By Michelle Graff
Akron, Ohio--Signet Jewelers Ltd., now the largest specialty jewelers in the United States, Canada and the U.K., reported solid third quarter results Tuesday.  

Same-store sales increased 7 percent for the company’s Sterling Jewelers division, led by an 8 percent increase at Kay Jewelers stores. Comps at Jared the Galleria of Jewelry were up 7 percent while regional stores saw same-store sales increase 3 percent. Total sales for Sterling climbed 10 percent to $692.8 million.

For the company’s Zales division, same-store sales were down 1 percent due to new inventory designed to replace slow-moving merchandise arriving late and some “distractions” from initiatives implemented to position the company for the holiday season.

(Results for both divisions include their respective outlet stores and e-commerce sites.)

Bridal brands Neil Lane and the Leo Diamond, along with fashion brands Le Vian and Diamonds in Rhythm, were the main drivers of third quarter sales for Sterling. For Zales, Signet is sinking money into Vera Wang Love and Unstoppable Love. Both Diamonds in Rhythm and Unstoppable Love are lines that have the diamonds set so they move, and display brilliance, in tandem with the wearer.

As further evidence of the growing importance of brands in the industry, the company also announced that it has remodeled about 150 Kay stores, dividing up the sales floor into side-by-side branded boutiques. When asked if all 1,055 Kay stores would be redone in the same manner, a Signet spokesperson said it is the new design for Kay that will be applied to all stores as they undergo remodeling.

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Signet, which completed its acquisition of Zale Corp. in late May, also is cross-testing brands. During the company's earnings call Tuesday, CEO Mark Light said 50 Kay and 30 Jared stores are carrying Zales’ Vera Wang Love brand while 50 Zales stores have Neil Lane, Le Vian and Jane Seymour.

It is, however, “way too soon to read” how the brands are doing in new stores, Light said. “At the end of the fourth quarter, we will get a better sense of what’s going on on that front.”

Same-store sales for Signet Jewelers Ltd., including its U.K. operations, were up 4 percent year-over-year in the quarter. Total sales climbed from $771.4 million to $1.18 billion, a 53 percent increase primarily due to the Zale Corp. acquisition.

Gross margin was 29.4 percent of sales, down from 31 percent of sales in the prior-year period, attributable to the fact that Zales operates with a lower gross margin. Helping gross margins was the drop in the gold price.

Signet recorded a third quarter net loss of $1.3 million compared with a net income of $33.6 million a year ago, dragged down by the Zales division. Zale Corp. had a “pre-acquisition trend of posting a loss in the third quarter,” Chief Financial Officer Michele Santana noted during the call.

Company executives said they expect markdowns this holiday season to be on par with the level of discounting seen in 2013. They anticipate same-store sales to increase 4 to 5 percent in the fourth quarter.

Also on Tuesday, Signet announced after years of trying, the company has been named a De Beers sightholder. De Beers began selecting additional sightholders in the middle of a contract period in 2013, adding five companies that March and another five in March 2014.

“Our De Beers site advances our strategic diamond sourcing efforts to the next level and, following last year’s purchase of a diamond-cutting factory in Botswana, we believe, as a De Beers site owner, that we are now far ahead of most of our industry peers," Light said.

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