What happened
Shares of Signet Jewelers (SIG -0.18%) were sparkling today after the world's largest diamond jewelry retailer reported solid fourth-quarter earnings and offered better-than-expected guidance for the current year. The stock closed up 7%.
So what
Signet's shares have soared since the early days of the pandemic. Sales were up 28.6% year over year to $2.81 billion and up by 30.6% from fiscal 2020 Q4, which ended Feb. 1, 2020. That edged out estimates of $2.77 billion.
Brick-and-mortar sales rebounded strongly from a lull during the start of the pandemic, up 34.6% from last year and 21.7% from two years ago. Meanwhile, e-commerce sales have nearly doubled over the last two years, up 85.4%.
Image source: Getty Images.
Thanks to the strong brick-and-mortar recovery and the surge in e-commerce sales over the last two years, comparable sales rose 23.8% from a year ago and 35.4% over the last two years, showing the success of the company's investments in technology and e-commerce, as well as strong consumer spending.
On the bottom line, the parent of brands like Jared and Kay saw profitability improve as it benefited from a store rationalization policy and slashing expenses in recent years. Adjusted operating income increased from 40% to $411 million, while adjusted earnings per share rose from $4.15 to $5.01, which matched estimates.
CEO Virginia Drosos said: "The investments we have made in our Connected Commerce capabilities and differentiated banner assortment and marketing have driven meaningful share gains, with all categories and all banners outpacing jewelry industry growth. Despite a challenging macro environment ahead, we believe that we are well-positioned in partnership with our strategic suppliers."
Signet also raised its quarterly dividend by 11% to $0.20.
Now what
Signet's guidance also impressed the market, though it sees growth moderating, calling for revenue of $8.03 billion-$8.25 billion, up 3%-6% from 2021 levels. The pandemic-era boom was unusual, as Signet competes in a mature industry and is facing difficult comparisons, as well as high inflation and rising interest rates. However, that forecast was still better than estimates at $7.89 billion.
On the bottom line, the company expects adjusted earnings per share of $12.28-$13.00, well above estimates of $10.52 and better than the $12.28 it reported in 2021.
After successfully executing its turnaround plan, Signet seems to be undervalued by Wall Street at a price-to-earnings ratio of just 7. If it can deliver on its guidance, the value stock should reward investors.
