Northcoast Research said Signet Jewelers Ltd. SIG is leaning to a sale of its credit business, a move that could potentially lift its valuation multiples and result in increased returns for shareholders.
Analyst Commentary
Analyst Jeff Stein explained that if Signet retains the ownership of the portfolio there would be more detailed disclosure of credit metrics and a greater level of transparency.
“But, we are not certain this path would result in as much value creation as a sale. In a sale we would expect the shares to be accorded a higher P/E multiple and look for SIG to use net proceeds to repurchase shares,” Stein wrote in a note.
Stein, who has a Neutral rating on the shares, sees some generational shift in purchasing behavior for jewelry. That said, this does not mean that the Signet story is done by any means, as its competitive advantages remain intact.
A Look Forward
To get back on track, Signet is focusing on product innovation, enhancing the omni-channel experience and a greater emphasis on digital marketing. Further, some of the enhancements that contributed to poor performance of the Sterling division's online sales over holiday have been peeled back.
“We believe there is considerable work to be done, and it is unclear whether the measures being undertaken will be able to reverse the negative momentum in comps in FY18,” Stein added.
At last check, shares of Signet were down 0.27 percent at $80.55.
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