Signet (SIG) Stock Up On Solid Holiday Sales, Upbeat View

Shares of Signet Jewelers Limited (NYSE:SIG) have surged about 40% during the trading hours on Jan 16, following the company’s better-than-anticipated holiday sales numbers. The impressive performance also prompted management to lift its fourth quarter and fiscal 2020 view.

Management highlighted that the company’s significant investments to augment digital sales along with strength in merchandising and marketing strategies aided e-commerce as well as brick and mortar sales growth in North America. In fact, the company is also benefitting from its ‘Signet Path to Brilliance’ plan, which is designed to augment savings, engage in customer-centric growth and bolster e-commerce.

We note that, shares of this Zacks Rank #1 (Strong Buy) company have increased 68% in the past six months compared with the industry’s growth of 38.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Let’s Take an Insight

Signet’s total same store sales for the nine-week period ended Jan 4, 2020, or the holiday season inched up 1.6%. E-commerce sales increased 13.5% year over year to $252.3 million while brick and mortar same store sales declined 0.2%.

Segment wise, same store sales at North America improved 2% driven by strength in the Bridal and Fashion category that more than offset declines in other categories like beads and Watches. Further, the company saw a rise in transactions, whereas average transaction value remained flat during the holiday season. The company’s e-commerce sales in North America jumped 13.3%, while brick and mortar sales climbed 0.4% on a same store sales basis.

We note that same store sales across Kay, Zales, Piercing Pagoda, James Allen and Peoples inched up 0.2%, 5.4%, 6.9%, 26.9% and 4.5%, respectively. However, the metric declined 3.5% and 10.4% across Jared and Regional banners, respectively.

Meanwhile, same store sales fell 3.1% in the International segment due to drab sales in all categories. Signet continued to battle a tough operating environment in the U.K. In the International segment, e-commerce sales saw a 15.8% increase with brick and mortar sales dropping 6% on a same store sales basis.

Raised Outlook

For fiscal 2020, the company expects 0.1% year-over-year rise in same-store sales now, which was earlier projected to decline 1-1.7%. The revised outlook includes an expected adverse impact of 25 basis points (bps) related to timing shift of service plan recognized revenues.

Sales for the fiscal year are now projected to be $6.1 billion compared with $6.01-$6.05 billion mentioned earlier. The guidance takes into account expected adverse impact of $190 million on revenues due to store closures. Markedly, the company intends to shut down about 165 stores in the fiscal and plans to open 38 stores in the same time frame.

Also, the company raised its net savings target from the transformation plan to $80-$90 million for fiscal 2002 compared with $70-$80 million expected earlier. Adjusted operating income for the fiscal is now anticipated in the range of $302-$307 million, higher than the previous guidance of $270-$280 million. The company now expects adjusted earnings in the range of $3.61-$3.69 per share, up from $3.11-$3.29 mentioned earlier. The Zacks Consensus Estimate is currently pegged at $3.25.

In fiscal 2020, capital expenditures are projected in the range of $135-$145 million.

For fourth-quarter fiscal 2020, the company now projects sales of $2.12 billion up from the previous guidance of $2.03-$2.07 billion. This includes an anticipated adverse impact of $55 million from store closures. Same-store sales are now expected to rise 1.1% year over year compared with its previously range of 2-4% decline. Moreover, it now envisions adjusted operating income in the range of $254-$259 million, higher than the previous forecast of $222-$232 million.

Further, Signet anticipates adjusted earnings per share in the range of $3.44-$3.52, which is pegged above the Zacks Consensus Estimate of $3.12. Management had earlier anticipated the metric to be between $3.01 and $3.16.

3 More Retailers’ Holiday Sales Reports

Macy’s (NYSE:M) comparable sales on an owned plus licensed basis dropped 0.6% during November and December period combined. On an owned basis, comparable sales fell 0.7%.

L Brands’ (NYSE:LB) comparable sales declined 3% in the nine weeks ended Jan 4, 2020.

J. C. Penney (NYSE:JCP) reported comparable store sales decline of 7.5% for the combined nine-week period ending Jan 4, 2020.

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