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Signet Stock Jumps on Q3 Earnings Beat

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Signet Jewelers (SIG) posted better-than-expected fiscal 2020 third-quarter results today, marking its eighth consecutive quarter of beating analysts’ estimates. Surprisingly, Signet’s same-store sales returned to growth. The company also increased its full-year outlook, which should support its stock.

The company’s clearance sales for its Kay and Jared brands boosted its average transactions, and in turn, its same-store sales. Its bridal and fashion sales were also higher.

Despite its higher same-store sales, Signet posted a loss per share, as expected. Its clearance sales impacted its merchandise and adjusted operating margins and bottom line. Higher advertising costs also dragged it down.

Nevertheless, Signet raised its fiscal 2020 same-store sales and earnings guidance, which is likely to boost its stock. Signet stock was trading about 11% higher in pre-market trading today.

Signet’s Q3 earnings in detail

In the third quarter, Signet Jewelers’ revenue fell about 0.3% YoY (year-over-year) to $1.19 billion, beating Wall Street’s estimate of $1.14 billion. Signet’s revenue was supported by its same-store sales increasing by 2.1% YoY, but offset by currency headwinds.

Its North American same-store sales rose 2.9%, reflecting 0.5% growth in ATV (average transaction value) and a 2.8% rise in transaction count. Higher clearance sales drove growth for the Kay and Jared brands, and James Allen sales grew by 15.8%. Bridal and fashion same-store sales also rose.

Signet’s international same-store sales fell by 5.2%, with international ATV and number of transactions falling 1.4% and 4.3%, respectively. Revenue fell across categories, reflecting continued weakness in the UK.

Signet’s adjusted gross margin stayed at 31.1% in the third quarter, while its adjusted operating margin narrowed by 80 basis points to 2.5%. Signet’s adjusted loss per share improved sharply YoY to $0.76 from $1.06, beating analysts’ loss-per-share estimate of $1.08.

Guidance update

Buoyed by its strong third-quarter performance, Signet raised its fiscal 2020 outlook. The jewelry retailer now expects its same-store sales to fall 1%–1.7%. It had previously guided for a 1.5%–2.5% decline.

Signet also raised its total sales guidance, to $6.01 billion–$6.05 billion from $6.0 billion–$6.03 billion. The company now expects adjusted EPS of $3.11–$3.29 in fiscal 2020, up from its previous guidance of $2.91–$3.23.

In the fourth quarter, Signet expects its same-store sales to fall 2%–4%, and total sales of $2.03 billion–$2.07 billion. It has forecast adjusted EPS of $3.01–$3.16.

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