January 17th, 2020 – Lisa Beilfuss
Signet Jewelers raised its sales and earnings guidance after a strong holiday showing. Its stock rocketed higher in response.
The jewelry chain reported a 13.5% jump in online sales during the holiday season.
Signet Jewelers raised its sales and earnings guidance after a strong holiday showing. Its stock rocketed higher Thursday in response. The jewelry chain, which operates the Kay, Zales, and Jared brands, along with online seller James Allen and others, said same-store sales rose 1.6% during the nine weeks ended January 4. More impressive was the 13.5% jump in online sales.
Thanks to solid holiday sales, Signet (ticker: SIG) lifted guidance for the fourth quarter and full year. The new forecasts are significantly more optimistic than what Wall Street has been expecting. For its fourth fiscal quarter, the company said same-store sales will be up 1.1%. Previously, Signet warned sales on that basis would drop 2% to 4%. Same-store sales will be up 0.1% for the year—a small increase but far better than an earlier projection of a 1% to 1.7% decline. As sales improved so have earnings.
Signet now predicts adjusted per-share profit of $3.44 to $3.52 for its fiscal fourth quarter, up from an earlier range of $3.01 to $3.16. For the full year, adjusted EPS will check in at $3.61 to $3.69, compared with previous guidance of $3.11 to $3.29. Analysts polled by FactSet are looking for a 0.9% drop in same-store sales for the fiscal year and $3.33 in earnings per share. Signet’s holiday sales and guidance comes as the U.S. Census Bureau reported overall retail sales for December. Overall sales rose 0.3% from a month earlier, a showing decent enough to allay investor concerns that the American consumer pulled back spending during the most crucial retail season.
For Signet, the improvement is largely around a higher volume of online sales. Transactions grew during the holiday season, while the company said the average transaction value was flat. Sales in the James Allen brand surged 26.9% from a year earlier, as sales across physical locations fell 0.2%. Signet bought the James Allen site in 2017, and it caters to bargain hunters with lab-grown diamonds and cheaper options, in part because the company can sell directly from wholesalers. Investors cheered Signet’s update and sent shares up by 41% Thursday morning, to $30.75. It’s possible some of the gain is about covering bets against the stock, which, according to FactSet, is still down 9% over the past 12 months even after surging Thursday.
Signet’s upside guidance and share price move didn’t do much for upscale rival Tiffany & Co. (TIF). Shares in that company were little changed, though the stock is up big since LVMH Moët Hennessy Louis Vuitton said in November it would buy Tiffany for $16.2 billion. (Tiffany shares are up 47% over the past 3 months). The fact that Tiffany isn’t bouncing on Signet’s surprise underpins the idea that consumers aren’t shunning diamonds, but they are going down-market. Investors should keep this in mind for Signet, too, where the profit margin has shrunk in part because of lower prices and promotional pricing.
Signet reports full-year and current-quarter results on March 26. Tiffany reports earnings later this month.