After management admitted that the company’s holiday season
performance fell short of their expectations, Kay, Zales, and Jared owner Signet
Jewelers’ (SIG 25.88, -7.48, -22.42%) shares are close to nine-year lows last seen during the first week of January
The company noted early improvements in refreshed merchandise assortment, digital marketing and OmniChannel were more than offset by larger than expected declines in legacy product lines. This led to a Holiday Season same store sales ("SSS") decline of 1.3%, which was inclusive of a positive impact of approximately 90 bps related to incremental clearance and a positive impact of 40 bps due to planned shifts in timing of promotions at Zales and Peoples. Signet’s eCommerce sales in the Holiday Season were $222.3 mln, up 5.6% yr/yr, while brick and mortar same store sales declined 2.2%.
In addition, the competitive promotional environment Signet saw early in the season intensified in December and, despite its increased promotional investments, Signet experienced reduced traffic during key December gifting weeks. Combined with higher than expected credit costs, these factors negatively impacted the company’s profitability.
As such, Signet revised its fourth quarter guidance to same store sales down 1.6-2.5% on non-GAAP earnings per share (EPS) of $3.77-3.92. Also, Signet lowered revenue guidance for the fourth quarter to $2.14-2.16 bln from the previous $2.17-2.22 bln.
What’s more, the company revised its Fiscal 2019 guidance to same store sales approximately flat, which is updated from the previous outlook of flat to up 1.0%, on non-GAAP EPS of $3.53-3.69, which is down from the prior guidance of $4.15-4.40. Additionally, Signet now expects revenues for the year in the range of $6.24-6.26 bln, down from the prior outlook of $6.26-6.31 bln.
Today’s news comes about 24 hours after a settlement was announced in the company’s case with the Attorney General for the State of New York (NY AG) and the Bureau of Consumer Financial Protection (CFPB) whereby the company agreed to pay civil money penalties of $10 mln to the CFPB and $1 mln to the NY AG related to the company's in-store credit practices, promotions, and payment protection products. At the time it was announced that Signet planned to recognize the related $11 mln pre-tax charge in the fourth quarter ending February 2, 2019.
Up next for Signet, the company is scheduled to report fourth quarter and full year Fiscal 2019 financial results on March 14, 2019.
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