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Why Signet Jewelers Dropped 23.3% in January

Steve Symington, The Motley Fool

What happened

Even as the S&P 500 roared 8% higher last month, shares of Signet Jewelers (NYSE: SIG) fell 23.3% in January, according to data from S&P Global Market Intelligence, after the jewelry retailer announced underwhelming holiday-season results. 

Shares plunged more than 20% on Jan. 17, 2019, alone -- the first trading day after its preliminary release hit the wires. In that release, Signet confirmed that same-store sales had fallen 1.3% year over year in the nine-week period ended Jan. 5, 2019.

Yellow stock chart with a pixelated gray background indicating losses

IMAGE SOURCE: GETTY IMAGES.

So what

Signet CEO Virginia Drosos blamed a combination of larger-than-expected declines in sales of legacy products, higher credit costs, intensified competitive promotions, and lower traffic in "key December gifting weeks."

"These holiday results reinforce the need to take even faster action to improve our financial and operational performance," Drosos added. "We will move decisively to improve profitability through aggressively optimizing our cost structure and continuing to right-size our store base, as well as more effectively managing our inventory."

Now what

In the meantime, however, Signet also reduced its fiscal fourth-quarter 2019 guidance to call for a same-store sales decline of 1.6% to 2.5%, compared to a prior range of down 1.5% to up 1%. Signet also anticipates fiscal Q4 sales of $2.14 billion to $2.16 billion (down from $2.17 billion to $2.22 billion before), and adjusted earnings per share of $3.77 to $3.92 (down from $4.35 to $4.59 previously). 

More recently, Signet followed by pushing back the date of its final fourth-quarter and full fiscal-year 2019 earnings release and conference call to April 3, 2019 (from March 14 previously). In a press release last week, the company explained that the change was made to give management time to complete analysis regarding a potential non-cash impairment charge in the fourth quarter stemming from Signet's recent decline in market capitalization. This non-cash charge will effectively punctuate Signet's recent share-price decline, but the company was quick to point out that it won't affect liquidity or cash flow.

In any case, if one thing is clear, it's that Signet wanted more from the crucial holiday season. And investors responded in kind by bidding down its shares last month.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.