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Signet's (SIG) Stock Tumbles on Q1 Earnings, Sales Miss
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After two straight quarters of earnings beat, Signet Jewelers Limited (SIG - Free Report) succumbed to a negative earnings surprise of 38% in the first quarter of fiscal 2018. On the other hand, top line continues with its dismal performance and missed the consensus mark for the tenth quarter in row. Despite witnessing lower-than-expected results, management reiterated its earnings projection but this failed to provide cushion to the stock.
Shares of this Hamilton, Bermuda based company were last seen down roughly 5% during the pre-market trading hours. We noted that the stock has plunged 40.9% in the past six months, and has underperformed the Zacks categorized Retail-Jewelry Stores industry that declined 11.3% in the said time frame.
Competitive retail environment, soft jewelry spending and company related challenges hurt Signet’s performance. Nevertheless, the company is striving hard to position itself on the growth trajectory. The company will invest between $260 million and $275 million towards opening of new Kay off-mall stores, remodeling, information and technology advancement as well as toward improving distribution facilities.
The company is improving its digital marketing efforts and made changes to organizational structure. Taking into account the success attained on its Customer-First OmniChannel strategy and other endeavors, Signet retained its outlook. The company also announced that it will sell $1 billion of prime-only credit quality accounts receivable to Alliance Data Systems Corporation, as a part of its plan to outsource its in-house credit program.
Coming to the Facts
Signet’s first-quarter earnings of $1.03 per share missed the Zacks Consensus Estimate of $1.66, and declined sharply from adjusted figure of $1.95 reported in the year-ago quarter. The current quarter earnings comprise a unfavorable impact of about 17 cents on account of the later timing of Mother's Day holiday.
Nevertheless, management reaffirmed its earnings per share projection of $7.00–$7.40 for fiscal 2018. The current Zacks Consensus Estimate for the fiscal year stands at $7.00.
The retailer of diamond jewelry and watches generated total sales of $1,403.4 million that declined 11.1% year over year (or 10.1% on a constant currency basis), and also came below the Zacks Consensus Estimate of $1,492 million. Same store sales fell 11.5% compared with an increase of 2.4% registered in the prior-year period. Management expects fiscal 2018 same store sales to decline in the low-to-mid single-digit percentage.
On account of lower store traffic, the number of transactions declined across all divisions. Merchandise categories and collections were significantly lower in the quarter but e-Commerce and Piercing Pagoda total sales rose year over year. Diamond fashion jewelry such as bracelets, earrings and necklaces showcased improved performance, when compared with the overall merchandise portfolio. e-Commerce sales came in at $81 million, up 1.1% on a year-over-year basis.
Gross profit slumped 18.2% to $491.2 million, while gross margin contracted 300 basis points (bps) to 35%. Operating income came in at $115.3 million, down 45.6%, whereas operating margin shriveled 520 bps to 8.2%.
Segment Discussion
By division, sales at the Sterling Jewelers Division decreased 11.2% to $871 million. Same store sales fell 12.8%, reflecting a decline of 16.6% in the number of transactions but an increase of 3.7% in average transaction value.
Sales at the Zale Division fell 10.4% to $403.4 million. Same-store sales declined 12.7%, reflecting a decline of 16.9% in the number of transactions but an increase of 2.9% in average transaction value. Same-store sales for Piercing Pagoda's decreased 1.3% but sales increased 1% to $69.7 million.
Sales at the UK Jewelry Division plunged 14.9% to $122.5 million. Same-store sales dropped 3.5%, reflecting a decline of 14.4% in the number of transactions but an increase of 12.4% in average transaction value.
Other segment sales soared 58.5% to $6.5 million.
Signet Jewelers Limited Price, Consensus and EPS Surprise
Signet ended the fiscal quarter with cash and cash equivalents of $99.7 million, net accounts receivable of $1,726.3 million and inventories of $2,432.4 million. Long-term debt and total shareholders’ equity were $1,311.6 million and $2,543.4 million, respectively.
During the quarter, the company did not buyback any shares. As of Apr 29, 2017, the company had $510.6 million worth of shares remaining under its repurchase authorization.
In fiscal 2018, the company plans to close 165–170 stores mostly in mall based regions while opening 90-115 fresh stores, mostly Kay off-mall. As of Apr 29, 2017, the company operated 3,665 stores, reflecting 1,590 stores under Sterling Jewelers division, 1,565 stores under Zale division and 510 stores under UK Jewelry division.
Best Buy delivered an average positive earnings surprise of 27.7% over the trailing four quarters and has a long-term earnings growth rate of 10.8%.
Burlington Stores delivered an average positive earnings surprise of 26.3% over the trailing four quarters and has a long-term earnings growth rate of 15.9%.
PVH Corp. delivered an average positive earnings surprise of 6.5% over the trailing four quarters and has a long-term earnings growth rate of 10.7%.
