Signet Jewelers (SIG) Q4 2025 Earnings Call March 19, 2025 08:30 AM ET Company Participants Rob Ballew - SVP - IRJ.K. Symancyk - CEOJoan Hilson - Chief Financial & Operating OfficerJuliana Duque - Equity Research AssociateLorraine Hutchinson - Managing DirectorPaul Lejuez - Managing DirectorDana Telsey - CEO and Chief Research OfficerMauricio Serna - Executive Director Conference Call Participants Jim Sanderson - Equity Research Analyst Operator Good morning, and welcome to the Signet Jewelers Fourth Quarte ...

Financial Performance - Fourth quarter sales were $2.4 billion, down $145 million or 5.8% compared to Q4 of FY24, with same store sales declining 1.1%[3] - Operating income for Q4 was $152.6 million, significantly down from $416.3 million in Q4 of FY24, impacted by non-cash impairment charges of $200.7 million[4] - Diluted earnings per share (EPS) for Q4 was $2.30, compared to $11.75 in Q4 of FY24, with adjusted diluted EPS at $6.62, slightly down from $6.73[8] - For Fiscal 2025, total sales were $6.7 billion, a decrease of $467.3 million or 6.5% from the previous year, with same store sales down 3.4%[9] - Net income for Fiscal 2025 was $61.2 million, a significant decrease from $810.4 million in Fiscal 2024[28] - Total sales for the North America segment decreased by 6.0% year-over-year to $6,299.1 million, while the International segment saw a decline of 13.4% to $373.2 million[29] - Operating income for the North America segment dropped to $143.6 million (6.5% of segment sales) from $396.0 million (16.8% of segment sales) in the previous year[30] - Adjusted operating income for Fiscal 2025 was $355.5 million, down from $409.7 million in Fiscal 2024, representing a decrease in adjusted operating margin from 16.4% to 15.1%[44] - Total adjusted operating income for the fourth quarter of Fiscal 2025 was $355.5 million, compared to $409.7 million in the fourth quarter of Fiscal 2024[44] Cash Flow and Dividends - The company generated over $400 million in free cash flow, allowing for a nearly 20% reduction in diluted share count by returning approximately $1 billion to shareholders[2] - Free cash flow for Fiscal 2025 was $437.9 million, slightly up from $421.4 million in Fiscal 2024[43] - The Board of Directors declared a quarterly cash dividend of $0.32 per share, representing a 10% increase[12] Assets and Liabilities - Total assets decreased to $5,726.6 million as of February 1, 2025, from $6,813.2 million as of February 3, 2024, a decline of 15.9%[27] - Cash and cash equivalents dropped to $604.0 million from $1,378.7 million, a decrease of 56.2% year-over-year[27] - Total current liabilities were $1,831.5 million, down from $1,976.0 million, reflecting a decrease of 7.3%[27] - Shareholders' equity decreased to $1,851.8 million from $2,166.5 million, a decline of 14.5%[27] Impairments and Expenses - The company reported asset impairments of $202.7 million for the 13 weeks ended February 1, 2025, compared to $3.4 million in the prior year[26] - The company recorded asset impairments of $200.7 million for the 13 weeks ended February 1, 2025, compared to $3.4 million for the 14 weeks ended February 3, 2024[45] - Income tax expense for the 13 weeks ended February 1, 2025, was $53.5 million, compared to a benefit of $(199.2) million for the 14 weeks ended February 3, 2024[48] Future Guidance and Plans - Fiscal 2026 guidance anticipates total sales between $6.53 billion and $6.80 billion, with same store sales projected to decline between 2.5% and increase by 1.5%[15] - The company plans to transition over 10% of mall locations to off-mall and eCommerce channels over the next three years[2] - A new fully traceable diamond collection is set to launch in Fall 2025, featuring responsibly sourced diamonds from Botswana[18] - Capital expenditures for Fiscal 2026 are planned at approximately $145 million to $160 million[19] - The company plans to continue focusing on market expansion and innovation in its product offerings to drive future growth[24] Store Operations - The company operated 2,642 stores as of February 1, 2025, a decrease of 56 stores compared to the previous year[31] - Capital expenditures for Fiscal 2025 were $153.0 million, compared to $125.5 million in Fiscal 2024[28] Segment Performance - North America segment adjusted operating income for the 13 weeks ended February 1, 2025, was $346.0 million, compared to $403.2 million for the 14 weeks ended February 3, 2024, reflecting a decrease of 14.2%[45] - International segment adjusted operating income for the 13 weeks ended February 1, 2025, was $21.8 million, slightly down from $22.2 million for the 14 weeks ended February 3, 2024, indicating a decrease of 1.8%[46] - The North America segment operating income for Fiscal 2025 was $143.6 million, down from $173.7 million in Fiscal 2024, a decrease of 17.3%[45] - The International segment operating income for Fiscal 2025 was $1.0 million, compared to $13.1 million in Fiscal 2024, reflecting a significant decline of 92.3%[46] Earnings and Margins - Basic earnings per share for the 13 weeks ended February 1, 2025, was $2.32, compared to $13.94 for the same period last year, a decrease of 83.4%[26] - Adjusted diluted EPS for the 13 weeks ended February 1, 2025, was $6.62, a decrease from $6.73 for the 14 weeks ended February 3, 2024[50] - Adjusted EBITDA for the 13 weeks ended February 1, 2025, was $393.9 million, down from $446.5 million for the 14 weeks ended February 3, 2024, representing a decline of 11.7%[51] - The effective tax rate for the 13 weeks ended February 1, 2025, was 34.7%, compared to (46.7)% for the 14 weeks ended February 3, 2024[49]

