Signet Rises on Q4 Earnings Beat - Analyst Blog

Shares of Signet Jewelers Limited SIG rose nearly 7% on the index before hitting an all-time 52-week high of $107.38 on the back of better-than-expected fourth-quarter fiscal 2014 results. The company's quarterly earnings per share of $2.18 surpassed the Zacks Consensus Estimate of $2.15 per share and grew 2.8% year over year.

For fiscal 2014, earnings came in at $4.56 per share, ahead of the Zacks Consensus Estimate of $4.53 and up 4.8% year over year

Signet posted net sales of $1,564.0 million in the quarter, up 3.4% from the prior-year quarter driven by healthy performance of stores in the U.S. and U.K. division. Total revenue came ahead of the Zacks Consensus Estimate of $1,550 million.

For the full year, net sales came in at $4,209.2 million, which was up 5.7% year over year and beat the Zacks Consensus Estimate of $ 4,193 million.

Quarterly Highlights

For the quarter, comparable-store sales climbed 4.3% as against an increase of 3.5% in the prior-year quarter. E-Commerce sales grew to $79 million, up 23.6% on a year-over-year basis.

By division, sales in the U.S. grew 3.5% to $1,288.0 million on the back of strong performance in the bridal, colored diamonds, watches, fashion jewelry and beads collections. Comps rose 4.0% while e-Commerce sales grew 21.4% to $61.9 million.

Sales in the U.K. division increased 1.4% to $272.2 million due to strong performance of bridal and fashion diamond jewelry, fashion and watches (excluding Rolex, which was offered in lesser outlets in fiscal 2014). Moreover, comps grew 5.7% while e-Commerce sales grew 32.6% to $17.1 million.

Consolidated gross profit for the quarter increased 1.8% to $648.8 million while gross margin contracted 60 basis points to 41.5%. Operating income was $270.6 million, up 1.1% while operating margin fell nearly 40 bps to 17.3%.

Other Details

Signet ended the quarter with cash and cash equivalents of $247.6 million, net receivables of $1,374.0 million while accounts payable were $162.9 million. Moreover, net cash provided by operating activities was $257.4 million.

In the quarter, Signet bought back 1,557673 shares at an average price of $67.24 per share. As of Feb 1, 2014, the company has $ $295.4 million worth of shares remaining under the share repurchase authorization.

As of Feb 1, 2014, the company operated 1,471 stores in the U.S. and 493 outlets in the U.K., thereby bringing the total store count to 1,964.

Moreover, Signet announced a 20% hike in its quarterly dividend to 18 cents per share payable on May 28, 2014 to shareholders of record on May 2, 2014,

Guidance

Signet now projects fiscal first-quarter 2015 earnings in the range of $1.14 to $1.20 per share, after including the impact of Zale Corporation ZLC acquisition. The current Zacks Consensus Estimate for first-quarter 2015 is $1.29 per share.  

In Feb 2014, Signet had declared that it would acquire Zale for $1.4 billion. This move is expected to result in combined sales of $6.2 billion generating from approximately 3,600 retail outlets and annual synergies of roughly $100 million within three fiscal years, resulting from operational efficiencies.

For the first quarter, comps are expected to increase 3%–4%.  

For fiscal 2015, Signet expects capital expenditure to be around $180 million to $200 million, which includes expenses related to the launch of 75–85 new Kay and Jared outlets, store remodeling, enhancing digital and information technology infrastructure as well as outlet channel development.

Signet currently has a Zacks Rank #3 (Hold). Some better-ranked retail stocks that look promising include Hanesbrands Inc. HBI and Barnes & Noble, Inc. BKS, both of which have a Zacks Rank #1 (Strong Buy).