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Signet Jewelers (SIG) Up 16.1% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Signet Jewelers Limited (SIG - Free Report) . Shares have added about 16.1% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to their next earnings release, or is the stock due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Signet's Q1 Earnings & Sales Miss Estimates
Signet Jewelers posted first-quarter fiscal 2018 earnings of $1.03 per share, which 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 an unfavorable impact of about $0.17 on account of the later timing of Mother's Day holiday.
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.
Management reaffirmed its earnings per share projection of $7.00–$7.40 for fiscal 2018.
The company 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 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.
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.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in estimates revisions. There have been two revisions higher for the current quarter compared to one lower.
At this time, the stock has an average Growth Score of 'C', though it is lagging a bit on the momentum front with an 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
While estimates have been broadly trending upward for the stock, the magnitude of these revisions indicates a downward shift. Interestingly, the stock has a Zacks Rank #5 (Strong Sell). We are expecting a below average return from the stock in the next few months.
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Signet Jewelers (SIG) Up 16.1% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Signet Jewelers Limited (SIG - Free Report) . Shares have added about 16.1% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to their next earnings release, or is the stock due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Signet's Q1 Earnings & Sales Miss Estimates
Signet Jewelers posted first-quarter fiscal 2018 earnings of $1.03 per share, which 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 an unfavorable impact of about $0.17 on account of the later timing of Mother's Day holiday.
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.
Management reaffirmed its earnings per share projection of $7.00–$7.40 for fiscal 2018.
The company 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 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.
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.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in estimates revisions. There have been two revisions higher for the current quarter compared to one lower.
Signet Jewelers Limited Price and Consensus
Signet Jewelers Limited Price and Consensus | Signet Jewelers Limited Quote
VGM Scores
At this time, the stock has an average Growth Score of 'C', though it is lagging a bit on the momentum front with an 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
While estimates have been broadly trending upward for the stock, the magnitude of these revisions indicates a downward shift. Interestingly, the stock has a Zacks Rank #5 (Strong Sell). We are expecting a below average return from the stock in the next few months.