Why Signet Jewelers Ltd. Stock Was Tumbling Today

MarketsMotley Fool

What happened

Shares of Signet Jewelers Ltd. (NYSE: SIG) were losing their luster today after the jewelry seller posted underwhelming fourth-quarter results and announced a three-year restructuring plan. The shift comes as the parent of Kay, Jared, Zales, and other retail jewelry chains continues to lose sales as mall traffic declines. The stock was down 16.8% as of 10:51 a.m. EST.

Continue Reading Below

So what

During the key holiday season, Signet said comparable sales fell by 5.2% with an 11% drop at Kay, its biggest chain. Overall revenue in the quarter, which had an extra week in the calendar, grew 1% to $2.29 billion, which topped estimates at $2.24 billion.

Gross margin was down 160 basis points to 40.1% of sales, and operating income fell 19% to $323.5 million. However, adjusted earnings per share rose from $3.92 to $4.28 due to a lower tax rate and fewer shares outstanding, topping expectations at $4.25.

"Fiscal 2018 was a challenging year for Signet," said CEO Virginia Drosos. "We gained sales momentum in our Zales banner in the fourth quarter as our strategic initiatives began to take hold, but we experienced challenges at our Kay and Jared banners, including execution issues related to the first phase of our credit outsourcing transaction."

Now what

Despite beating estimates, investor focus may have been on the restructuring plan, which included closing more than 200 stores this year, cutting costs, and enhancing e-commerce and omnichannel capabilities. For the current year, the company sees comparable sales declining in the low-to-mid single digits and adjusted EPS of $3.75 to $4.25, but just $0.00 to $0.60 in GAAP EPS. Considering the structural problems the company's facing, it's not surprising to see today's sell-off.

10 stocks we like better than Signet JewelersWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Signet Jewelers wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of March 5, 2018

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.