Why Signet Jewelers stock is up today

Actions of Jewelers with signs (SIG 15.56%) were glowing today as the world’s largest diamond jewelry retailer posted better-than-expected results in its second-quarter earnings report. As of 10:10 a.m. ET, the stock was up 15.1% on the news.

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Signet returns

Signet has struggled over the past few quarters amid a broader slowdown in consumer spending and a backlog of commitments. The company also faced tough comparisons after revenue rose in the later stages of the pandemic, fueled by stimulus checks.

Revenue fell again in the second quarter, but results were better than expected and management said comparable sales were positive so far in the third quarter. Comparable second-quarter sales fell 3.4 percent and revenue fell 7.6 percent to $1.49 billion, just short of estimates of $1.5 billion.

Despite the decline, it was the company’s fifth straight quarter of sequential same-store sales improvement, showing the business is moving in the right direction. The company also offered 120 basis points of freight margin improvement. Bottom line, adjusted earnings per share (EPS) fell from $1.55 to $1.25, which beat the consensus of $1.14.

The company also took a $166 million non-cash impairment charge on the Digital Banners goodwill and Blue Nile brand. Management said the impairment was caused by challenges in the integration of Blue Nile and a delay in the recovery of the commitment.

CEO Virginia Drosos noted the turnaround in commitments and said, “Our strategy to accelerate new merchandise at the right prices is to capture customer demand and drive merchandise margin expansion.”

What’s next for Signet

Looking ahead to the rest of the year and the key holiday quarter, the company expects Q3 revenue of $1.345 billion – $1.38 billion, compared with estimates of $1.35 billion, and calls for comparable sales between -1% and +1.5 %. For the full year, it reaffirmed its adjusted EPS forecast of $9.90-$11.52, ahead of the $10.23 mid-range consensus.

Some pessimism appeared to be priced into the stock after it dipped in its first-quarter report, but the return to same-store sales growth is clearly a positive sign for the company. His prediction regarding the recovery of the engagement has also been confirmed as auspicious for the coming year.

The stock still looks like good value at a forward price-to-earnings (P/E) of less than 9.