Signet Jewelers Limited SIG looks well poised for growth, thanks to its robust business strategies. Following the successful execution of its Path to Brilliance initiative, the company has entered into the next phase of its growth strategy — Inspiring Brilliance. The new strategy focuses on expanding big banners, boosting service revenues, broadening the Accessible Luxury and Value segments, as well as accelerating digital commerce, amongst others. Markedly, it has been boosting customers’ online shopping experience with advanced virtual and digitally native experiences.
Impressively, Signet is cheering investors by returning them 109.7% over the past three months. The jewelry retailer has surpassed its industry’s 101.3% rally. This outperformance can also be attributed to the company’s recently reported stellar fourth-quarter fiscal 2021 results. In the reported quarter, both the top and bottom lines beat the Zacks Consensus Estimate and also improved year over year. Notably, this was the company’s third straight quarter of sales and earnings beat. Additionally, analysts seem optimistic about the company. The Zacks Consensus Estimate for earnings has increased 176.2% to 58 cents for first quarter and 0.8% to $3.94 for fiscal 2022.
Let’s Delve Deeper
As part of the Inspiring Brilliance growth strategy, Signet will make use of data-driven insights for targeting new and existing customers. It has been working toward evolving its Customer First strategy to a consumer-inspired experience, which includes tailored merchandise assortments and expanded services offering. The company also plans to boost its omni-channel capabilities by focusing on better connection of physical and digital footprints.
Notably, the Inspiring Brilliance growth strategy also includes transformational productivity, as part of which the company expects to achieve efficiencies in both gross margin, and selling, general and administrative expenses. Such actions are likely to lead to benefits of $175-$200 million over the next three years. The company will continue to work toward achieving capital efficiency. Furthermore, Signet will carry on its store portfolio-optimization efforts, which include transitioning to off-mall formats.
Speaking of e-commerce, we note that online sales contributed 23.4% to the company’s total sales during fourth-quarter fiscal 2021. In the same quarter, e-commerce sales skyrocketed 70.5% from the prior-year quarter’s level. While e-commerce sales in North America segment surged 66% year over year, the metric at the International segment rose 115.1%. The upside was driven by the company’s continued efforts to bolster omni-channel capabilities. The company has been introducing technology tools like conversational messaging, improved text search, virtual try-on and consulting. Encouragingly, Signet has been focusing on developing channel-agnostic retailer capabilities.
Although e-commerce continued its momentum in fourth-quarter fiscal 2021, the company’s brick-and-mortar same-store sales have been soft. Overall, brick-and-mortar same-store sales declined 4.2% year over year, mainly due to a plunge of 56.2% at the International segment. In addition, management expects a shift in consumer discretionary spending, away from the jewelry category toward experience-oriented categories, given the progress of the roll-out of vaccinations. Moreover, the company plans to increase marketing investments to keep supporting growth in revenues as well as manage the shift in consumer spending. That said, management expects same-store sales to be negative in the second half of the year.
Nonetheless, management anticipates stronger sales performance during the first half of fiscal 2022. For fiscal first quarter, it expects revenues of $1.42-$1.46 billion versus $852.1 million recorded in the year-ago quarter. Same-store sales for the quarter are expected to be 80-84% against a decline of 38.9% witnessed in the year-earlier quarter. Preliminary same-store sales for the first quarter till Mar 14, 2021, were nearly 16%.
Given the sturdy performance in fiscal first quarter through Mar 18, management plans to continue investing in digital and marketing capabilities. Moving on, for fiscal 2022, the company expects revenues of $5.85-$6.00 billion, up from $5.23 billion recorded last fiscal. Further, same-store sales are expected to be 14-17% against a dip of 10.8% last fiscal. Incidentally, Signet’s Zacks Rank #3 (Hold), coupled with a VGM Score of A, further builds optimism.
Key Picks in Retail
Abercrombie & Fitch ANF has a long-term earnings growth rate of 18% and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Boot Barn BOOT boasts a long-term earnings growth rate of 20% and currently carries a Zacks Rank #2 (Buy).
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