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Why Signet Stock Tumbled Today
Shares of Signet Jewelers (NYSE: SIG) were taking a dive after the company gave a disappointing update to the key holiday quarter and cut its forecast for the fourth quarter.
As a result, the stock was down 25.6% on the news as of 11:47 a.m. ET.
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Signet comes up short
Signet, which is the world's largest retailer of diamond jewelry, said that same-store sales were down 2% through the first 10 weeks of the quarter, which ended on Jan. 11.
The company now expects same-store sales to decline 2% to 2.5% for the full quarter and said average prices rose 5%, though it experienced lower traffic and conversion. It lowered its revenue forecast from $2.38 billion-$2.46 billion to $2.32 billion-$2.335 billion and adjusted its operating income projection from $397 million-$427 million to $337 million-$347 million.
CFO/COO Joan Hilson said the results "reflect peak selling days leading up to Christmas that were below forecast," noting that fashion gifting underperformed as consumers moved down to lower price points.
New CEO J.K. Symancyk added, "I see meaningful potential to unlock shareholder value through the strength of both our brand portfolio and financial foundation."
What's next for Signet?
Given that Signet makes most of its profit in the fourth quarter, the sell-off is understandable, as the update will significantly impact full-year results.
However, if this is a reflection of temporary challenges in the macroeconomic climate, it's likely a buying opportunity for the stock, as Signet trades at a price-to-earnings ratio of less than 6 now. Of course, falling profits are a problem for now, but a strengthening economy and recovery engagements should support a return to growth for Signet.
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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.
