What happened
Shares of Signet Jewelers (NYSE: SIG) were moving higher today after the world's largest diamond jewelry retailer topped estimates in its second-quarter earnings report.
As of 2:07 p.m. ET, the stock was up 5.6% after gaining as much as 9.7% earlier in the session.
So what
Revenue at Signet continued to decline as the company faces a difficult macroenvironment as spending on discretionary goods has fallen, but it still topped estimates in the quarter.
Same-store sales were down 12% in the quarter, and revenue was down 8.1% to $1.61 billion, topping the consensus at $1.58 billion.
Gross margin was steady at 37.9%. But adjusted selling, general, and administrative expenses rose 450 basis points as a percentage of revenue to 31.7%. This was due to strategic investments in the business; an advertising shift due to the timing of Mother's Day; and deleveraging from the decline in sales.
As a result, adjusted operating margins fell from 11% to 6.4%, and adjusted earnings per share (EPS) declined from $2.68 to $1.55, though that topped estimates at $1.45.
CEO Virginia Drosos said,
We're reaffirming our full-year revenue and non-GAAP operating income guidance today as we anticipate the current macro trends will continue and engagements will begin their recovery. Additionally, we are increasing our EPS guidance to reflect second-quarter share repurchases.
Now what
Looking ahead, the company sees Q2 revenue of $1.36 billion to $1.41 billion, implying a decline of 12.5%, which was in line with analyst estimates.
For the full year, it continues to expect revenue of $7.1 billion to $7.3 billion, down 9.2% at the midpoint, but it raised its adjusted EPS guidance slightly to $9.55 to $10.14, which was ahead of estimates at $9.42.
Overall, Signet is managing its margins well in a difficult consumer environment and expects a rebound later in the year as wedding engagements rebound from a pandemic lull.
The stock continues to look cheap at a forward P/E of less than 8.
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