Group 1 - Signet's stock closed at $47.94, down 1.6% from the previous day, underperforming the S&P 500's loss of 1.22% [1] - Over the past month, Signet's shares have declined by 15.9%, while the Retail-Wholesale sector and S&P 500 lost 4.52% and 2.31% respectively [1] Group 2 - The upcoming earnings report for Signet is expected on March 19, 2025, with analysts forecasting earnings of $6.39 per share, a year-over-year decline of 5.05% [2] - Revenue is projected to be $2.33 billion, indicating a 6.71% decline compared to the same quarter last year [2] Group 3 - Recent changes in analyst estimates for Signet reflect evolving short-term business trends, with positive revisions indicating a favorable outlook on the company's health and profitability [3] - The Zacks Rank system, which evaluates these estimate changes, currently ranks Signet at 4 (Sell) [5] Group 4 - Signet's Forward P/E ratio is 5.47, significantly lower than the industry's average of 14.23, indicating a valuation discount [6] - The PEG ratio for Signet is 3.09, compared to the average PEG ratio of 4.07 for Retail - Jewelry stocks [6] Group 5 - The Retail - Jewelry industry is part of the Retail-Wholesale sector and currently holds a Zacks Industry Rank of 162, placing it in the bottom 36% of over 250 industries [7] - The Zacks Industry Rank measures the strength of industry groups based on the average Zacks Rank of individual stocks, with the top 50% rated industries outperforming the bottom half by a factor of 2 to 1 [7]

Core Viewpoint - Signet Jewelers' stock has risen following an activist investor's call for the company to explore strategic options, including a potential sale [1][2]. Group 1: Investor Actions - Activist investor Select Equity has acquired a 9.7% stake in Signet and has urged the board to consider all strategic options due to the stock being perceived as deeply undervalued [2]. - Select Equity has held the stock since 2020 and highlighted that same-store sales have declined for 11 consecutive years, underperforming the industry [3]. Group 2: Management Criticism - Select Equity criticized management for mishandling the transition of the James Allen and Blue Nile brands to a new technology platform and for poor capital allocation [4]. - The firm also expressed concerns regarding the appointment of new CEO J.K. Symancyk, suggesting that he lacks the necessary experience for the role [4]. Group 3: Company Performance - Signet's stock has experienced a significant decline, dropping nearly 50% from its peak in November, following a missed earnings estimate in the third quarter and a subsequent guidance cut for the holiday quarter [5]. - Despite today's stock gains, the overall performance indicates that Signet has struggled to outperform the industry, as noted by Select Equity [6]. Group 4: Strategic Considerations - Considering strategic alternatives may be beneficial for Signet, as there could be interest from private equity firms or other maneuvers to enhance company value [7]. - A response from the board to Select Equity's letter is anticipated, and if a sale is considered, it could lead to an increase in the stock price [7].

