Signet glisters in the retail gloom

Time to order up City Centre shares; Datamonitor's rating sets demanding test

America's love affair with "bling bling" delivered a happy Christmas for Signet, the jewellery group which yesterday proved that some retailers got the festive season right, even if most have had a torrid time.

America's love affair with "bling bling" delivered a happy Christmas for Signet, the jewellery group which yesterday proved that some retailers got the festive season right, even if most have had a torrid time.

Strong sales of chunky gold chains, diamond rings and other expensive paraphernalia allowed Signet to deliver a strong trading update yesterday with a particularly good performance in the US.

The company generates 69 per cent of turnover in America. Its Kay Jewelers and Jared chains there delivered a 6.4 per cent increase in like-for-like sales in the eight weeks to 24 December, with total sales up 10.4 per cent.

Terry Burman, Signet's chief executive, resisted the temptation to discount in the run up to Christmas, reporting "an improving retail environment" in America. The only snag is the weakness of the dollar. Once that is taken into account, the reported increase in total sales fell to 1.4 per cent, quite a blow.

That said, Mr Burman still reckons that profit before tax at the group is expected to be ahead of last year, meeting analysts' expectations.

In Britain, where Signet trades as H Samuel and Ernest Jones, like-for-like sales were up 6.7 per cent in what was generally accepted to be a tough trading environment.

It seems Signet got Christmas right. The blemish on the shine is the currency translation. Ignoring that for the moment, the company is performing well, generating plenty of cash with a progressive dividend policy, and delivering improved earnings per share every year.

In the US it has increased its retail space by 20 per cent over the past three years and has outperformed its American peers such as Zales over the Christmas period. Many UK retailers have come unstuck in the US, so credit is due for that.

The shares took a knock yesterday as the market absorbed the full extent of the currency hit, falling from 104.25p to 100.5p. But the company has got its trading strategies right, a skill which should not be underestimated. One day the dollar weakness will reverse in Signet's favour and a prospective price-earnings ratio of 12 for the next year is not too demanding for a company showing good growth.

At a time when many investors are intuitively saying "avoid retailers" Signet is one worth considering.

Time to order up City Centre shares

With the tie-up of City Centre Restaurants and Ask Central, slated to complete around the end of the month, it is a relief to see both companies trading well.

The deal marries City Centre's Caffé Uno's, Est Est Est and Garfunkel's with Ask's 167 pizza and pasta restaurants under the Ask and Zizzi brands. The new group - which will be renamed The Restaurant Group - will have more than 400 sites and about 10,000 staff.

City Centre said it had a decent Christmas and new year with sales up more than 7 per cent - making for growth of about 3 per cent over the year as a whole.

Ask, as always, is a little less precise in its assessment of the festive period but says it enjoyed a "successful" December/Christmas period with positive sales growth. It noted, however, that it opened 30 restaurants last year, most in the fourth quarter, which won't make a significant contribution until this year. There will also be development costs tied to its three new Jo Shmo sites - upmarket American-style grill restaurants.

But all eyes will be on what savings and synergies can be made from a combination of the pair and at what price. They have also yet to say how the portfolio will look and how much it will cost to rebrand certain sites.

Analysts are forecasting City Centre to make about 6.5p of earnings this year, putting it on a rating of 11.7 times, while they reckon Ask should produce about 15.9p, putting it on a multiple of 11.3 times.

The merger will clearly produce savings and synergies - although they remain unquantified and, in any case, are unlikely to be felt until 2005. But given the strong current trading, City Centre looks appetising.

Datamonitor's rating sets demanding test

Barely a day seems to go by without some new piece of research from Datamonitor telling us that consumer debt is spiralling out of control or that we are becoming a nation of "down-shifters".

This is the popular interest stuff from the information and research group - the reports that are picked up in the press - but it is outweighed by a much greater quantity of detailed industry analysis for corporate clients.

The company, which put out a very positive trading update yesterday, works for some 500 large companies, providing quarterly reports on aspects of the sectors it covers - energy, pharmaceuticals, technology etc.

Datamonitor has turned out to be a remarkable recovery play over the past 12 months, even through the uncertain corporate conditions we have seen. The company had fallen into difficulty, especially as a result of costs getting out of control. Then founder Mike Danson came back as chief executive and things have turned around.

The company's shares closed up 7.5p at 131p yesterday, having stood at just 22.5p a year ago. Investec, the house broker, now expects 2003 to bring in pre-tax profits of £2.5m or 3.6p a share, rising to £3.6m or 5.3p in 2004.

The rating is pretty demanding, even though the outlook for businesses is improving - especially for some of the sectors that have proved lucrative for Datamonitor in the past, such as technology. Hold.