‘we’re prepared for a strong holiday season’

Signet Jewelers Ltd (NYSE: SIG) ended roughly 20% up on Tuesday after reporting its third-quarter results that topped Street estimates by a significant margin.

Signet stock up on raised guidance

The stock is up also because the world’s largest retailer of diamond jewellery raised its guidance for the full year.

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It’s now calling for $7.77 billion to $7.84 billion in sales this year on up to $12 of adjusted per-share earnings. On CNBC’s “Closing Bell”, CEO Gina Drosos said:

We’ve seen a strong consumer so far and we’re prepared for a strong holiday season. People are giving fewer gifts but at higher price points because they’re giving to people they care more about. That’s been very good for the jewellery business.

The revised guidance, she confirmed, includes the company’s recent $360 million acquisition of Blue Nile. Drosos doesn’t expect that business to be profitable in the current quarter but said:

It’s the strongest brand name in online bridal retail. There’s a lot we can do with it. So far, we’re very pleased with the talent in the organisation and the synergies we’re seeing. A lot of opportunity in the back office.

Signet Jewelers Q3 financial highlights

• Earned $48.4 million versus the year-ago $106.9 million
• Per-share earnings also tanked from $1.45 to 60 cents
• On an adjusted basis, EPS came in at a higher 74 cents
• Total sales went up 2.9% year-on-year to $1.60 billion
• Consensus was 32 cents of EPS on $1.50 billion in sales

For the year, Signet stock is still down about 25%.

What else was noteworthy?

Signet Jewelers ended the quarter with inventory down 2.0%, as per the earnings press release. The chief executive noted:

Our inventory is healthiest it’s been in recent history. We’ve been very diligent in bringing down inventories. We have flexible fulfilment across our fleet, our jewellery consultants and customers can access jewellery from anywhere in the country.

Wall Street currently has a consensus “overweight” rating on the Signet stock.

Drosos also said that the business was not facing any meaningful supply constraints. Signet Jewelers, she added, has increased prices a bit and is also focusing on more premium products for the higher income customers.

We’ve been able to pivot our assortment very quickly, use data to target higher income customers. We anticipated that lower income customers would be challenged, so, we pivoted our assortment and marketing into the higher end.