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Signet Jewelers (SIG) Beats on Q3 Earnings, Lags Revenues

Zacks

Signet Jewelers Limited SIG reported better-than-expected earnings for third-quarter fiscal 2017 after missing estimates in the previous quarter. The company’s earnings came in at 30 cents per share, beating the Zacks Consensus Estimate of 19 cents. However, the bottom-line of this jewelry retailer decreased 9.1% year over year.

Signet posted total sales of $1,186.2 million in the reported quarter, down 2.5% from the prior-year quarter and missed the Zacks Consensus Estimate of $1,190 million. The downside can be attributed to dismal performance in select stores, energy dependent regions and declines in select collections like Charmed Memories and watches.

Quarterly Highlights

In the fiscal third quarter, comparable-store sales (comps) declined 2%. eCommerce sales came in at $51.6 million, up 2.2% on a year-over-year basis.


By division, sales at the Sterling Jewelers Division decreased 2.9% to $712.5 million mainly due weakness in non-core regional store brands, Jared and energy dependent regions.

Sales at the Zale Division inched up 1.8% to $335.8 million. This increase was driven by higher sales Piercing Pagoda. Sales in the U.K. division were down 12.8% to $130.3 million, primarily due to negative impact of foreign currency exchange rate.

Gross profit dropped 5.7% to $352.5 million, while gross margin contracted 100 basis points (bps) to6%. Operating income was $43.8 million, down 7%. Operating margin declined 20 bps to 3.7%.

SIGNET JEWELERS Price, Consensus and EPS Surprise

SIGNET JEWELERS Price, Consensus and EPS Surprise | SIGNET JEWELERS Quote

Other Details

Signet ended the fiscal quarter with cash and cash equivalents of $82.7 million, net receivables of $1,581.1 million and net inventories of $2,649.4 million. Long-term debt and total shareholders’ equity, as of Oct 29, 2016, were $1,324.2 million and $2,231.2 million, respectively.

In fiscal 2017, Signet bought back 9.9 million shares for $842.5 million at an average price of $85 per share. As of Oct 29, 2016, the company had $510.6 million worth of shares remaining under its repurchase authorization.

As of Oct 29, 2016, the company operated 3,159 stores in the U.S. and 509 outlets in U.K., taking the total store count to 3,668.

Guidance

Signet projects fourth-quarter fiscal 2017 adjusted earnings in the range of $3.91 to $4.13 per share. The current Zacks Consensus Estimate for fourth-quarter fiscal 2017 is currently pegged at $3.97 per share.

For fiscal 2017, Signet expects comparable sales to decline in the range of 1–2.5%. The company projects adjusted earnings per share in the band of $7.03 to $7.25. The company anticipates capital expenditure of $280 million to $320 million, which includes expenses related to Kay, store remodeling, enhancing digital and information technology infrastructure.

Zacks Rank & Other Stocks

Signet currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the retail sector include Best Buy Co., Inc. BBY, The Children's Place, Inc. PLCE and Domino's Pizza, Inc. DPZ, all flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy delivered an average positive earnings surprise of 25.7% in the trailing four quarters and has a long-term earnings growth rate of 11.4%.

The Children's Place delivered an average positive earnings surprise of 36.3% in the trailing four quarters and has a long-term earnings growth rate of 10.3%.

Domino's Pizza delivered an average positive earnings surprise of 1.4% in the trailing four quarters and has a long-term earnings growth rate of 16.8%.

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