3 Factors That Make Signet (SIG) an Alluring Stock Post Q2
Signet Jewelers Limited SIG has been constantly undertaking strategic endeavors to strengthen its footing in the jewelry space, including efforts to enhance traffic, develop a strong product portfolio and make its business operations more efficient. These factors, coupled with strength in e-commerce aided the company in second-quarter fiscal 2019, wherein same-store sales aided top-line growth.
On that note, let’s take a sneak-peak into some of the strategies that this Zacks Rank #1 (Strong Buy) company has put in place to maintain its growth path. Markedly, Signet’s shares have rallied 36% in the past six months compared with the industry’s growth of 24.4%.
Digital Presence Adds Gleam to Jewelry Sales
Rise in e-commerce operations has been fueling the company’s top-line performance for a while. During second-quarter fiscal 2019, e-commerce sales, including James Allen, came in at $150.3 million, up 82.8% on a year-over-year basis. Moreover, e-commerce sales accounted for almost 10.6% of total sales. In the first quarter, e-commerce sales accounted for almost 10% of total sales and surged 80.9% on a year-over-year basis. Encouragingly, traffic and average order value witnessed growth in the first half of the fiscal.
In order to keep the momentum in e-commerce, Signet has lined-up several initiatives. Significant among them is its plans to utilize digital innovation capabilities of R2Net for developing innovative offerings. Notably, through the acquisition of R2Net, Signet has been able to combine the retail jewelry business with R2Net’s solid digital portfolio. Apart from this, the company is trying to make online shopping simpler for customers.
Markedly, it has expressed plans to make it easier for customers to sign into Kay, Zales, and Jared websites using Google and Facebook credentials. Moreover, encouraged by sturdy mobile traffic witnessed in the first half, management intends to make more investments in this area. Bolstering digital capabilities also form vital part of the company’s strategic initiative entitled ‘Signet Path to Brilliance’ that is essentially our next topic of discussion.
Path to Brilliance
In an effort to drive long-term growth, Signet came up with the ‘Signet Path to Brilliance’ plan, which will continue for the next three years. Notably, this three-year strategic initiative comprises focusing on customer-centric growth actions, enhancing efficiency across omnichannel and most importantly, driving cost effectiveness. In fact, based on the customer-first approach, the company introduced improved feedback systems across its stores during the second quarter. Additionally, to enhance consumers’ shopping experience, it is on track with the process of differentiating its banners and launching new collections.
Impressively, a vital aspect in the company’s three-year strategic initiative is to enhance savings. Under this transformation plan announced in March 2018, management expects to generate $200-$225 million of net cost savings over the next three fiscals. During fiscal 2019, the company anticipates net costs savings of $85-$100 million, with the remaining coming in by the end of the three-year program.
Share Buybacks & Dividend Payments
Signet has been consistently enhancing shareholders’ return through share repurchases and dividends. During the second quarter of fiscal 2019, the company bought back shares worth $425 million. With this, the company completed stock repurchases of $485 million in the first half of fiscal 2019. As of Aug 4, it had $165.6 million worth of stock left under its authorized share repurchase program. Additionally, management frequently engages in dividend payments. In fact, the company announced a dividend of 37 cents for third-quarter fiscal 2019.
Final Thoughts
Clearly, Signet has all the right strategic arrows in its quiver to keep the growth momentum alive. Encouragingly, management raised its guidance for fiscal 2019, following second-quarter results. These factors are more than enough to keep this renowned jeweler glistening in the eyes of investors.
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