394 million loss the company incurred the previous year.

Trends and Forces

Global Economic Downturn Hurting "Affordable Luxury" Jewelry Sales

Because three-quarters of Signet's sales come from their U.S. operations, the company is heavily dependent upon the health of the U.S. economy and global economy. Jewelry is a luxury that consumers will avoid in times when disposable income is low, such as in times of recessions or shorter economic downturns. This is especially true of "affordable luxury" retailers such as Signet which appeal to consumers with sensitive budgets by offering jewelry at lower price points than some of their competitors (Signet's most expensive chain, Jared, has an average unit price of $747 compared with prices above $3,000 for nearly half of the jewelry sold by Tiffany). In 2010, the sluggish economy weakened the demand for Signet's products and as a result, the company's net sales fell by 1.6%.[1]

Increasing Commodities Prices Hurt Signet's Already Small Margins

As an "affordable luxury" jewelry retailer who delivers value to middle-income consumers with mid-range prices, Signet's profit margins are slim. These margins can be seriously diminished by rising prices in commodities that are inputs in jewelry such as gold, silver and other precious metals. Recent trends in the global economy, spurred by rising oil prices and the falling dollar have led to increasing prices in these precious metals which may seriously hurt Signet's gross margin.

Exchange Rates Can Help or Hurt Signet

As a quarter of its sales are derived from abroad, exchange rates can play a major role in Signet's performance. As the company doesn't engage in any significant hedging activity against exchange rate risk, the final amount of its sales and profits are greatly exposed to fluctuations in the value of the U.S. dollar. When the dollar falls against the British pound, Signet's U.K. sales become more valuable when translated back into dollars.

Competition

The jewelry market is split between a range of companies of different sizes, because jewelry-shoppers are less price sensitive than other goods and thus price is not a major factor in a purchase decision, rather important points of differentiation are quality, service and image. Thus, smaller specialized jewelers are able to compete on a store-to-store basis against larger companies such as Signet. As such Signet's competition comes from a variety of sources, including other specialty jewelry retail chains, as well as department stores with jewelry operations and small jewelry shops. Signet's largest direct competitors include Tiffany (TIF) , Zale (ZLC), and Blue Nile (NILE). Tiffany (TIF) is a leading jewelry retailer based in the U.S. but over half of its stores are located outside the United States, with strong presences in Europe and Japan. Zales specializes in diamond jewelry and operates mostly mall-based stores as well as mall kiosks only in North America. Blue Nile (NILE) is the largest online-only retailer of certified diamonds and fine jewelry. In addition to these specialty retailers Signet also faces competition from upscale and exclusive retailers such as Bulgari and Cartier.

Speciality Jewelry Retailers:

Department Stores:

References

  1. 1.0 1.1 1.2 1.3 1.4 SIG 2010 10-K "Selected Consolidated Financial Data" pg. 48
  2. SIG 2010 10-K "Competition and Sector Consolidation" pg. 3
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