Signet Meets High End of Earnings Guide on Sales Decline
Despite a double-digit decline in sales, Signet Jewelers Ltd. beat expectations on the earnings side by capitalizing on cost savings and bridal market share gains.
Diluted earnings per share for the quarter ended Oct. 28, including 16 cents in integration-related charges for Blue Nile, were 7 cents, down from 60 cents in the year-ago period. But adjusted earnings per share at 24 cents beat expectations of 18 cents a share. In August 2022, Signet bought Blue Nile for $360 million cash, which is helping expand the company’s bridal category and its appeal to younger luxury shoppers.
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The jeweler reported $11.7 million in net profit on an unaudited basis, compared to $37.5 million in the year-ago quarter.
Sales declined 12.1 percent to $1.39 billion, from $1.58 billion in the year-ago period.
Operating income reached $13.3 million, down $35.1 million from the third quarter of a year ago. The third quarter of this fiscal year includes $7.5 million for the Blue Nile charges. The third quarter of last year included $9.5 million related to the fair value adjustment of acquired inventory as well as acquisition and integration-related charges.
Non-GAAP (generally accepted accounting principles) operating income of $23.9 million was down from $57.9 million in the year-ago third quarter. Non-GAAP diluted EPS of 24 cents, compared to 74 cents in the third quarter of the year before.
Cash and cash equivalents at the end of last quarter came to $643.8 million, compared to $327.3 million in the third quarter of fiscal year 2023.
Signet’s stock price ended the day up 5.89 percent, or $4.99, to $89.78.
Jamie Singleton, group president and chief consumer officer, told WWD, “Black Friday and Cyber Monday were in line with what we expected based on our data and consumer predictive analysis. Shoppers are being very particular. They’re looking for great deals and waiting to see them happen. Consumers are coming off several years of supply chain shortages and this year there is plenty of inventory. A large majority of our jewelry sales happen in the final two weeks of the season. The beginning of the season is more female- and value-focused and the end becomes more concentrated with males less interested in value. They’re looking for gifts that tell a story of their love and appreciation for someone in their life. We call that customer ‘the late inspiration seeker.’
Singleton said bestsellers for the season so far include “larger stones, bigger looks, fancy shapes, lab-created diamonds. Engagements are coming back, and yellow gold with all kinds of diamonds and gemstones are selling. Fancy cuts are so popular.…We have moved out slow-selling product and entered the season with newness in fashion. Customers are really responding to new product and want to see it quicker.”
“We delivered earnings on the high end of our expectations driven by continued progress on our strategic goals. We believe our extensive consumer insights provide a competitive advantage that has contributed to continued bridal market share gains and consistency in average transaction value again this quarter,” Signet chief executive officer Virginia C. Drosos said in a statement Tuesday when the results were released. “Trends through Black Friday weekend, including sequential improvement in engagement trends, are performing in line with guidance expectations for the fourth quarter. As we enter the holiday season, jewelry remains a top of mind gifting category for consumers in a value-conscious shopping environment.”
“We’re reaffirming guidance for fiscal-year 2024 with the full-year outlook updated for the profitable and strategic sale of 15 primarily luxury watch stores in the U.K. We continue to make progress expanding gross margin through merchandise and sourcing strategies and growth in services revenue,” added Joan Hilson, chief financial, strategy and services officer, in a statement. “Cost savings initiatives are on track and healthy inventory enables product newness as we enter the holiday season and improved free cash flow, allowing Signet to return nearly $160 million to shareholders already this year.”
Looking ahead, Signet projects sales of between $7.07 billion and $7.27 billion for the year. Past guidance called for $7.10 billion to $7.30 billion in sales for the year.
Earnings per share are forecast between $9.55 and $10.18 for the year. Previous guidance called for between $9.55 and $10.14 in earnings per share.
Fourth-quarter sales for this year are seen reaching $2.4 billion to $2.6 billion.
Signet operates about 2,700 stores primarily under the brand names Kay Jewelers, Zales, Jared, Banter by Piercing Pagoda, Diamonds Direct, Blue Nile, JamesAllen.com, Rocksbox, Peoples Jewellers, H. Samuel, and Ernest Jones.
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