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Signet (SIG) Plummets on Dismal Holiday Sales & Soft View

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Shares of Signet Jewelers Limited (SIG - Free Report) lost sheen in the index and declined roughly 6.9% yesterday, following lackluster performance this holiday season and soft fiscal 2018 guidance. The company’s dismal holiday sales results were primarily due to negative effect of the credit outsourcing transition and weakness at UK Jewelry division. Further, challenging retail landscape, aggressive promotional strategies and waning mall traffic were the other reasons behind lower-than-expected results.

Signet’s total sales for the nine-week period ended Dec 30, 2017, decreased 3.1% to $1,881.7 million from $1,940.9 million in the prior year, while same store sales fell 5.3%. On a constant currency basis, total sales dropped 3.9%. However, e-commerce sales in the holiday season surged 47.7% to $210.5 million from the year-ago period. Sharp increase in e-commerce sales were primarily driven by R2Net buyout. During the holiday season, the company raised digital marketing expenditure by 35%, compared with prior year spending of 29%.

Same store sales across Sterling Jewelers division and UK Jewelry division fell 8.5% and 10.3%, respectively. However, same store sales at Zale division rose 4%.

This holiday season performance was more or less similar to that of 2016, where total sales decreased 5.1% and same store sales declined 4.6% in the nine-week period ended Dec 31, 2016.

The dismal results compelled management to adopt a more conservative view. Signet now expects fiscal 2018 earnings (excluding the impact of U.S. tax reform) in the range of $6.17-$6.22, compared with the prior guidance of $6.10-$6.50. Moreover, earnings (including the impact of U.S. tax reform) are estimated to be in range of $6.45-$6.50. Meanwhile, the company continues to expect same store sales to decline by mid-single digits.

Apart from Signet, other retailers such as Urban Outfitters (URBN - Free Report) and Kohl’s Corp. (KSS - Free Report) registered sales growth of 3.6% and 6.9%, respectively, during the November-December period, while both J. C. Penney (JCP - Free Report) and Target (TGT - Free Report) recorded comparable store sales growth of 3.4%.

Bottom Line

Signet’s dull holiday season and subsequent tightening of guidance has hurt investor sentiment and it would not be a surprise if shares slide further in the coming days. In a year, shares of this Zacks Rank #5 (Strong Sell) company have plunged 36.4%, against the industry’s growth of 9.3%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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