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Signet (SIG) Q1 Earnings Surpass Estimates, Sales Down Y/Y

Signet Jewelers Limited SIG posted better-than-expected results for first-quarter fiscal 2024. Both sales and earnings declined from the year-ago fiscal quarter’s readings. Also, same-store sales dropped 13.9% from the year-earlier fiscal quarter’s reading.

This presently Zacks Rank #3 (Hold) player’s shares have lost 8.9% in the past six months, compared with the industry’s 13.9% drop.

Quarterly Details

Signet reported adjusted earnings of $1.78 per share, beating the Zacks Consensus Estimate of adjusted earnings of $1.44 per share. The bottom line decreased from $2.86 per share earned in the year-ago fiscal quarter.

Signet Jewelers Limited Price, Consensus and EPS Surprise

Signet Jewelers Limited Price, Consensus and EPS Surprise
Signet Jewelers Limited Price, Consensus and EPS Surprise

Signet Jewelers Limited price-consensus-eps-surprise-chart | Signet Jewelers Limited Quote

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This jewelry retailer generated total sales of $1,668 million, ahead of the consensus estimate of $1,631 million. The top line decreased 9.3% from the prior-year fiscal quarter’s tally due to soft same-store sales. The metric declined 8.7% at constant currency.

A Sneak Peek Into Margins

The gross profit in the fiscal first quarter amounted to $632 million, down from $723.7 million in the year-ago fiscal comparable quarter.

Selling, general & administrative expenses came in at $530.4 million, down from $533.1 million in the prior fiscal year’s comparable quarter. SIG reported an adjusted operating income of $106.5 million, down from $194.6 million recorded in the year-ago fiscal quarter. As a rate of sales, the adjusted operating margin decreased 420 basis points to 6.4%.

Segment Discussion

Sales in the North American segment fell 8.4% from the year-ago fiscal quarter’s number to $1.6 billion. Same-store sales tumbled 14.2% from the year-ago fiscal quarter’s levels, reflecting a fall in average transaction value ("ATV") on a lower number of transactions year over year.

Sales in the International segment dropped 15.5% from the year-earlier fiscal quarter’s reading to $93 million. Same-store sales slipped 8.5% from the year-ago fiscal quarter’s tally, reflecting the impacts of increased ATVs and lower transactions. Sales fell 8.6% on a constant currency basis.

Financial Details

Signet ended the fiscal first quarter with cash and cash equivalents of $655.9 million, accounts receivable of $19.8 million and inventories of $2,183.5 million. The long-term debt was $147.5 million at the end of the reported fiscal quarter. Total shareholders’ equity was $1,581.5 million at the end of the fiscal first quarter.

As of Apr 29, 2023, Signet generated net cash of $381.8 million from operating activities. SIG had a free cash flow of $408.9 million as of Apr 29, 2023.

Signet completed a shares buyback of $39.1 million in the fiscal first quarter. We note that Signet had 2,778 stores as of Apr 29, 2023.

Guidance

Signet issued guidance for the second quarter and fiscal 2024, which is a 53-week fiscal year. For the second quarter, it projects total sales in the band of $1.53-$1.58 billion and operating income in the range of $85-$100 million.

For the fiscal year, it projects total sales in the band of $7.10-$7.30 billion, compared with $7.84 billion delivered in fiscal 2023. The operating income is anticipated in the range of $635-$675 million, versus $850.4 million recorded in the last fiscal year. Earnings per share (EPS) are envisioned in the bracket of $9.49-$10.09, compared with $11.80 earned in fiscal 2023.

Management expects capital investments of up to $200 million, along with investments in banner differentiation including stores, connected-commerce capabilities, and digital and technology upgrades.

The company’s guidance is based on assumptions, which include the annual US Jewelry industry’s revenues to decline over mid-single digits, persistent headwinds in engagements with recovery later in fiscal 2024 and an annual tax rate of around 19%. We note that bridal overall, inclusive of engagements, historically reflects nearly 50% of the company’s merchandise sales. It expects a certain shift in consumer discretionary spending from the jewelry category.

Solid Picks in Retail

We have highlighted three top-ranked stocks, namely Abercrombie & Fitch ANF, American Eagle Outfitters AEO and Hibbett Sports HIBB.

Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and EPS suggests growth of 2.1% and 472%, respectively, from the year-ago reported figures. ANF delivered a negative trailing four-quarter earnings surprise of 141.2%.

American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). AEO delivered an earnings surprise of 23.3% in the last reported quarter.

The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year sales and EPS suggests growth of 1.4% and 15.5%, respectively, from the year-ago reported figures.

Hibbett, a sporting goods retailer, currently carries a Zacks Rank of 2. The company has a negative trailing four-quarter earnings surprise of 13.9%, on average.

The consensus estimate for Hibbett’s current financial-year sales suggests growth of 5.7% from the year-ago reported figure.

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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report

American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report

Hibbett, Inc. (HIBB) : Free Stock Analysis Report

Signet Jewelers Limited (SIG) : Free Stock Analysis Report

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