Signs for Kay Jewelers, a subsidiary of Signet Jewelers Ltd., are displayed on the front of the store in New York.
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Signet Jewelers fell on Thursday, despite parent company Kay Jewelers, Zales and Jared reporting third-quarter earnings, ahead of analyst expectations, prompting it to raise its outlook for the year.
Analysts believe that after tremendous gains this year, when the company’s shares are up 240% since the beginning of the year, some investors are likely to have taken profits. UBS retail analyst Jay Sole said he had expected the stock to rally following a better-than-expected report.
Signet shares recently dropped nearly 4% after rising 4% in the premarket.
But some investors are also concerned about Signet’s ability to maintain momentum, especially next year.
Telsey Advisory Group CEO and Principal Investigator Dana Telsey said in a note to clients that she was pleased with Signet’s third quarter results, but noted that the company will now face difficult comparisons after the holidays. Some consumers may start shifting their spending towards entertainment, including vacations and concert tickets, she said. This could hold back the growth of Signet.
Last week, in anticipation of a strong report, Telsi raised its target price for Signet shares from $ 94 to $ 110. The shares closed at $ 92.94 on Tuesday.
Sales exceeded $ 1.5 billion
Signet reported net income for the three-month period ended October 30 of $ 92.6 million, or $ 1.45 per share, up from $ 9.3 million, or 2 cents per share, a year earlier.
Excluding one-time commodities, it earned $ 1.43 a share, beating expectations of 72 cents, according to a survey by Refinitiv analysts.
Sales rose to $ 1.54 billion from $ 1.3 billion a year earlier. This topped estimates of $ 1.43 billion.
Single-store sales that track revenue in stores that have been open for at least 12 months were up 18.9%. This is well ahead of the 11.6% growth predicted by analysts surveyed by FactSet.
Amid ongoing global supply chain problems and a tight job market, Signet CEO Virginia Drosos said the company purchased its holiday merchandise earlier this year in anticipation of possible delays and does not anticipate major disruptions. There are also enough staff there, she said.
The company’s current FY2022 sales will be $ 7.41 billion to $ 7.49 billion, up from the previous $ 7.04 billion to $ 7.19 billion. Same store sales are expected to grow 41-43% year over year, up from previous expectations of 35% to 38% growth.
CFO Joan Hilson said in a press release that the company remains cautious about its outlook due to the new coronavirus variant, omicron, as well as potential changes in consumer spending.
Citi analyst Paul Lehuez said he expects Signet shares to rise in the third quarter and raised the forecast.
However, if the company moves into a more favorable environment next year and continues to face higher labor costs, it will put more pressure on profitability, he said.
The entire jewelry industry was This year has seen a surge in sales as young shoppers purchase this category for the first time – many of them are planning offers or preparing for the wave of weddings in 2022 that have been delayed due to Covid. Jewelry can also be a sentimental gift that many consumers have wanted to give to loved ones during a pandemic.
Signet also recently completed the acquisition of the Diamonds Direct jewelry chain.
Find the Complete Signet Income Press Release here…