Signet Jewelers Limited (SIG Quick QuoteSIG - Free Report) has effectively navigated a challenging market landscape by implementing strategic cost-saving measures, enhancing digital platforms, optimizing fleet performance and introducing innovative product offerings. Despite downturns in certain segments, particularly in North America and international markets, Signet's proactive measures and strategic partnerships, such as the De Beers partnership, position the company for continued success. 

By focusing on operational efficiency and leveraging data-driven strategies, Signet aims to sustain profitability and growth in an uncertain economic environment. Driven by these factors, shares of this Zacks Rank #3 (Hold) company have gained 5.3% in the past year against the industry’s 3.8% decline.

The Zacks Consensus Estimate for current-year sales is pegged at $6.80 billion, indicating a year-over-year decline of 5.2%. However, the consensus estimate for earnings per share is pegged at $10.60, indicating year-over-year growth of 2.2%.

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Detailed Insights

Signet's strategic cost-saving measures aim for a total cost reduction of $350 million. Efforts include optimizing inventory, managing markdowns, enhancing sourcing efficiencies and leveraging technology. In first-quarter fiscal 2025, despite increased marketing spending for Mother's Day, Signet managed to lower its adjusted SG&A expenses by $9 million year over year.

Enhancing the digital platform is pivotal for improving the customer experience and boosting online sales. With e-commerce becoming increasingly crucial in retail, Signet has been utilizing proprietary data on 17 million individuals for targeted marketing, particularly to enhance bridal recovery. This data-driven strategy is expected to increase U.S. engagements by 5-10% in fiscal 2025, indicating a strong sales pipeline and effective market capture.

Signet's partnership with De Beers aims to enhance sales team training and improve customer interactions by emphasizing the uniqueness of natural diamonds. This includes marketing efforts to educate consumers about the differences between natural and lab-created diamonds, thereby strengthening Signet's market position.

The introduction of social selling capabilities for jewelry consultants is projected to triple revenue contribution in fiscal 2025, thereby adding 0.5 points to comp growth in fiscal 2025. Capital expenditure, which is estimated between $160 million and $180 million for fiscal 2025, focuses on store openings, renovations, and digital and technology advancements.

Fleet optimization efforts have been significant, particularly in the United Kingdom, where the company closed 23 stores in the first quarter, reducing overhead costs in the Ernest Jones banner. Additionally, inventory management has been optimized by clearing less productive, lower-margin products and introducing higher-margin, more relevant merchandise.

New fashion product offerings, like the Shy Collection at Jared and Unstoppable Love at Kay, have driven a 500-basis-point increase in fashion sales from fourth-quarter fiscal 2024, thereby boosting revenues and maintaining transaction values. Lab-created diamond fashion pieces and precious metal jewelry saw a 14% revenue increase year over year. The loyalty program expansion has increased active loyalty members by 20 points in first-quarter fiscal 2025 and has grown total membership by 25% since fiscal 2024.

Soft North American and International Segment

Despite the positive overall performance, there have been significant downturns in the North American and International segments. North American sales fell 9% year over year to $1.4 billion in the first quarter, with a 1.6% dip in average transaction value (“ATV”) and a drop in transaction volume, which led to a 9.2% decrease in same-store sales. International sales decreased 17% to $77.2 million due to a 15.3% ATV reduction from the sale of prestige watch stores and fewer transactions, resulting in a 3.2% same-store sales drop.

Looking Ahead

Signet remains cautious about the uncertain macroeconomic environment, particularly as consumer discretionary spending heightens during the peak holiday season. For second-quarter fiscal 2025, the company anticipates total sales in the range of $1.46-$1.52 billion, down from $1.61 billion reported in second-quarter fiscal 2024. For fiscal 2025, total sales are expected to be $6.66-$7.02 billion, down from $7.17 billion in fiscal 2024. However, the company’s cost-reduction efforts and enhanced operational efficiency should help mitigate these challenges.

Key Picks

Some better-ranked stocks in the retail space are The Gap, Inc. , Abercrombie & Fitch Co. (ANF Quick QuoteANF - Free Report) and Urban Outfitters Inc. (URBN Quick QuoteURBN - Free Report) .

Gap is a premier international specialty retailer that offers a diverse range of clothing, accessories and personal care products. It 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 Gap’s fiscal 2024 earnings and sales indicates growth of 22.4% and 0.2%, respectively, from fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.

Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.

The consensus estimate for Abercrombie’s fiscal 2024 earnings and sales indicates growth of 48.9% and 10.4%, respectively, from the fiscal 2023 reported levels. ANF has a trailing four-quarter average earnings surprise of 210.3%.

Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products. It currently has a Zacks Rank of 2. 

The Zacks Consensus Estimate for Urban Outfitters’ fiscal 2024 earnings and sales indicates growth of 9.9% and 5.8%, respectively, from the year-ago actuals. URBN has a trailing four-quarter average earnings surprise of 16.9%.