Marriage proposals are still falling but should bottom this year, Signet says

By Tomi Kilgore

Kay Jewelers, Zales parent's stock suffers biggest selloff in four years after sales miss expectations

Shares of diamond seller Signet Jewelers Ltd. tumbled Thursday, after the parent of Kay Jewelers, Zales and Jared jewelry-store chains missed quarterly sales expectations, as engagements continued to decline and as troubles integrating Blue Nile continued.

On the bright side, the company (SIG) said the pace of the decline in engagements is slowing and is expected to bottom in the coming months, and end the fiscal year with growth.

"From low-double digit [percentage] decline in the fourth quarter, we've seen engagements improve to mid-single digit decline in Q1 with April and May reflecting a low single digit decline," said Chief Executive Gina Drosos, according to an AlphaSense transcript of the post-earnings call with analysts.

"Our proprietary data continues to point to a multi-year recovery, and we believe we remain on track to see engagements in the U.S. increase 5% to 10% for fiscal 2025," Drosos added.

Still, the stock tumbled 14.8% toward a three-month low. It was headed for the biggest one-day selloff since it dropped 16.1% on June 9, 2020.

For the quarter to May 4, the company swung to a net loss of $40.1 million, or 90 cents a share, from net income of $88.8 million, or $1.79 a share, in the same period a year ago.

Excluding nonrecurring items, such as costs of redemptions of preferred shares, adjusted earnings per share fell to $1.11 from $1.78, but beat the FactSet consensus of 85 cents.

Net sales declined 9.4% to $1.511 billion, which was just shy of the FactSet consensus of $1.516 billion.

Same-store sales, or sales of stores open at least a year, dropped 8.9%, or more than the FactSet consensus for an 8.1% decline.

Drosos said that while engagement units - essentially diamond rings - priced below $5,000 were flat to last year in April, the recovery has been slower at price points above $5,000. The reason for the weakness was partly because of the lower fulfillment of orders resulting from challenges in the integration of Blue Nile with production partners.

"This continues to be a challenging environment with macro pressure on the consumer and heightened discount activity among many jewelry participants," Drosos said.

For the second quarter, the company expects same-store sales to be down between 6% and 2%, surrounding the current FactSet consensus for a decline of 5.2%.

The full fiscal year outlook for same-store sales growth was kept intact at negative 4.5% to positive 0.5%, while the revenue guidance range remained at $6.66 billion to $7.02 billion.

The stock has now shed 13.9% year to date, while the SPDR S&P Retail ETF XRT has gained 4.5% and the S&P 500 index SPX has advanced 13.4%.

-Tomi Kilgore

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06-13-24 1226ET

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