Please ensure Javascript is enabled for purposes of website accessibility

Why Signet Jewelers Ltd. Stock Slumped Today

By Timothy Green - May 26, 2016 at 4:23PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Despite a big earnings increase, slowing same-store sales growth sent the stock lower.

Image Source: Signet Jewelers.

What: Shares of Signet Jewelers (SIG 0.17%) slumped on Thursday following the company's first-quarter earnings report. Results were mixed, with the company beating estimates for earnings, but missing estimates for revenue. At market close, the stock was down about 10.5%.

So what: Signet reported quarterly revenue of $1.58 billion, up 3.2% year over year, but about $30 million shy of the average analyst estimate. Same-store sales increased by 2.4% year over year, or by 3.9% adjusted for currency. The company's Sterling Jewelers division, which includes the Kay and Jared brands, posted 2.3% same-store sales growth, while the Zale division reported 2.5% same-store sales growth.

Non-GAAP EPS came in at $1.95, up 20.4% year over year, and $0.01 better than analyst expectations. GAAP EPS of $1.87 was up 26.4%. The company stated that the integration of Zale, which Signet acquired two years ago, is progressing according to plan, and that it's conducting a strategic evaluation of its credit portfolio.

Signet CEO Mark Light pointed to the company's success despite a difficult environment. "We gained profitable market share despite a challenging retail environment through strong sales of Ever Us and other fashion jewelry collections, as well as select branded bridal. Our 26% EPS growth was driven by higher same-store sales and total sales along with solid expense management and synergies, leading to 190 basis points of operating margin expansion."

Now what: Signet expects same-store sales to increase by 1%-2% during the second quarter, with adjusted EPS between $1.49 and $1.54. For the full year, 2%-3.5% same-store sales growth is expected, with adjusted EPS in the range of $8.25 to $8.55.

Signet's same-store sales growth is slowing, down from 4.9% during the fourth quarter, and a further slowdown is expected during the second quarter. Signet does expect to expand its store base this year, planning for a 3%-3.5% increase in net selling square footage, and further synergies from the Zale acquisition could boost the bottom line. But there was enough bad news for investors to sink the stock on Thursday.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Signet Jewelers Limited Stock Quote
Signet Jewelers Limited
SIG
$53.55 (0.17%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.