Group 1: Company Performance - Signet (SIG) stock closed at $54.91, showing a +1.33% change from the previous day's closing price, outperforming the S&P 500's daily gain of 0.03% [1] - Over the past month, Signet shares have decreased by 26.81%, underperforming the Retail-Wholesale sector's gain of 9.07% and the S&P 500's gain of 4.19% [1] - The upcoming earnings report projects an EPS of $6.39, reflecting a 5.05% decline compared to the same quarter last year, with revenue expected to be $2.33 billion, indicating a 6.71% decrease [2] Group 2: Analyst Estimates and Ratings - Recent adjustments to analyst estimates for Signet are being monitored, as upward revisions indicate analysts' positive outlook on the company's operations and profit generation [3] - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), currently ranks Signet at 4 (Sell), with a 13.71% decrease in the Zacks Consensus EPS estimate over the last 30 days [5] - The Zacks Rank has a strong track record, with 1 stocks delivering an average annual return of +25% since 1988 [5] Group 3: Valuation Metrics - Signet's Forward P/E ratio stands at 6.08, which is below the industry average Forward P/E of 15.25, indicating a valuation discount [6] - The company has a PEG ratio of 3.44, compared to the Retail - Jewelry industry's average PEG ratio of 4.11, suggesting a relatively favorable valuation in terms of expected earnings growth [7] Group 4: Industry Context - The Retail - Jewelry industry, part of the Retail-Wholesale sector, has a Zacks Industry Rank of 155, placing it in the bottom 39% of over 250 industries [8] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1, highlighting the importance of industry strength in stock performance [8]

Company Performance - Signet (SIG) closed at $59.54, reflecting a -1.51% change from the previous day, underperforming the S&P 500's daily loss of 1.46% [1] - Over the past month, Signet's shares have decreased by 26.25%, contrasting with the Retail-Wholesale sector's gain of 2.27% and the S&P 500's gain of 1.08% [1] Upcoming Earnings - Analysts predict Signet will report an EPS of $6.39, indicating a 5.05% decline compared to the same quarter last year [2] - The consensus estimate for revenue is projected at $2.33 billion, reflecting a 6.71% decrease from the equivalent quarter last year [2] Annual Forecast - Zacks Consensus Estimates forecast earnings of $8.73 per share and revenue of $6.68 billion for the year, indicating changes of -15.81% and -6.83%, respectively, compared to the previous year [3] Analyst Projections - Recent shifts in analyst projections for Signet should be monitored, as positive estimate revisions can indicate a favorable business outlook [4] Zacks Rank and Valuation - The Zacks Rank system currently rates Signet as 5 (Strong Sell), with the EPS estimate moving 11.6% lower over the last 30 days [6] - Signet's Forward P/E ratio is 6.92, indicating a discount compared to its industry's Forward P/E of 21.71 [6] Industry Comparison - Signet has a PEG ratio of 3.91, while the average PEG ratio for Retail - Jewelry stocks is 4.29 [7] - The Retail - Jewelry industry holds a Zacks Industry Rank of 216, placing it in the bottom 14% of over 250 industries [7]

