Signet Jewelers (NYSE:SIG) Shines Bright After Strong Beat-And-Raise Report And Share Buyback Expansion (SIG)
3:03 pm Thursday, June 09th, 2022
Signet Jewelers (NYSE:SIG) is sparkling today after reporting impressive 1Q23 results that beat EPS and revenue expectations, setting itself apart from the many retailers that have disappointed investors recently. The company’s outperformance is partly tied to its more affluent customer base, which is in better position to absorb the rampant inflation that’s afflicting the financial health of many. Additionally, celebrations and trips that were put on hold during the pandemic, such as weddings, anniversaries, and family gatherings, continue to unfold, creating a strong tailwind and many gifting opportunities.
SIG’s strong quarterly results aren’t the only factor that’s driving the stock higher. The owner of Zales, Kay, and Jared also expanded its share repurchase authorization by $500 mln and raised its EPS outlook for FY23. After originally guiding for EPS of $12.28-$13.00, SIG is now forecasting EPS of $12.72-$13.47. Its revenue outlook of $8.03-$8.25 bln was reaffirmed.
Drilling down a bit further on SIG’s results, a couple relatively minor blemishes do emerge.
Same-store sales were up 2.5%, which is quite remarkable considering that SIG lapped comp growth of 106.5% from the year-earlier period. However, same-store sales in North America (~94% of total sales) were down 0.9% due to a lower number of transactions compared to a year ago. A higher average transaction value helped mitigate the drop in transactions.
Relatedly, CFO Joan Hilson acknowledged that the company experienced a softening of demand within lower price points due to heightened inflation and the lack of stimulus. SIG would have an issue if its wealthier customers begin pulling back on spending for jewelry.
Gross margin slipped by 80 bps yr/yr to 39.4%. This modest dip actually represents a pretty solid performance, though, since merchandise margin remained stable on a yr/yr basis. Strength in the relatively lower margin Diamonds Direct bridal business was the main cause for the slight drop in gross margin.
Overall, it was another strong showing from SIG, illustrating that its strategy to keep inventory levels healthy, while continually refreshing its jewelry assortments, is paying off. Although the company’s not completely immune to the inflationary pressures that are wreaking havoc across the retail space, its more affluent customer base gives it an important edge.
