Signet Jewelers Ltd Earnings Call Nuggets: Ultra Gross Margin and Third Quarter Guidance
Signet Jewelers Ltd (NYSE:SIG) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Ultra Gross Margin
Rick Patel – Stephens: Can you help us think about what happened to Ultra’s gross margin on a sequential basis just comparing the first quarter to the second? On the surface, it looks like things got a little worse, but we’re just trying understand if that has to do with product, pricing or if it’s just the traditional thing that you’re going through right now?
Ron Ristau – CFO: Rick, you mean the operating margin at Ultra?
Rick Patel – Stephens: Gross margin.
Ron Ristau – CFO: The operating margin at Ultra was affected in the second quarter by one-time exit costs. So, therefore, the loss was about $0.06 in the quarter as we had previously indicated. And as we said, the entire loss in Ultra, about $0.09 in the first half of the year, a lot of that is related to transitional or one-time costs. So, as we move forward, we don’t, of course, next year believe that $0.09 expense will continue.
Rick Patel – Stephens: And do you have confidence that the gross margin part of Ultra or at least the impact of that to the total gross margin line is going to improve as you through the year?
Ron Ristau – CFO: I believe that the gross margin in Ultra will do a little better, yes.
Rick Patel – Stephens: And then can you talk to us about how we should we be thinking about SG&A for the remainder of the year. I’m curious if you can achieve leverage in the back half and how we should be thinking about the fourth quarter, specifically given last year’s 53rd week and the acquisition of Ultra.
Ron Ristau – CFO: Well, we don’t give specific guidance on that. I think our SG&A spending, as I indicated, was well controlled. If you look at our SG&A spending, excluding Ultra, we actually leveraged it and we believe that our excellent controls in SG&A will continue as we go through the year. That’s probably the best I could say about that. We will experience some deleveraging as it relates to Ultra, but we expect that the base business will continue to perform well…