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Signet (SIG) is Sparkling, Stock Up More than 50% in 3 Months

Zacks Equity Research

Shares of Signet Jewelers Limited SIG have been on a bull run of late. Apparently, this Zacks Rank #1 (Strong Buy) stock has returned 52.8% in the past three months, outpacing the industry’s rise of 4.5%. The stock rally is solely attributed to its robust performance during the holiday season of 2019, which in turn prompted management to lift fourth-quarter and fiscal 2020 view. Following the holiday results announcement on Jan 16, the company has seen its shares surge almost 40%.

The holiday season turned out pretty well for Signet. In fact, the jewelry retailer posted better-than-anticipated holiday sales, primarily backed by notable improvement at its Zales, Piercing Pagoda and Peoples brands. Moreover, growth at the e-commerce platform was mainly powered by Signet’s online jewelry retailer James Allen, which reported same-store sales growth of nearly 27% during the season. This clearly demonstrates that the company has been largely benefiting from its online strategy, which is likely to continue driving results ahead.

Impressively, Signet’s overall e-commerce sales increased 13.5% year over year in the holiday period. The company’s significant investments to augment digital sales along with strength in merchandising and marketing strategies aided e-commerce as well as brick and mortar sales growth in North America. The company is also benefitting from its ‘Signet Path to Brilliance’ plan.

Signet now envisions fourth-quarter and fiscal 2020 sales of $2.12 billion and $6.1 billion, respectively. Earnings per share are projected in the range of $3.44-$3.52 and $3.61-$3.69 for the corresponding periods. (Read More: Signet Stock Up on Solid Holiday Sales, Upbeat View)

Management’s ‘Signet Path to Brilliance’ transformation plan is designed to augment savings, engage in customer-centric growth and bolster e-commerce sales. Signet continues to anticipate cost savings of $80-$90 million for fiscal 2020. The company had earlier guided cost savings of $200-$225 million from this program by the end of fiscal 2021, including savings of $85 million achieved in fiscal 2019. Going ahead, the plan is anticipated to prove accretive to fiscal 2021 results.

With that said, we believe that Signet is well poised for growth in the coming months, based on the aforesaid strengths.

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