Group 1: Company Performance - Signet (SIG) closed at $60.45, reflecting a -0.56% change from the previous day, which is less than the S&P 500's daily loss of 0.29% [1] - The stock has decreased by 26.28% over the past month, underperforming the Retail-Wholesale sector's gain of 3.53% and the S&P 500's gain of 2.52% [1] Group 2: Upcoming Earnings - Signet is projected to report earnings of $6.39 per share, indicating a year-over-year decline of 5.05% [2] - The consensus estimate anticipates revenue of $2.33 billion, representing a 6.71% decrease from the same quarter last year [2] Group 3: Full Year Estimates - For the full year, earnings are estimated at $8.73 per share and revenue at $6.68 billion, showing declines of -15.81% and -6.83% respectively from the previous year [3] - Recent changes to analyst estimates for Signet may indicate shifts in near-term business trends, with positive changes suggesting a favorable outlook on the company's health and profitability [3] Group 4: Valuation Metrics - Signet has a Forward P/E ratio of 6.96, significantly lower than the industry average of 21.84, suggesting it is trading at a discount [6] - The PEG ratio for Signet is currently 3.93, compared to the average PEG ratio of 4.29 for Retail - Jewelry stocks [7] Group 5: Industry Ranking - The Retail - Jewelry industry is part of the Retail-Wholesale sector, which has a Zacks Industry Rank of 168, placing it in the bottom 34% of over 250 industries [7][8] - The Zacks Industry Rank indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8]

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Signet (SIG), and highlights the disparity between average brokerage recommendations (ABR) and Zacks Rank, suggesting that investors should be cautious in relying solely on brokerage ratings for investment decisions [1][4][12]. Group 1: Brokerage Recommendations - Signet currently has an average brokerage recommendation (ABR) of 2.00, indicating a Buy, based on recommendations from six brokerage firms, with three of those being Strong Buy, representing 50% of all recommendations [2][4]. - Despite the ABR suggesting a Buy for Signet, studies indicate that brokerage recommendations often fail to guide investors effectively towards stocks with significant price appreciation potential [4][9]. - Analysts from brokerage firms tend to exhibit a strong positive bias in their ratings, with five "Strong Buy" recommendations for every "Strong Sell," which may mislead retail investors [5][9]. Group 2: Zacks Rank Comparison - Zacks Rank categorizes stocks into five groups based on earnings estimate revisions, with a strong correlation to near-term stock price movements, making it a more reliable indicator than ABR [7][10]. - The Zacks Rank is updated more frequently than ABR, reflecting timely changes in earnings estimates, which can provide better insights into future price movements [11]. - For Signet, the Zacks Consensus Estimate for the current year has declined by 11.6% over the past month to $8.73, leading to a Zacks Rank of 5 (Strong Sell), indicating a potential decline in stock value [12][13].

Core Viewpoint - The article discusses potential fraud affecting investors in Signet Jewelers Limited (SIG), suggesting that those who lost money may have been impacted by fraudulent activities [1] Group 1 - Signet Jewelers Limited has faced allegations of fraud, which may have led to financial losses for investors [1] - The law firm Levi & Korsinsky is reaching out to affected investors, indicating a possible legal response to the situation [1] - The article highlights the importance of investor awareness regarding potential fraud in the market [1]

Core Viewpoint - Signet Jewelers' shares dropped 26.2% following disappointing holiday sales pre-announcement, indicating potential challenges ahead for the company [1][2]. Sales Performance - Signet reported a 2% decline in holiday same-store sales, which was below prior forecasts, suggesting a likely disappointing full fourth-quarter report [2][3]. - Management now expects same-store sales to decrease between 2% and 2.5% for the quarter, a significant revision from the previous expectation of flat to up 3% [3]. Revenue Guidance - Fourth-quarter revenue is now projected to be between $2.320 billion and $2.335 billion, down from earlier guidance of $2.38 billion to $2.46 billion [3]. Consumer Behavior - The engagement and service segments performed as expected, but non-engagement gifting and self-purchase categories fell short, with consumers favoring lower price points amid a competitive environment [4]. - The impact of inflation on food and housing, along with a shift in consumer spending towards experiences, has negatively affected discretionary goods sales, including jewelry [4]. Market Dynamics - Signet appears to be a cheap stock at 6.6 times trailing earnings, but there are concerns it may be a value trap due to future uncertainties [5]. - The rise of lab-grown diamonds is disrupting the market for traditional diamonds, as they are cheaper and have fewer environmental and political issues associated with them [6]. Strategic Considerations - While Signet can pivot to selling lab-grown diamonds, this transition may pressure revenue and profits in the short term [7]. - The company has manageable debt levels, which may aid in adaptation, but the transition process could be challenging [7].