Why Shares of Signet Jewelers Tumbled Today

By Markets Fool.com

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Image source: Signet Jewelers.

What: Shares of Signet Jewelers (NYSE: SIG) slumped on Thursday following the company's second-quarter report. Signet missed analyst estimates on all fronts and slashed its guidance for the full year, sending the stock down 13% by 11:30 a.m.

So what: Signet reported second-quarter revenue of $1.37 billion, down 2.6% year over year and $60 million below the average analyst estimate. Same-store sales slumped 2.3% overall during the quarter, with most of the company's brands suffering declines. Jared same-store sales declined by 7.6%, while Kay registered a 0.5% decline.

Non-GAAP earnings per share (which allow for departures from generally accepted accounting principles) came in at $1.14, down from $1.28 during the prior-year period and $0.31 lower than analysts expected. On a GAAP basis, Signet reported EPS of $1.06, up from $0.78. The company spent $250 million on share buybacks during the quarter, helping to drive up per-share numbers.

In addition to missing analyst estimates, Signet lowered its guidance for the full year.

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Metric

New Guidance

Old Guidance

Same-store sales

(2.5%) to (1%)

2% to 3.5%

EPS

$6.90 to $7.22

$7.88 to $8.23

Non-GAAP EPS

$7.25 to $7.55

$8.25 to $8.55

Net selling square footage growth

3% to 3.5%

3% to 3.5%

Data source: Signet Q1and Q2 earnings reports.

Now what: Signet CEO Mark Light blamed a challenging environment for the company's weak results and guidance. "We are disappointed by our Q2 results and market conditions have been challenging particularly in the energy-dependent regions. This has contributed to a downward revision in our annual guidance," he said.

The company also announced that Leonard Green & Partners, a private equity firm, had agreed to purchase $625 million of convertible preferred shares from the company. The proceeds will be used to buy back shares, adding to the company's existing buyback program. These additional buybacks weren't enough to offset lackluster results and a major guidance cut, though, with investors punishing the stock as a result.

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