SEATTLE (Reuters) — Bermuda-based jewellery retailer Signet Jewelers Ltd. posted a higher-than-expected quarterly profit yesterday as cost-cuts helped to offset weak demand, and its shares rose more than 12 percent in afternoon trading.

The retailer, which has kept a tight lid on expenses to fight a sales slump, said it is on track to save up to $100 million in costs at its US division, which accounts for about 80 percent of its overall sales.

Signet earned $27.6 million, or 32 cents a share, in the second quarter ended August 1, compared with $19.7 million, or 23 cents a share, a year earlier.

Analysts on average had expected earnings of 23 cents a share, according to Reuters Estimates.

Total sales at Signet, which runs Kay Jewelers and Jared The Galleria of Jewelry stores in the United States and Ernest Jones and H Samuel in Britain, fell about 7.6 percent to $710.8 million.

Jewellers like Signet and Zale Corp and even upscale chain Tiffany & Co have faced weak sales as the economic slump has forced shoppers to turn frugal. In turn, retailers have cut costs to offset lower demand.

But in a possible sign that the decline may not worsen, Tiffany pointed to slightly recovering demand for jewellery late last month, though it Tiffany noted that it does not expect the economic environment to change materially from its current state in the near future.

Signet took a similar stand yesterday, saying "the consumer environment in both the US and UK remains very uncertain" in the short term. But it said it is prepared to face the fast-approaching holiday sales season.

The world's largest speciality retailer had said in June that its marketing efforts and more exclusive merchandise were helping to bolster its market share. It has also benefited as many of its rivals have closed stores or gone bankrupt.

It now expects free cash inflow of $275 million to $325 million for the year, up from its prior target of $175 million to $225 million.