Signet may sell H Samuel and Ernest Jones

Signet, the largest jewellery retail business in the world, is examining the potential sale of its UK chains H Samuel and Ernest Jones.

According to a report in the Sunday Telegraph, Signet has instructed its investment banking advisers, Lazard, to sound out potential buyers for the company’s UK arm and to investigate the price level that may be achieved. At this stage, indications are that a realistic sale value might be in the £400m - £600m vicinity.

Although at least two private equity firms have been approached directly to gauge their interest, the process is at a very early stage and there is no clear mandate to market the business for sale.

Sales results for the UK arm for the year to the end of January 2011 were down 1.4 per cent - not nearly as encouraging as the US operations which were up by nearly 9 per cent. In the US, Signet owns around 1000 stores under its Kay Jewelers and Jared the Galleria of Jewelry brands.

During the period, the UK arm made around £36 million profit on revenues of £435 million. Most recent UK figures for the beginning of this financial year show an even more severe 4.6 per cent decline in sales across its 590 stores, which comprise around 190 Ernest Jones outlets and 400 H Samuels outlets.

The company has been working hard to counter the challenging UK market conditions which have been exacerbated by the VAT rise to 20 per cent. Measures include developing new product lines and improving staff training and marketing strategies.

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