Signet Jewelers' Sales Decline in Q1

Jewelry
07/06/2019 15:20

Signet Jewelers reported a decline in revenue during the first quarter of fiscal 2020 (ended May 4), as sales fell at all their banner stores except for Piercing Pagoda - the ear piercing and gold and sterling silver shop with roughly 780 kiosks in shopping malls across the United States and Puerto Rico - which gained 13.5%. Ecommerce sales also increased 5.3% year over year to $154.3 million.

Overall same-store sales dropped 1.3% in the quarter, while total revenue for the quarter declined 3.3% to $1.43 billion. Signet's total sales were $1.43 billion, down 3.3% on a reported basis and down 2.6% on a constant currency basis. The results led the company to slightly revise their fiscal 2020 guidance down 2.5% to down 1.5% (previously down 2.5% to flat) and total sales down to $6.0 billion - $6.06 billion, compared to $6 billion to $6.1 billion announced earlier. “We delivered operating profit above our guidance range and strong free cash flow in the first quarter, with same store sales at the low end of our guidance,” said Signet Chief Executive Officer Virginia C. Drosos. “Given the sales trends we experienced year to date and softening retail traffic, we are narrowing our Fiscal 2020 guidance while continuing to expect strong progress on cost savings across our business. She said mall traffic in particular softened in May.

As mentioned above, e-commerce increased 5.3% year over year to $154.3 million, and now accounts for 10.8% of the company’s sales, up from 9.9% the year before. James Allen’s sales will likely continue to be affected as more states institute online sales tax, Drosos said. Brick and mortar same store sales declined 2.0%. Like other US jewelers, Signet expects the newly imposed tariffs on Chinese goods could have a “material effect” on the company’s results, which could increase prices for US consumers, or decrease margins for Signet stores. Drosos said that 30% of the company’s products come from China, and the company was looking at diversifying its sourcing. The company still plans to close around 150 stores and to and open 20-25 stores over the coming fiscal year, which should lead to $70 million–$80 million net savings this year, but it expects those store closing to have an unfavorable $190 million impact on revenues.