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Signet Jewelers Continues to Disappoint on Sales

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4Q18 sales exceed expectation

Signet Jewelers (SIG) reported sales of $2.3 billion in fiscal 4Q18. The company’s sales were ahead of analysts’ expectation and increased ~1% on a YoY (year-over-year) basis. Notably, fiscal 4Q18 had one extra week compared to the previous year, which contributed $84.3 million to its overall sales. The company acquired R2Net in September 2017, which contributed $64.4 million to its sales. Excluding the benefits from R2Net and one extra week, Signet’s top line decreased 5.1% on a YoY basis.

In comparison, analysts expect Tiffany’s (TIF) to report an improved top-line performance due to growth across major regions and product categories.

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Signet Jewelers’ comparable-store-sales decreased 5.2% in fiscal 4Q18, which reflects a decline in the Sterling Jewelers division. However, strong R2Net sales added 90 basis points to its comps. Amid the gloom, the company’s e-commerce sales jumped 52.8% on a comparable basis and represented ~11% of its quarterly sales.

Segment-wise sales

Signet’s same-store sales or comps declined 8.6% at its Sterling Jewelers division, which reflects a 12.8% decline in transactions partially offset by a 1.7% increase in transaction value and a 1.5% favorable impact from R2Net. Notably, the company’s credit portfolio outsourcing had a negative impact of 5% on same-store sales.

The company outsourcing its credit portfolio continued to impact its in-store customers who use the credit facility to buy jewelry, which resulted in lower bridal merchandise sales. Less effective promotional spending and sluggishness in the Ever Us collection pressured the Sterling division’s sales.

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For Zale’s Jewelry segment, the comps improved 4.3%, which reflects a higher number of transactions and value. The new Enchanted Disney collection, fancy cut diamonds, and Vera Wang Love collection generated higher sales. Sales at the Piercing Pagoda segment increased 4.6% due to increased chain and gold jewelry sales.

Comps in its UK Jewelry segment fell 9.2%, which reflected lower diamond and fashion jewelry sales, were partially offset by increased sales in select prestige watch brands.

Outlook

Signet Jewelers expects its fiscal 2019 comps to decrease by low to mid-single digits, which reflects a decline in net selling square footage due to planned store closures. Credit portfolio outsourcing will likely hurt the Kay and Jared banner sales.

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