Shares of Signet Jewelers Limited SIG lost sheen on the bourses and nosedived roughly 24.7% on Jan 17, 2019, as investors fretted over the company’s lackluster performance during the holiday season. This compelled the retailer of diamond jewelry to trim sales and earnings forecast.
Management stated that fall in sales of legacy collections, aggressive promotional environment and waning traffic during important gifting weeks of December were the primary reasons behind lower-than-expected results. Even the company’s new merchandise assortment, digital marketing and omni-channel efforts failed to deliver desired results.
Signet’s total sales for the nine-week period ended Jan 5, 2019, decreased 2.5% to $1,835.4 million, while same store sales fell 1.3%. On a constant currency basis, total sales dropped 1.9%. Non-same store sales during the festive season fell 0.6%. E-commerce sales increased 5.6% year over year to $222.3 million.
Meanwhile sales at North America and International segments declined 2.1% to $1,667.5 million and 11.7% to $156.4 million, respectively. Same store sales across the respective segments declined 0.7% and 7.3%.
We note that same store sales across Kay, Jared, James Allen and Regional banners fell 0.8%, 8%, 0.2% and 14.6%, respectively. However, the metric improved 2.9%, 16.9% and 4.5% across Zales, Piercing Pagoda and Peoples, respectively.
The dismal results compelled management to lower view. Signet, which competes with Tiffany TIF, now expects fourth-quarter fiscal 2019 same store sales to decline in the band of 1.6-2.5% compared with previous forecast of down 1.5% to up 1.0%. Management now projects adjusted earnings between $3.77 and $3.92 per share for the quarter compared with $4.35-$4.59 anticipated earlier.
For fiscal 2019, same store sales are now expected to be flat compared with the prior estimate of flat to up 1%. Adjusted earnings are projected in the band of $3.53-$3.69 per share compared with earlier view of $4.15-$4.40. Management now expects capital expenditures between $165 million and $175 million compared with prior guidance of $165-$185 million.
Signet’s dull holiday season and subsequent trimming of guidance hurt investor sentiment and it will come as no surprise if shares slide further in the coming days. In the past three months, shares of this Zacks Rank #3 (Hold) company have plunged 52.8% compared with the Zacks Retail-Jewelry industry’s decline of 24.3%.
Nevertheless, the company is concentrating on cost containment efforts, optimization of store base and management of inventory level. The company is on track with the ‘Signet Path to Brilliance’ plan, which is designed to augment savings, engage in customer-centric growth and bolster e-commerce.
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