Signet Jewelers (SIG +6.17%), the world's largest retailer of diamond jewelry, has served up a mixed bag for investors in recent years, with the stock up 30% over the last three years, though those gains haven't come smoothly.
The stock plunged at the beginning of this year after weak holiday results in 2024, though it has recouped those losses.
Signet operates in the mature jewelry market, but it has a number of competitive advantages, including its scale, brand portfolio, digital platform, and services business. The retailer is also a classic value stock, trading at a price-to-earnings ratio of just 9, and it has a history of opportunistically buying back stock, taking advantage of that low valuation.
Can Signet's leading position in jewelry and its low valuation make it a winner in 2026? Here are a few key areas to watch.
Image source: Getty Images.
Performance over the holidays
Jewelry is a popular gift, and, unsurprisingly, the holidays are the biggest time of year for Signet, which owns banners like Kay, Zales, and Jared. The company makes a majority of its profits during the fourth quarter so its performance during the holidays is key to determining its full-year results. A strong fourth quarter can also outweigh weakness over the rest of the year.
Last year, the company didn't have enough inventory at the right price points and disappointed the market with its holiday results. This year, management offered underwhelming guidance for the fourth quarter, noting a slowdown that began in late October, which it believes was driven by macro factors. For the fourth quarter, it called for same-store sales between -5% and +0.5%. However, that guidance could give the company a low bar to hop over as management said it was well-stocked on lower price-point items in order to meet holiday demand.
We should get a report from the company in early January on the holiday results. If the numbers are better than expected, the stock could soar.
Can average unit retail keep growing?
One sign of strength from the company has been growth in average unit retail prices, which were up 7% in the third quarter with strong growth in both the bridal segment, which was up 6%, and fashion, which rose 8%.
The company has been able to pass along higher average prices in part due to demand for lab-grown diamonds in fashion, which have allowed customers to get a larger diamond than they would for the same price with natural diamonds.
That strength has helped make up for a decline in unit sales. At a time when consumer sentiment appears to be weakening, continued growth in average unit volume would be a positive sign for the company.
NYSE: SIG
Key Data Points
Share buybacks
With only modest top-line growth expected, share buybacks seem like the best way for the company to drive stock gains and return capital to shareholders.
Signet has effectively executed share buybacks in recent years, with shares outstanding down 8% over the last year. Look for the company to continue using its free cash flow to buy back shares, as the stock is still well-priced for buybacks.
Overall, Signet faces potential headwinds with weak consumer spending next year, but the stock is also poised for gains at the current price if it can deliver better-than-expected holiday results and execute on its strategic plan.
