Signet Jewelers Limited (SIG Quick QuoteSIG - Free Report) posted better-than-expected results for second-quarter fiscal 2024. Yet, both sales and earnings declined from the year-ago fiscal quarter’s readings. Also, same-store sales fell 12% from the year-earlier fiscal quarter’s levels.

This presently Zacks Rank #3 (Hold) player’s shares have gained 14.6% in the past three months compared with the industry’s 5.4% growth.

Quarterly Details

Signet reported adjusted earnings of $1.55 per share, beating the Zacks Consensus Estimate of $1.34. However, the bottom line decreased from $2.68 in the year-ago fiscal quarter.

This jewelry retailer generated total sales of $1,613.6 million, ahead of the consensus estimate of $1,560 million. Yet, the top line dipped 8.1% from the prior-year fiscal quarter’s tally due to soft same-store sales. The metric tumbled 8.2% at constant currency.

A Sneak Peek Into Margins

Gross profit in the fiscal second quarter came in at $610.8 million, down from $664.7 million in the year-ago fiscal quarter.

Selling, general & administrative expenses reached $511.2 million, up from $477.3 million in the prior-year fiscal quarter. SIG reported adjusted operating income of $102.7 million, down from $193.2 million in the year-ago fiscal quarter. As a rate of sales, adjusted operating margin contracted 460 basis points to 6.4%.

Segment Discussion

Sales in the North American segment fell 7.1% from the year-ago fiscal quarter’s number to $1.5 billion. This reflected a rise of 4.4% in total average transaction value ("ATV"), mainly owing to a lift from Blue Nile of about 5% on a lower number of transactions. Same-store sales tumbled 12.2% from the year-ago fiscal quarter’s levels.

Sales in the International segment tumbled 8.6% from the year-earlier fiscal quarter to $102 million. Same-store sales slipped 8.4%, reflecting impacts of increased ATVs and lower transactions. Sales fell 11.6% on a constant-currency basis.

Financial Details

Signet ended the quarter under discussion with cash and cash equivalents of $690.2 million, accounts receivable of $16.8 million and inventories of $2,093.9 million. It has no long-term debt at the end of the reported fiscal quarter. Total shareholders’ equity was $1,614.1 million.

As of Jul 29, 2023, Signet used net cash of $253.3 million from operating activities. Free cash flow was $308.7 million as of the same date.

During the first half, the company repurchased about 1.2 million shares for $82.4 million, including $43.3 million in the reported quarter. Nearly $718 million is available under its multi-year authorization. SIG’s board has announced a quarterly cash dividend of 23 cents per share for the second quarter, payable on Nov 24, 2023 to shareholders of record as of Oct 27, with an ex-dividend date of Oct 26, 2023.

We note that Signet had 2,761 stores as of Jul 29, 2023.

Guidance

Signet issued guidance for the third quarter and reiterated view for fiscal 2024, which is a 53-week fiscal year. For the third quarter, it projects total sales in the band of $1.36-$1.41 billion.  Operating income is anticipated in the range of $10-$25 million.

For the current fiscal year, it continues to forecast total sales in the band of $7.10-$7.30 billion. Operating income is estimated in the range of $635-$675 million, down from $850.4 million recorded in the last fiscal year.

Earnings per share (EPS) are envisioned in the bracket of $9.55-$10.14 compared with the earlier view of $9.49-$10.09. In fiscal 2023, it recorded EPS of $11.80.

Management expects capital investments of up to $200 million along with investments in banner differentiation with stores, connected-commerce capabilities, and digital and technology upgrades.

The company’s guidance is based on assumptions, which include the annual US Jewelry industry’s revenues to decline over mid-single digits, persistent headwinds in engagements with recovery later in fiscal 2024 and an annual tax rate of around 19%. We note that bridal overall, inclusive of engagements, historically reflects nearly 50% of the company’s merchandise sales. It expects a certain shift in consumer discretionary spending from the jewelry category.

Key Picks

We have highlighted three better-ranked stocks, namely Abercrombie & Fitch (ANF Quick QuoteANF - Free Report) , Boot Barn (BOOT Quick QuoteBOOT - Free Report) and American Eagle Outfitters (AEO Quick QuoteAEO - Free Report) .

Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and EPS suggests growth of 3.4% and 736%, respectively, from the year-ago reported figures. ANF has delivered earnings surprise of 480.6% in the last four quarters.

Boot Barn, a fashion retailer of apparel and accessories, currently flaunts a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 13.5%, on average.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales implies a rise of 5.1% from the year-ago reported figure.

American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). AEO has delivered average earnings surprise of 9.2% in the last four quarters.

The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year EPS indicates a jump of 7.2% from the year-ago reported figure.