Signet’s a Real Market Gem

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Posted: Jan 13, 2016 12:01 AM
Signet’s a Real Market Gem

Bermuda-based Signet Jewelers Plc (SIG) may not be a retail name you recognize, but you will likely recognize its many jewelry store brands such as Kay Jewelers, Jared, Zales, and the Diamond Store to name a few. Signet engages in the retail sales of jewelry, watches in the US, Canada, UK, Ireland, and Channel Islands, and operates thousands of jewelry stores in malls and off-mall locations as well as mall-based kiosks.

In this era when most traditional brick and mortar retailers are languishing, Signet Jewelers is bucking that trend, satisfying a niche in retail that has been quite resilient. Signet targets mid-tier shoppers, with more than half of their sales coming from the reasonably recession-proof bridal business.

While its more upscale competitors like Tiffany & Co (TIF) have been hurt by the strong dollar, Signet stores do not rely on spending from foreign tourists. As a result, its stores have consistently been delivering same store sales growth in the 3-5% range which has helped drive better stock price performance.

This holiday season the company announced holiday sales of $1.94 billion, up 5% over last year’s levels. Same-store sales increased 4.9% over the holidays. Given its strong results, the company narrowed it earnings guidance to $3.44 to $3.50 per share from $3.30 to $3.50 and narrowed its same-store sales guidance to between 4.6% and 5% from between 3.5% and 5%.

These results were particularly important given its miss in Q3 and concerns about a sales slowdown at Jared and Zales. Over the holidays Kay delivered strong results, with Jared and Zales also demonstrating improvement. Not bad in a year when most mall-based retailers failed to deliver. It should be noted also that the company’s online sales were also up 10.9% over last year, capturing more digital sales as well.

There is growing evidence that the consumer is not “dead”, but merely more discriminate about the purchases it is making. It may be making more purchases online, but it is also still buying higher ticket items like jewelry and cars in person.

So let’s see how the stock looks in the Best Stocks Now app.

Source: Best Stocks Now App

Signet Group is a consumer discretionary, retail stock with a market capitalization of $10.6 billion, placing it in the Mid Cap category.

Source: Best Stocks Now App

From a valuation standpoint, Signet’s trailing PE is 24 with a forward PE of 17 times. Given its estimated 5-year annual growth rate of 18.75%, it valuation appears quite reasonable. Its PEG ratio is below 1, at an attractive 0.89. In addition, the stock pays a dividend, yielding 0.71%.

Source: Best Stocks Now App

Signet Jewelers has been a good “all-weather” retail stock, delivering better-than-market performance on a 3,5, and 10 year basis. Last year it underperformed the market, but thanks to its recent strong holiday results and higher guidance, it has been a “gem” year-to-date, up 7.8%. Its Momentum Grade is B-, but its Performance Grade is an A-.

Source: Best Stocks Now App

Signet Jewelers ranks #17 out of the more than 4100 stocks in the Best Stocks Now Universe, earning it a stock grade of A- and a rating of Buy. I am currently long the stock. After implementing a store operations initiative in Q3, combined with an investment in new innovative merchandising and marketing programs, Signet appears to be back on track and poised for future growth. In short, Signet Jewelers is a gem of a stock in a sea full of rocks.