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.
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-eps-surprise-chart | Signet Jewelers Limited Quote
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%.
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.
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.
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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