Signet Jewelers Lowered Annual Outlook, Cash Flow Turns Negative

Scott Peters
01 Sep, 2022
New York City

Signet Jewelers Ltd dropped 11.4% to $57.29 despite the retailer reaffirming its full-year outlook and exceeding quarterly earnings estimates. 

Same store sales declined more than anticipated as higher prices deterred customers and lowered the number of transactions in the quarter. 

Total sales declined 1.9% to $1.8 billion and same store sales fell 8.2% from a year ago. 

North America sales declined 1.8% to $1.6 billion on 8.7% decline in same store sales. 

International sales plunged 14.6% to $111.6 million on 1.5% decline in same store sales. 

Gross margin, declined 220 basis points from a year ago, was $664.7 million or 37.9% of total sales. 

Operating income was $186.8 million or 10.6% of sales compared to $225.4 million or 12.6% of sales last year. 

Diluted earnings per share declined to $2.58 from $3.60 a year ago. 

 

Inventories 

Inventories at the end of the quarter increased to $2.2 billion from $2 billion last year. 

 

Cash Flow 

On larger purchases of inventories in the quarter, cash outflow was $114.9 million compared to cash inflow of 458.5 million a year ago. 

Free cash outflow in the quarter was $173.1 million from cash inflow of $426.3 million last year. 

 

Dividends and Stock Repurchase 

The company declared a dividend of 20 cents a share to shareholders on record of October 28 and payable on November 25. 

In the first-half ending on July 30, Signet repurchased approximately 4.7 million shares at an average cost per share of $72.14 or $341 million including $22.8 million during the second quarter and $50 million from the completion of the accelerated share repurchase program from fiscal 2022. 

Approximately $622.4 million are still available for stock repurchase from its share authorization program. 

 

Outlook and Guidance 

Signet lowered its full-year fiscal 2023 annual revenues to fall between $7.6 billion and $7.7 billion and diluted earnings per share between $10.98 and $11.57. 

The company previously guided annual revenues between $8.03 billion and $8.25 billon and diluted earnings per share between $12.47 and $13.47. 

The above guidance excludes $190 million of legal charges, $11 million charges for the acquired inventories, and $133 million for the buyout of substantially all U.K. pension obligations. 

The guidance also excludes planned capital expenses of up to $250 million.  

 

Retail Footprint 

During the quarter, Signet opened 23 new stores and closed 36 and ended with 2,493 stores in North America. 

The retailer added one store and closed 9 and ended with 340 international stores. 

At the end of the second quarter, Signet operated 2,833 jewelry stores covering 4.2 million square feet of selling space.