Wednesday, Specialty retail jeweler Signet Jewelers Limited (SIG, SIG.L) reported a loss for the fourth quarter, hurt by a massive impairment charge coupled with lower sales. Noting that it has made an encouraging start to fiscal 2010, the company said it expects to cut costs in the U.S. and restrict capital spending.
Fourth quarter net loss was $424 million, or $4.97 per share, compared to net income of $143 million, or $1.65 per share, reported in the same period last year.
Comprehensive loss for the fourth quarter was $490.5 million, compared to comprehensive loss of $102.4 million in the year-ago quarter. Loss before income taxes was $373.6 million, in comparison with income before income taxes of $218.7 million last year.
Sales for the quarter declined to $1.124 billion from $1.385 billion in the previous year. The U.S. accounted for $862.1 million in sales, lower than $1.001 billion generated last year. Sales in UK were $261.5 million, down from $384.2 million reported in the prior year.
For the third quarter, the company had reported a net loss of $15.1 million or $0.18 per share, compared to net income of $2.5 million or $0.03 per share in the year-ago quarter. Total sales for the third quarter were 7.3% lower to $629.3 million from $678.7 million in the same quarter of last year.
Gross margin was $378.5 million in the just concluded period, compared to $535.6 million in the previous year. The company recorded a goodwill impairment charge of $516.9 million in the latest period after running an annual goodwill impairment test as per a requirement by US GAAP stermming from the company's listing in the New York Stock Exchange. The relisting costs amounted to a one-time $10.5 million.
For the full year, the jewelry retailer reported a net loss of $393.7 million, or $4.62 per share, compared to net income of $219.8 million, or $2.55 per share, in the previous year. Comprehensive loss for the year was $589.7 million, compared to comprehensive income of $222.2 million last year.
Excluding the impact of the costs of moving listing and goodwill impairment, the company reported net income of $133.7 million, or $1.57 per share for fiscal 2009. Income before goodwill impairment, relisting costs and income taxes was $200.9 million. Full year sales declined to $3.344 billion from $3.665 billion in the previous year and same-store sales dropped 8.2%.
Due to the economic prospects and financial market conditions, as well as to focus on debt reduction, the Board concluded that it is not currently appropriate to pay dividends.
The company, which runs Kay and Jared stores in the U.S., intends to reduce net debt by around $200 million in fiscal 2010 and plans to reduce costs in the U.S. by about $100 million. Signet will restrict capital spending to $55 million in fiscal 2010 compared to $114.9 million in fiscal 2009.
In the US, same store sales for the first seven weeks of fiscal 2010 were down by 2.7% against the comparable period in fiscal 2009, with Valentine's Day trading stronger than the remainder of the period. The change in timing of Easter had an adverse impact of about 1%.
Gross merchandise margin was meaningfully up for the first seven weeks, reflecting the benefit of the price increases implemented in the first quarter of fiscal 2009 and favorable mix changes, which more than offset the increase in the cost of gold.
The operator of Ernest Jones and H Samuel said that in the UK, same store sales for the first seven weeks were down 3.8% and timing of Easter had limited impact. Gross merchandise margin was up slightly, reflecting higher prices offsetting increased merchandise costs. However, the company expects pressure on UK gross merchandise margin to build during the rest of the year due to higher gold costs and the weakness of the pound sterling against the U.S. dollar.
SIG closed Tuesday's regular trade at $11.28, lower than the previous close of $11.61, on 212,900 shares.
SIG.L is currently trading at 789 pence, up 7 pence from the previous close, on 88,350 shares. For the past year, the stock moved in the range of 42.50 pence - 1,449.00 pence.
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