Shares of Signet Jewelers (NYSE: SIG) were shining bright today as the world's largest diamond jewelry retailer posted better-than-expected results in its second-quarter earnings report. As of 10:10 a.m. ET, the stock was up 15.1% on the news.
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Signet is turning around
Signet has struggled for the last several quarters amid broader sluggishness in consumer spending and a delay in engagements. The company has also faced difficult comparisons after revenue surged during the later stages of the pandemic, fueled by stimulus checks.
Revenue declined again in the second quarter, but results were better than expected, and management said that comparable sales have been positive so far in the third quarter. Comparable sales in the second quarter were down 3.4%, and revenue fell 7.6% to $1.49 billion, just shy of estimates at $1.5 billion.
Despite the decline, this was the company's fifth consecutive quarter of sequential same-store sales improvement, showing that the business is moving in the right direction. The company also delivered 120 basis points of merchandise margin improvement. On the bottom line, adjusted earnings per share (EPS) fell from $1.55 to $1.25, which topped the consensus at $1.14.
The company also took a $166 million non-cash impairment charge on its Digital Banners goodwill and Blue Nile brand. Management said the impairment was caused by the challenges in the Blue Nile integration and a delay in the engagement recovery.
CEO Virginia Drosos noted the recovery in engagements and said, "Our strategy to accelerate new merchandise at the right price points is capturing customer demand and driving merchandise margin expansion."
What's next for Signet
Looking ahead to the rest of the year and the key holiday quarter, the company expects Q3 revenue of $1.345 billion-$1.38 billion, which compared to estimates of $1.35 billion, and calls for comparable sales of between -1% and +1.5%. For the full year, it reaffirmed its adjusted EPS forecast of $9.90-$11.52, ahead of the consensus of $10.23 at the midpoint of that range.
Some pessimism seemed priced into the stock after it fell on the first-quarter report, but the return to same-store sales growth is clearly a positive sign for the company. Its forecast about the engagement recovery has also borne out, boding well for next year.
The stock still looks like a good value at a forward price-to-earnings (P/E) of less than 9.
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