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Signet Stock Tumbles Amid Soft Q4 Sales and Outlook

Signet Jewelers’ stock price fell 12 percent on Wednesday after the retailer gave investors a disappointing sales forecast for 2024 and posted a top-line decline in the fourth quarter.

Despite the sales shortfall, Signet, which operates the Zales, Kay and Jared jewelry businesses and others, has been navigating effectively through what’s been a highly price-promotional retail landscape where consumers have become increasingly choosey. For the fourth quarter ended Feb. 3, net income more than doubled to $810.4 million, from $376.7 million in the year-ago quarter.

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Still, Wall Street reacted to the top-line decline by dragging the stock price down $12.38, or 12.1 percent, to $90.08 on Wednesday.

Fourth-quarter sales of $2.5 billion fell 6.3 percent, or $168.6 million, from the corresponding year-ago period. This includes $103.2 million of sales from a 53rd week in the last quarter, partially offset by about $25 million from lost sales contribution from U.K. prestige watch locations that were sold.

Same-store sales in the fourth quarter were down 9.6 percent.

Fourth-quarter operating income of $416.3 million was up from $369.5 million in the year-ago period. Non-GAAP operating income of $409.7 million last quarter compared to $404.7 million in the year-ago quarter.

Cash and cash equivalents reached $1.4 billion at the end of the year, up approximately $212 million from a year ago.

“Thank you to our Signet team for once again delivering on our expectations and successfully navigating a challenging quarter and year for the industry,” said Signet chief executive officer Virginia C. Drosos, in a statement Wednesday. “We drove gross margin expansion of 160 basis points and sustained average transaction value this quarter by executing on our strategy of building brand equity, customer experience innovation, and accelerated sell through on product newness as offsets to heavy discounting by competitors. As we look to fiscal 2025, we are expecting sequential same-store sales improvement over the year as engagements gradually recover. We believe we’re positioned to win new customers through our marketing personalization, growing consumer inspired product newness, and aggressive expansion of our service business.

“For the fourth year in a row, our flexible operating model generated over $600 million in free cash flow in fiscal 2024, excluding nonrecurring legacy legal settlements, led by agile inventory management and cost discipline. Fueled by robust cash conversion, we are raising our share buyback program from approximately $650 million to $850 million, increasing our common dividend, and maintaining ample financial capacity to address maturities this fiscal year,” said Joan Hilson, chief financial, strategy and services officer. “Our fiscal 2025 guidance reflects the beginning of the three-year engagement recovery, investments in our strategic initiatives, and continuing cost diligence to drive operating income, including $150 million to $180 million in cost savings this year.”

Signet plans to cut a total of $350 million in costs over the next three years.

For the first quarter of this year, Signet is forecasting sales of between $1.47 billion and $1.53 billion, with same-store sales down between 11 and 7 percent. Operating income is seen at $40 million to $60 million, and adjusted earnings before interest, taxes, depreciation and amortization are seen at $87 million to $107 million.

The first-quarter outlook, Signet indicated, is based on “a soft start to the quarter with trends notably improving since mid-February.” The company expects U.S. engagement incidents to be down “low- to midsingle digits” compared to the first quarter a year ago.

The outlook for 2024 is for sales of between $6.66 billion and $7.02 billion, with same-store sales down 4.5 percent to plus 0.5 percent. Operating income is seen coming in at $590 million to $675 million. Adjusted EBITDA is seen at $780 million to $865 million.

For all of 2023, Signet’s total sales of $7.2 billion were down $671 million, or 8.6 percent compared to last year. Same-store sales declined 11.6 percent.

Aside from Zales, Kay and Jared, Signet Jewelers operates Banter by Piercing Pagoda, Blue Nile, Diamonds Direct, JamesAllen.com, Rocksbox, Peoples Jewellers, H.Samuel and Ernest Jones.

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