Downturn hits jewellery as Signet sales slump

H Samuel owner Signet today revealed UK sales had plunged in the run up to Christmas as the downturn in consumer spending hit jewellery sales.

Signet, which also trades as Ernest Jones and Leslie Davis from a total of 561 UK stores, said like-for-like sales fell 10.9% in the nine weeks to 3 January, leaving the figure 3.5% lower for the first 48 weeks of the financial year.

Across the group's UK and US businesses performance was "very disappointing", with like-for-like sales down 15.2% over the period. This compares to an 8.1% fall in like-for-like sales for the 48 weeks to 3 January.

The UK division accounts for 25% of the business.

Investec Securities said the Christmas trading update was much worse than expected, with the UK's value-oriented H Samuel chain outperforming the more upmarket Ernest Jones chain.

H Samuel sales were down 9.2% in the last nine weeks, while Ernest Jones saw a fall of 13.2%.

Shares dropped more than 7% today after the company said it would not be appropriate to pay dividend as it attempts to reduce its debt, which is expected to be between 470 million and 490 million US dollars (£308m and £321m) at the year-end in February.

The company said it still expected to produce profits in line with market expectations after tight cost controls buffered margins.

The group said income before tax was expected to be between 180 million and 195 million US dollars (£118m to £128m) for the full year.

H Samuel added more watches to its sales mix, while Ernest Jones' was little changed.

Average selling prices were up at both companies in the nine week period but discounting and changes in the mix of stock meant margins were expected to be around 1% below last year.

Signet said total UK sales were down 33.4% in the period on a reported basis, or 9.7% at constant exchange rates.

Terry Burman, Signet chief executive, said against a background of "extremely difficult trading conditions", the group's main focus would be on reducing debt, cutting costs and reducing capital expenditure.

Investec said it planned to revise forecasts in light of company guidance and expectations that conditions will remain difficult in 2009/10.

"We think the company remains well and tightly managed, and over the longer term should be able to benefit from the inevitable capacity withdrawal in the broader jewellery sector.

"Signet will be a long-term survivor and winner, and the current market malaise could possibly accelerate broader sector consolidation."