What happened
Shares of Signet Jewelers (SIG 0.97%) fell 43.7% in the first six months of 2019, according to data from S&P Global Market Intelligence, extending its nearly 40% plunge last December, as the world's largest diamond retailer struggles to bolster sales in an increasingly promotional retail environment.
To be sure, Signet started this year on a low note, dropping more than 23% in January alone when the company announced that its 2018 holiday-season same-store sales had declined 1.3% year over year. To blame, according to Signet CEO Virginia Drosos, was a brutal combination of higher credit costs, intensified competitive promotions, and lower traffic in key "gifting weeks" throughout the month of December.
Image Source: Getty Images.
So what
Drosos insisted at the time that the company would "move decisively to improve profitability" via aggressive cost reductions, right-sizing its store base, and improving inventory management.
To those ends, Signet followed a few weeks later by hiring three new agency partners with the goal of improving the effectiveness of its advertising and marketing investments. Then in March, Signet appointed a new CFO and restructured the leadership teams of its Kay, Zales, and Peoples brands under a single combined "Mall Leadership Team."
Still, Signet stock slipped another 21% in the two weeks following its fiscal fourth-quarter 2019 report (for the period ended February 2, 2019) in early April. That quarter notably included those underwhelming holiday-season results, along with Drosos' admission that the company simply "did not finish the year as strongly as expected..."
Finally, shares continued to drift lower on the heels of Signet's similarly dreary fiscal first-quarter 2020 report in early June, which highlighted a 1.3% decline in same-store sales -- near the low end of Signet's guidance -- due to what the company described as "softening retail traffic."
Now what
That said, Signet did make notable progress improving profitability in its seasonally slow period, incurring a modest quarterly generally accepted accounting principles (GAAP) operating loss of $2.6 million that arrived well above its outlook for even steeper losses in the range of $25 million to $12 million.
As it stands for the full fiscal-year 2019, Signet expects same-store sales to decline in the range of 2.5% to 1.5%, leading to total sales in the range of $6 billion to $6.06 billion (down from $6.253 billion in fiscal 2018), and an adjusted net profit of $2.88 to $3.17 per share (down from $3.72 per share a year earlier).
If anything is as clear as Signet's diamonds, then it's that this will be a transition year of sorts as the company works to recapture sustained, profitable growth. Until then, I suspect Signet Jewelers' stock will remain under pressure.
