Signet Boosts Full-Year Guidance Heading in to Holiday Season

(Bloomberg) -- The owner of Kay Jewelers and Zales reported quarterly revenue that exceeded the highest estimate by an analyst and raised its full-year outlook again, further evidence that consumers are stepping up their spending on diamonds and gemstones ahead of the holiday season. 

• Signet Jewelers Ltd. reported revenue of $1.54 billion in its fiscal third quarter that ended Oct. 30. Analysts surveyed by Bloomberg had expected the company to report revenue of $1.43 billion on average.
• See more details here.

Key Insights

• “While uncertainties remain in the macro environment, our strategies are working as evidenced by strong conversion rates and higher average transaction value,” Signet Chief Executive Officer Gina Drosos said.
• Signet said it expects fiscal fourth-quarter revenue of $2.40 billion to $2.48 billion.
• The company raised its full-year revenue guidance and now expects sales of between $7.41 billion to $7.49 billion.
  • Its previous estimate, published in mid-October, was for full-year sales of as much as $7.2 billion.
• The brighter outlook is buoyed in part by “the ongoing structural changes in our business model, which include fleet optimization, transformation of financial services and significant cost savings,” said Chief Financial Officer Joan Hilson. That has “enabled investments in marketing, talent and new capabilities.”
• Despite the more upbeat forecasts, Signet executives cautioned that they expected consumers to shift some of their spending away from jewelry and other discretionary spending toward experience-oriented categories in the fourth quarter.
  • The “timing and magnitude is difficult to predict.”
• The fourth-quarter and full-year fiscal guidance include Diamonds Direct, the company said.
• In October, Signet said it was buying Diamonds Direct, part of the company’s bid to boost its market share in the highly-fragmented jewelry business.
  • “We believe Signet will be able to add significant value to the Diamonds Direct business particularly in the e-commerce channel,” Wells Fargo analyst Ike Boruchow said in a research report earlier this month.

Market Reaction

• Signet rose as much as 5.4% to $98 in premarket trading.

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