Signet Jewelers (SIG), the world's largest retailer of diamond jewelry, reported mixed Q1 results, disappointing investors hoping for a demand recovery. Same-store sales decreased by 8.9%, slightly missing expectations, driven by fewer transactions and a 1.6% drop in average transaction value.
- Consumers are avoiding big-ticket purchases, especially those needing financing, impacting SIG's sales. The bridal market's gradual rebound hasn't offset the broader weakness in SIG's business.
- Digital banner issues have also been a problem. In Q4, same-store sales were negatively impacted by 1% due to integration issues with the Blue Nile and James Allen digital banners, leading to fulfillment problems. This quarter, digital banner issues were a 2-point negative headwind.
The good news is that the worst may be behind SIG.
- CEO Virginia Drosos noted that North America engagement unit sales increased by 400 bps, excluding digital banners, in Q1. After a slow February, business improved during the quarter, with May showing even stronger results. SIG expects this momentum to continue in Q2, leading to a "positive same-store sales inflection in 2H25."
- However, the stock isn't reacting positively because SIG kept its FY25 guidance unchanged. The company still forecasts revenue of $6.66-$7.02 billion, same-store sales of -4.5% to +0.5%, and EPS of $9.90-$11.52, despite comfortably topping EPS estimates in Q1.
- Shares have risen about 20% since its Q4 report on March 20 (before today's losses), suggesting the stock was pricing in a second-half recovery. The unchanged FY25 outlook is creating uncertainty about the strength of that rebound.
The main takeaway is that business conditions remained unfavorable in Q1, and digital banner integration issues added to the topline pressures. SIG remains optimistic about a turnaround in 2H25, but investors were looking for that optimism to be reflected in an improved financial outlook, which did not happen.
