Shares of Signet Jewelers (NYSE: SIG) were losing their luster on Wednesday after the world's largest retailer of diamond jewelry posted solid results for its fiscal 2024 fourth quarter, but offered disappointing guidance for fiscal 2025.
As of 1:21 p.m. ET, the stock was down by 10.8%.
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Waiting for engagements to bounce back
In its fiscal fourth quarter, which ended Feb. 3, same-store sales fell 9.6%, driving revenue down 6.3% to $2.5 billion. That missed the analysts' consensus of $2.55 billion.
Despite the falling revenue in a challenging macro environment with weak consumer discretionary spending, gross margin in the quarter expanded by 160 basis points to 43.3% due to improving merchandise margins. Further down the income statement, Signet's selling, general, and administrative expenses rose 60 basis points to 26.9% of sales.
Adjusted operating income rose 1.2% to $409.7 million, giving Signet an operating margin of 16.4% in the seasonally strong quarter. On the bottom line, it reported adjusted earnings per share of $6.73, which was ahead of $5.52 in the quarter a year ago, though the latest result was boosted by a tax benefit equivalent to $0.38 per share. Analysts had expected $6.37 in EPS, meaning Signet essentially matched the consensus estimate when excluding the tax benefit.
"As we look to Fiscal 2025, we are expecting sequential same-store sales improvement over the year as engagements gradually recover," said CEO Virginia Drosos in the earnings release.
The company also raised its dividend by 26% to $0.29 a quarter, which at current share prices gives it a dividend yield of 1.3%.
Guidance disappoints
Investors were also disappointed with the company's guidance, as the recovery from engagements is expected to be weighted toward the back half of the fiscal year. For the fiscal first quarter, the company expects revenue of $1.47 billion to $1.53 billion, below analysts' average estimate of $1.61 billion, and anticipates a same-store sales decline of 7% to 11%.
For the fiscal year, management expects revenue growth trends to improve, but is calling for same-store sales in the range of down 4.5% to up 0.5%, and adjusted EPS of between $9.08 and $10.48. That entire EPS range was worse than the analysts' consensus of $10.57.
Given the weaker-than-expected guidance, it's not surprising that the stock is falling Wednesday, but Signet's long-term strategy is still in place, and investors will benefit from a rebound in engagements, as well as the company's ongoing share buybacks and the dividend hike.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
