Signet’s Comps Fall, but Stock Rises

Signet Jewelers announced mixed but better-than-expected results for the second quarter of fiscal 2020 (ended Aug. 3)—giving a much-needed boost to the company’s much-battered stock.

The world’s largest jewelry retailer announced that comps fell 1.5% in the quarter, better than the forecast 2–3% drop. Overall sales totaled $1.34 billion. Earnings came in at $53 million, or 51 cents a share, topping analyst estimates.

Piercing Pagoda was once again the company’s star banner, with quarterly comps jumping 11%, its fifth consecutive quarter of growth. Zales’ same-store sales rose 2%.

E-commerce sales climbed 4.4%. Online sales now comprise 11.5% of the company’s revenue, more than double what they were two years ago.

Yet, every other part of the company registered drops. Comps fell 2.7% at Kay, 3.5% at Jared, 1.5% at e-tailer James Allen, 0.9% at Canadian chain Peoples, and 11% at its U.K. division, which consists of chains H. Samuel and Ernest Jones.

On a conference call following the release of its financial results, chief executive officer Gina Drosos noted that sales had improved in July, with comps turning positive during Amazon Prime Week.

She also ran through a surprisingly lengthy list of upcoming initiatives, part of Signet’s ongoing “transformation.”

Among the merchandise its stores will stock this holiday: an expansion of the company’s partnership with Disney, with refreshed Princess anniversary and bridal lines; new Vera Wang collections, including one for men; Zales Private, an Art Deco–inspired line that will “celebrate Zales’ rich heritage and diamond expertise since 1924”; more colored gemstone bridal; and a beefed-up fashion assortment, built around “on-trend” gold. In addition, the Neil Lane Premiere Bridal and True North Celestial Diamond collections are being rolled out to more stores.

Marketing is also getting mixed around. In addition to its previously announced decision to move advertising away from television and toward digital, it’s embracing an “always on” ad model that will mean greater marketing throughout the year. It will also shift more of this year’s spend to the third quarter, to raise awareness earlier in the season.

In addition, each of its main U.S. banners will debut new ad campaigns for holiday. Piercing Pagoda is also launching its first-ever holistic advertising campaign, “Be More You.”

Signet continues to roll out piercing services to Kay stores, which Drosos said “drive incremental traffic and build customer relationships early.” By next year, it plans to offer ear piercing at several hundred Kays.

The better-than-expected results lifted the company’s stock more than 20%, its highest jump in decades. At press time, it was trading at $13.63 a share. Yesterday, it was hovering the $10 mark, a 10-year low.

The company’s ongoing struggles were reflected in the fact that there were only two questions during the earnings call—a sign of its shrunken market cap.

Still, it hasn’t given up its efforts to woo Wall Street. Its quarterly results included a 37 cents a share dividend, and Drosos suggested more dividends and buybacks are possible.

Finally, it is refinancing its five-year $1.6 billion senior asset-based credit facility, which matures in July 2021, to back a tender offer for outstanding senior notes due in 2024.

The new senior asset-based credit facilities are expected to be leverage-neutral. They will expand Signet’s debt maturity profile, increase available liquidity, and will likely incur a slightly lower interest rate, the company said.

(Image courtesy of Signet Jewelers)

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JCK News Director