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Could These Jewelry Stocks See Further Growth?

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Sep. 25 2018, Published 1:39 p.m. ET

Strong financial performance is driving stock

Tiffany (TIF) and Signet Jewelers (SIG) have impressed investors with their financial performances in the first half of 2018. Higher consumer spending, new design launches, and omnichannel offerings are driving the top-line growth for Tiffany. Meanwhile, new products and promotions supported Signet’s comps growth.

Moreover, lower diamond acquisition costs and a considerable decline in the effective tax rate have been supporting the earnings of these companies. Also, share repurchases are further cushioning their bottom lines.

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Both the companies remain upbeat and have raised their full-year outlook for earnings, which is an encouraging sign. Tiffany’s management expects to sustain healthy sales and earnings growth in the second quarter of the current fiscal year. Meanwhile, Signet Jewelers’ underlying business is showing signs of improvement.

However, a stronger US dollar could play spoilsport as it could hurt tourist spending. Meanwhile, increased marketing spending could lower the bottom-line growth rate. Also, operational issues could continue to hurt Signet Jewelers’ financials. Both the companies are trading at a higher valuation, which indicates that most of the positives are already priced in.

Stock performance

Tiffany and Signet Jewelers stocks have outperformed the broader markets so far this year. Tiffany stock is up 20.8%, while Signet Jewelers has grown 14.1% on a YTD (year-to-date) basis as of September 24. The S&P 500 Index has risen 9.2%.

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