Signet Jewelers has revised its fiscal fourth-quarter sales outlook following a noticeable trend in consumer preferences during the essential holiday season. The company's shift in focus towards lower-priced fashion gifts has influenced its financial projections, resulting in a significant drop in share value.
Analysts suggest that the owner of prominent jewelry store chains such as Kay Jewelers and Zales now anticipates sales ranging between $2.32 billion and $2.34 billion for the quarter. This adjustment is a sharp decrease from its earlier guidance, which predicted sales between $2.38 billion and $2.46 billion, while the current market consensus on FactSet sits at $2.42 billion.
As a consequence of this news, Signet's shares plummeted 19% during Tuesday trading. The forecast for same-store sales in this three-month period has also seen a revision, now projected to decline by 2% to 2.5%, which stands in contrast to the prior expectation of relatively flat growth or an increase of up to 3%.
In a poll conducted by FactSet, three analysts had forecasted a growth of 1.7% for same-store sales. Additionally, the adjusted operating income is now expected to fall between $337 million and $347 million, a significant drop from its previous guidance of $397 million to $427 million. Adjusted earnings before interest, taxes, depreciation, and amortization for the quarter are now anticipated to be in the range of $381 million to $391 million, down from an earlier estimate of $441 million to $471 million. Examining the 10-week period leading up to January 11, 2024, Signet reported a decrease of roughly 2% in same-store sales year over year.
This decline reflects an underperformance during peak holiday sales days, as noted by Chief Financial Officer Joan Hilson in a formal statement. The average unit retail of merchandise, which divides same-store sales revenue by the volume of same-store sales units, increased by around 5%. However, lower traffic and conversion rates were evident. "Fashion gifting underperformed as consumers gravitated to lower price points even more than anticipated in a continued competitive environment," Hilson stated.
She also pointed out that assortment gaps at crucial gifting price points hindered the company’s ability to adjust to consumer trends. Despite these challenges, Signet's merchandise margin saw a slight increase, albeit lower than expected, due to a reduced fashion mix and a stronger consumer response to promotional items.
Sales in engagement and service sectors aligned with expectations, with the company recording average unit retail gains in bridal and fashion categories, according to Hilson's insights. In a broader financial context, last month Signet announced a third-quarter revenue of $1.35 billion, marking a decrease from $1.39 billion reported a year earlier.
Notably, same-store sales experienced a decline of 0.7% during this period. In light of these developments, Chief Executive J.K. Symancyk acknowledged the positives identified within the underlying business performance during the holiday period. He expressed optimism about the potential to reshape customer-facing strategies concerning marketing, product design, and assortment innovation.
"I see meaningful potential to unlock shareholder value through the strength of both our brand portfolio and financial foundation," said Symancyk during the Tuesday statement..