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Signet's (SIG) Stock Tumbles on Q1 Earnings, Sales Miss
After two straight quarters of earnings beat, Signet Jewelers Limited (SIG - Free Report) succumbed to a negative earnings surprise of 38% in the first quarter of fiscal 2018. On the other hand, top line continues with its dismal performance and missed the consensus mark for the tenth quarter in row. Despite witnessing lower-than-expected results, management reiterated its earnings projection but this failed to provide cushion to the stock.
Shares of this Hamilton, Bermuda based company were last seen down roughly 5% during the pre-market trading hours. We noted that the stock has plunged 40.9% in the past six months, and has underperformed the Zacks categorized Retail-Jewelry Stores industry that declined 11.3% in the said time frame.
Competitive retail environment, soft jewelry spending and company related challenges hurt Signet’s performance. Nevertheless, the company is striving hard to position itself on the growth trajectory. The company will invest between $260 million and $275 million towards opening of new Kay off-mall stores, remodeling, information and technology advancement as well as toward improving distribution facilities.
The company is improving its digital marketing efforts and made changes to organizational structure. Taking into account the success attained on its Customer-First OmniChannel strategy and other endeavors, Signet retained its outlook. The company also announced that it will sell $1 billion of prime-only credit quality accounts receivable to Alliance Data Systems Corporation, as a part of its plan to outsource its in-house credit program.
Coming to the Facts
Signet’s first-quarter earnings of $1.03 per share missed the Zacks Consensus Estimate of $1.66, and declined sharply from adjusted figure of $1.95 reported in the year-ago quarter. The current quarter earnings comprise a unfavorable impact of about 17 cents on account of the later timing of Mother's Day holiday.
Nevertheless, management reaffirmed its earnings per share projection of $7.00–$7.40 for fiscal 2018. The current Zacks Consensus Estimate for the fiscal year stands at $7.00.
The retailer of diamond jewelry and watches generated total sales of $1,403.4 million that declined 11.1% year over year (or 10.1% on a constant currency basis), and also came below the Zacks Consensus Estimate of $1,492 million. Same store sales fell 11.5% compared with an increase of 2.4% registered in the prior-year period. Management expects fiscal 2018 same store sales to decline in the low-to-mid single-digit percentage.
On account of lower store traffic, the number of transactions declined across all divisions. Merchandise categories and collections were significantly lower in the quarter but e-Commerce and Piercing Pagoda total sales rose year over year. Diamond fashion jewelry such as bracelets, earrings and necklaces showcased improved performance, when compared with the overall merchandise portfolio. e-Commerce sales came in at $81 million, up 1.1% on a year-over-year basis.
Gross profit slumped 18.2% to $491.2 million, while gross margin contracted 300 basis points (bps) to 35%. Operating income came in at $115.3 million, down 45.6%, whereas operating margin shriveled 520 bps to 8.2%.
Segment Discussion
By division, sales at the Sterling Jewelers Division decreased 11.2% to $871 million. Same store sales fell 12.8%, reflecting a decline of 16.6% in the number of transactions but an increase of 3.7% in average transaction value.
Sales at the Zale Division fell 10.4% to $403.4 million. Same-store sales declined 12.7%, reflecting a decline of 16.9% in the number of transactions but an increase of 2.9% in average transaction value. Same-store sales for Piercing Pagoda's decreased 1.3% but sales increased 1% to $69.7 million.
Sales at the UK Jewelry Division plunged 14.9% to $122.5 million. Same-store sales dropped 3.5%, reflecting a decline of 14.4% in the number of transactions but an increase of 12.4% in average transaction value.
Other segment sales soared 58.5% to $6.5 million.
Signet Jewelers Limited Price, Consensus and EPS Surprise
Signet Jewelers Limited Price, Consensus and EPS Surprise | Signet Jewelers Limited Quote
Other Details
Signet ended the fiscal quarter with cash and cash equivalents of $99.7 million, net accounts receivable of $1,726.3 million and inventories of $2,432.4 million. Long-term debt and total shareholders’ equity were $1,311.6 million and $2,543.4 million, respectively.
During the quarter, the company did not buyback any shares. As of Apr 29, 2017, the company had $510.6 million worth of shares remaining under its repurchase authorization.
In fiscal 2018, the company plans to close 165–170 stores mostly in mall based regions while opening 90-115 fresh stores, mostly Kay off-mall. As of Apr 29, 2017, the company operated 3,665 stores, reflecting 1,590 stores under Sterling Jewelers division, 1,565 stores under Zale division and 510 stores under UK Jewelry division.
Zacks Rank & Other Stocks
Signet currently carries a Zacks Rank #4 (Sell). Investors may consider better-ranked stocks such as Best Buy Co., Inc. (BBY - Free Report) , Burlington Stores, Inc. (BURL - Free Report) and PVH Corp. (PVH - Free Report) , each of them carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Best Buy delivered an average positive earnings surprise of 27.7% over the trailing four quarters and has a long-term earnings growth rate of 10.8%.
Burlington Stores delivered an average positive earnings surprise of 26.3% over the trailing four quarters and has a long-term earnings growth rate of 15.9%.
PVH Corp. delivered an average positive earnings surprise of 6.5% over the trailing four quarters and has a long-term earnings growth rate of 10.7%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>