Signet Jewelers (SIG) is the largest specialty jewelry retailer in the U.S., Canada, and U.K. Signet owns Kay (the top jeweler in the U.S), Jared, Zale, fast-growing online brand, as well as the #1 and #2 brands in the U.K. Signet focuses on the $40 billion mid-market jewelry sector with an average merchandise price of $450 and has ~15% market share globally. Signet has made transformational deals over the last four years including picking up R2Net (which owns in 2017. Today the stock is getting slammed, hitting a new 52-week low:


Source: Yahoo Finance


As you can see, the stock is unloved. The reason behind this selloff were sales that were underwhelming in Q4 for the company. In this column, we discuss the sales results, and hone in on expectations for 2018 performance.


Sales discussion

Sales were weaker than we anticipated. Signet’s total sales were $2.3 billion, up $23.2 million or just 1.0% in the quarter versus last year. The total sales increase was driven almost entirely by the extra 14th retail-calendar week of sales, worth $84.3 million, as well as the addition of R2Net (acquired in September 2017) which contributed $64.4 million in sales in the quarter, offset by a year-over-year decline in base same store sales. Without these factors, sales would have declined sharply.

The real story is same store sales. On a comparable basis, same store sales decreased sharply. They fell 5.2% in the quarter. That said, R2Net sales were  a bright spot, and were up 35.0% compared to the prior year quarter and had a 90 bps positive impact on total company same store sales in the quarter.

eCommerce sales in the fourth quarter at banner websites and R2Net were $253.8 million, up 52.8%. eCommerce sales increased across all divisions and accounted for 11.1% of quarterly sales, up from 7.1% of total sales in the prior year fourth quarter. Let us turn to discuss segment specific performance.

Sterling Jewelers

The jewelry stores are suffering. Sterling Jewelers’ same store sales decreased 8.6%, including 150 bps of favorability from the addition of R2Net. Ouch. Now, some of this was due to credit outsourcing. In fact, 500 bps of the same store sales decline was a result of the credit outsourcing transition, most notably in sales of bridal merchandise.

The company also indicated that while both Kay and Jared experienced issues related to the credit transition, “impacts were more pronounced at Kay, where a greater percentage of customers utilize in-store credit for bridal purchases”.

In addition to credit transition issues, Sterling sales were driven by less effective promotional spending and lower sales of the Ever Us collection partially offset by the success of the Chosen collection at Jared.

One positive takeaway here was that average transaction value increased 1.7%. However, this positive is immediately and dramatically offset by the fact that the number of transactions decreased 12.8%, excluding the impacts of R2Net.

Zale Jewelry

Zale Jewelry did well. This segment’s same store sales increased 4.3%, driven by the new Enchanted Disney collection, line extensions in Vera Wang Love and an improved selection of solitaires and fancy cut diamonds. Average transaction value increased 3.8% and the number of transactions increased 1.1%.

Piercing Pagoda

Piercing Pagoda is a small but meaningful contributor. It saw same store sales increase 4.6%. This was driven by strong sales of chains and gold jewelry. Average transaction value increased 8.1%, while the number of transactions decreased 2.6%.

UK Jewelry

The UK continues to see struggles. UK Jewelry’s same store sales decreased 9.2% due principally to diamond and fashion jewelry, partially offset by higher sales in select prestige watch brands and strength in eCommerce.

On a positive note, the average transaction value increased 6.6% in the quarter. However, like we saw for Sterling Jewelers, the number of transactions decreased heavily, falling 15.2%.

Looking ahead


We expect the trouble to continue. What is odd, Signet declared a $0.37 per share quarterly dividend, 19.4% increase from the prior dividend of $0.31. This was perplexing, but the name is now a yield play. At $1.48 annually, the stock is yielding 3.7%.


We continue to expect poor same store sales. For fiscal 2019, we are targeting same store sales to decline mid-single-digits. We are looking for sales to come in at  total sales of $5.8 billion to $6.0 billion. On an adjusted basis, we see fiscal 2019 earnings approximating $3.71 to $4.19.

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