Signet Jewelers Limited (SIG Quick QuoteSIG - Free Report) posted better-than-expected results for third-quarter fiscal 2023. Further, sales increased year over year while earnings declined from the year-ago fiscal quarter’s reading. Also, same-store sales dropped 7.6% from the year-earlier fiscal quarter’s reading.

This presently Zacks Rank #3 (Hold) player’s shares have increased 2.1% in the past three months compared with the industry’s 5.9% dip.

Management raised the view for fiscal 2023, which reflects confidence in the current business trends and is inclusive of Blue Nile.  The holiday season remains encouraging.

Quarterly Details

Signet reported adjusted earnings of 74 cents per share, beating the Zacks Consensus Estimate of 30 cents. The bottom line plunged from $1.43 earned in the year-ago fiscal quarter.
 

This jewelry retailer generated total sales of $1,582.7 million, ahead of the Zacks Consensus Estimate of $1,473 million. The top line rose 2.9% from the prior-year fiscal quarter’s tally due to soft same-store sales.

A Sneak Peek Into Margins

The adjusted gross profit in the fiscal third quarter amounted to $557.6 million, down 3.1% from $575.6 million in the year-ago fiscal comparable quarter.

Adjusted SG&A expenses came in at $497.2 million, up 5.4% from $470.5 million in the prior fiscal year’s comparable quarter. SIG reported an adjusted operating income of $57.9 million, down from the $105.2 million recorded in the year-ago fiscal quarter. As a rate of sales, the adjusted operating margin contracted 310 basis points to 3.7%.

Segment Discussion

Sales in the North American segment rose 5.1% from the year-ago fiscal quarter’s number to $1.5 billion. Same-store sales fell 7.6% from the year-ago fiscal quarter’s levels due to lower transactions, partly compensated by a rise in the average transaction value (ATV).

Sales in the International segment dropped 21.2% from the year-earlier fiscal quarter’s reading to $95.3 million. Same-store sales in the segment slipped 6.7% from the year-ago fiscal quarter’s tally, reflecting the impacts of increased ATVs and lower transactions.

Financial Details

Signet ended the fiscal third quarter with cash and cash equivalents of $327.3 million, accounts receivable of $29.8 million and inventories of $2,429 million. The long-term debt was $147.3 million at the end of the reported fiscal quarter. Total shareholders’ equity was $1,358.1 million at the end of the fiscal third quarter.

As of third-quarter fiscal 2023, Signet used net cash of $155.5 million from operating activities. SIG had an adjusted free cash flow of a negative $249.8 million as of Oct 29, 2022.

Signet completed a shares buyback of $20.2 million in the fiscal third quarter. Fiscal 2023 year to date through Dec 2, it has repurchased roughly 5.6 million shares for $393 million. SIG has buybacks of about $570.3 million left under its authorization. Signet’s board declared a quarterly cash dividend of 20 cents per share for the fourth quarter of fiscal 2023.

We note that Signet had 2,800 stores as of Oct 29, 2022.

Guidance

Signet updated guidance for fiscal 2023. It projects total revenues in the band of $7.77-$7.84 billion, compared with $7.60-$7.70 billion projected earlier and $7.83 billion delivered in fiscal 2022. The adjusted operating income is still anticipated in the range of $809-$850 million, versus the earlier projection of $787-$828 million and $908.1 million recorded in the last fiscal year.

Adjusted earnings per share (EPS) are envisioned in the bracket of $11.40-$12.00 compared with the previous forecast of $10.98-$11.57 for fiscal 2023 and $12.28 earned in fiscal 2022.

Capital expenditures for fiscal 2023 are likely to be nearly $215 million.

For the fourth quarter of fiscal 2023, management expects revenues in the range of $2.59-$2.66 billion. The adjusted operating income is expected in the range of $363-$404 million.

Management’s guidance assumes consumer pressure, including inflation. It expects a certain shift in consumer discretionary spending from the jewelry category, indicating the pent-up demand for experience-oriented categories in fiscal 2023. Signet’s initiatives to lower supply-chain hurdles have been effective so far and management does not expect any considerable challenges in the inventory availability.

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