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Signet Rebounds in Fiscal 2Q18, Beats Estimates

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Signet Rebounds in Fiscal 2Q18, Beats Estimates PART 2 OF 4

Here’s Why Signet’s Fiscal 2Q18 Sales Rebounded

Sales beat expectation

Signet Jewelers’ (SIG) fiscal 2Q18 sales of $1.4 billion surpassed the analysts’ expectation and rose 1.9% YoY (year-over-year). The company’s same-store-sales improved 1.4% in fiscal 2Q18, compared with its 2.3% decline registered in 2Q17.

Increased sales of fashion and branded bridal jewelry, a shift in the timing of Mother’s Day, and a strong performance in the e-commerce channel benefited the company’s top-line growth rate. Notably, the average transaction value increased during the quarter, which had been showing declines due to lower store traffic and increased promotional activity.

Here’s Why Signet’s Fiscal 2Q18 Sales Rebounded

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By comparison, Tiffany’s (TIF) fiscal 2Q17 sales rose 3.0% YoY, reflecting higher diamond wholesale sales and increased volumes of fashion jewelry. However, weak tourist spending in the US (SPY), resulted in lower comps which fell 2%. Notably, Signet’s comps (comparable same-store sales) data includes e-commerce sales, while Tiffany’s does not.

Segment performance

Signet’s top line primarily benefitted from increased sales of fashion jewelry, which includes bracelets, necklaces, and rings. Meanwhile, improvements in the branded bridal collection supported the top-line growth rate, and the e-commerce channel rose 18.1% YoY. Both off-mall and in-mall stores reported improved sales.

By segment, Sterling Jewelers’ comps rose 1.8% during the quarter, reflecting increased demand for fashion and bridal jewelry and rise in average transaction value of 5.2%. This was partially offset by a 2.9% fall in average transactions, especially from Jared. The management noted that high-priced jewelry sales generated higher sales in fiscal 2Q18.

In the Zale Jewelry segment, comps rose 1.6%, reflecting improvement in average transactions and average transaction value. The segment witnessed increased sales in the bridal and fashion jewelry categories in Canada.

Comps at Piercing Pagoda rose 7.0%, reflecting a significant rise in average transaction value, partially offset by a decline in the number of transactions. The segment saw increased sales in children’s and religious jewelry and 14-karat gold chains. Piercings also witnessed improved sales.

But the UK Jewelry segment’s comps fell 3.4% as the improved transaction value was offset by a decline in the number of transactions.

Outlook

SIG’s management reaffirmed its fiscal 2018 comps outlook. The company is expected to report a low-to-mid-single-digit decrease in comps. Signet has taken several strategic initiatives to accelerate sales growth, including investments in new collections, omnichannel offerings, and the recent acquisition of JamesAllen.com owned by R2Net.

However, soft industry trends, increased promotions, and stiff competition from low-priced fashion jewelry are all likely to remain a drag.

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