Signet Jewelers Ltd (SIG)

Signet Jewelers (SIG) stock dropped by 12.08% following the company's announcement of disappointing guidance for fiscal 2025. Despite posting solid results for its fiscal 2024 fourth quarter, the world's largest retailer of diamond jewelry faced challenges that contributed to the decline in its stock price.

• Fiscal Fourth Quarter Performance: In the fiscal fourth quarter, which ended Feb. 3, Signet Jewelers reported a 9.6% decline in same-store sales, leading to a 6.3% decrease in revenue to $2.5 billion. While the company's gross margin expanded by 160 basis points to 43.3% due to improving merchandise margins, selling, general, and administrative expenses rose 60 basis points to 26.9% of sales. Adjusted operating income increased by 1.2% to $409.7 million, resulting in an operating margin of 16.4%. Adjusted earnings per share (EPS) were reported at $6.73, ahead of $5.52 in the same quarter a year ago. However, the latest EPS figure was boosted by a tax benefit equivalent to $0.38 per share. Excluding the tax benefit, Signet essentially matched the consensus estimate of analysts.
• Fiscal 2025 Guidance: Looking ahead to Fiscal 2025, Signet Jewelers expects sequential same-store sales improvement over the year as engagements gradually recover. However, the company's guidance for the fiscal first quarter fell below analysts' average estimate, with revenue expected to range from $1.47 billion to $1.53 billion and a same-store sales decline of 7% to 11%. For the full fiscal year, Signet anticipates revenue growth trends to improve, but forecasts same-store sales to range from down 4.5% to up 0.5%, with adjusted EPS between $9.08 and $10.48. The entire EPS range was below the analysts' consensus of $10.57.
• Investor Reaction and Long-Term Strategy: Investors reacted negatively to the weaker-than-expected guidance, leading to the decline in Signet Jewelers' stock price. However, the company's long-term strategy remains intact, with potential benefits from a rebound in engagements, ongoing share buybacks, and the recently announced 26% dividend hike to $0.29 per quarter, providing a dividend yield of 1.3% at current share prices.