QUOTE AND NEWS
Clusterstock  Nov 17  Comment 
TORONTO (Reuters) - Canadian buyout firm Onex Corp is leading the bidding for Swiss juice-box maker SIG Combibloc Group, Bloomberg reported on Sunday, citing unnamed people familiar with the matter. Officials at Toronto-based Onex, Canada's...
newratings.com  Nov 12  Comment 
LONDON (dpa-AFX) - Constrution-supplies distributor SIG plc (SHI.L) Wednesday said its Like-for-like sales increased 1.7 percent for the 4-month period ended October. LFL or like-for-like sales grew 6.5 percent in UK and 21.6 percent in Ireland....
Reuters  Nov 7  Comment 
Buyout groups BC Partners, Onex and Partners Group are set to bid for Swiss packaging maker SIG Combibloc in an auction likely to raise less for seller New...
The Hindu Business Line  Nov 4  Comment 
Signet Industries in a communication to the stock exchanges said it has received an allocation/target for micro irrigation of 23,000 hectares for Rs 120 crore from Gujarat Green Revolution Company...
Wall Street Journal  Oct 14  Comment 
Signet Jewelers Ltd. said Chief Executive Michael Barnes has resigned and will be succeeded by Mark Light, the company’s current president and operating chief.
newratings.com  Oct 14  Comment 
LONDON (dpa-AFX) - SIG plc (SHI.L) Tuesday said it disposed its 50.6 percent stake in heat pumps maker Ice Energy Technologies Ltd., amid delays in the Renewable Heat Incentive scheme. SIG sold the stake to existing Ice Energy management team of...
Forbes  Sep 4  Comment 
Okay – you’ve done your homework and completed a third-party risk assessment for each of your vendors. Maybe you used the industry’s preeminent tool, Shared Assessments’ Standard Information Gathering (SIG) questionnaire, with all its 1800...
TheStreet.com  Aug 29  Comment 
NEW YORK (TheStreet) -- Shares of Signet Jewelersa are up 0.58% to $117.04 in pre-market trading after analysts ataDeutsche Banka increased its price targetato $125 from $115 with a "buy" rating. The firm cited the encouraging company...
Benzinga  Aug 28  Comment 
Midway through trading Thursday, the Dow traded down 0.31 percent to 17,069.84 while the NASDAQ declined 0.22 percent to 4,559.78. The S&P also fell, dropping 0.20 percent to 1,996.21. Leading and Lagging Sectors Utilities shares rose by...




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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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