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On June 4, 2009,

Signet Group

(SIG) - Get Report

reported a 2.3% increase in its Q1 FY10 earnings, helped by lower expenses partially offset by declining revenues. Net income stood at $26.30 million or $0.31 per share compared to $25.70 million or $0.30 per share in Q1 FY09.

Revenue fell 7.3% to $762.60 million from $822.50 million a year ago, reflecting an underlying decrease of 1.1% at constant exchange rates, as well as a 2.9% decrease in same store sales. Geographically, revenue from the US market, contributing 81.9% to the total revenue, inched down marginally to $624.90 million from $631.10 million. Average unit selling price fell by 9.0% in the mall brands and by 7.0% in Jared, excluding the impact of a new merchandising program. Furthermore, revenue from the UK slumped 28.1% to $137.70 million from $191.40 million, due to a 4.2% drop in same-store sales, with H. Samuel down 2.0% and Ernest Jones down 6.7%.

Central costs incurred were $2.70 million, due to the impact of the change in the average exchange translation rate and a gain on foreign exchange. Additionally, finance costs rose to $11.00 million as a result of fees of $3.40 million related to the amendment to the borrowing agreements, a higher level of debt and increased interest rates under new facilities. Furthermore, the gross profit margin declined 26 basis points to 33.50% from 33.76%. However, operating profit margin increased 129 basis points to 6.87% from 5.58%, helped by a decline of 11.0% in its selling, general, and administrative expenses.

Looking ahead to FY10, Signet Group estimates that it will carry out a $100.00 million cost reduction program in its U.S operations with a significant working capital reduction. It also forecasts the reduction of its capital expenditure by about 50.0% to approximately $55.00 million. Additionally, it now expects cash flow before financing activities to range in between $175.00 and $225.00 million.