Signet Jewelers Reports Strong Q4 Earnings, Shares Surge but Face Key Resistance

Signet Jewelers (SIG) delivered a stronger-than-expected fourth-quarter earnings report, with both revenue and earnings per share (EPS) beating analyst estimates. The company reported adjusted EPS of $6.62, surpassing the consensus estimate of $6.25, while revenue came in at $2.35 billion, exceeding expectations of $2.33 billion. Despite these beats, total sales declined 5.8% year-over-year, reflecting ongoing challenges in the consumer discretionary sector. Shares of sig jumped nearly 10% in premarket trading, though they face key technical resistance at the 50-day moving average ($56) and prior gap-down resistance.

Earnings Breakdown: EPS and Revenue Beat Expectations

- Adjusted EPS: $6.62 vs. $6.25 expected, compared to $6.73 last year

- Revenue: $2.35 billion vs. $2.33 billion expected, down 5.8% year-over-year

- Comparable sales: -1.1 percent, better than expectations of -2.0 percent

- Gross margin: 42.6 percent, down 80 basis points year-over-year

- Operating income: $152.6 million, impacted by $200.7 million in impairment charges

- Adjusted operating income: $355.5 million vs. $343 million expected

Despite a decline in overall sales, Signet outperformed the company's reduced Q4 guidance, which had been lowered in January following softer holiday sales. The company’s better-than-expected performance was driven by a slight recovery in demand post-holiday, disciplined cost controls, and a positive same-store sales trend in January.

Key Drivers Behind the Results

Signet’s Q4 results highlight a mix of challenges and strategic shifts. The company saw:

- Stronger demand in January. Following a weaker holiday season, January same-store sales turned positive, suggesting a stabilizing trend.

- Improved merchandise mix. Merchandise average unit retail (AUR) increased by 7 percent, helping to offset volume declines.

- Cost efficiencies. While gross margin contracted slightly, SG&A expenses were well managed, leading to better-than-expected operating margins.

The company also announced plans to close up to 150 stores and transition 10 percent of its mall-based locations to off-mall and e-commerce channels over the next three years. This move reflects broader retail trends favoring digital and off-mall retail spaces.

Consumer Trends and Tariff Impact

Signet’s performance offers insights into consumer spending behavior, particularly in discretionary retail. The company noted that shoppers continued to gravitate toward lower price points during the holiday season, which contributed to weaker sales. However, the luxury and bridal segments remained resilient, suggesting that higher-income consumers are still spending, while mass-market jewelry buyers remain more cautious.

CEO J.K. Symancyk, who took the helm in November, emphasized that consumer spending remains measured, leading the company to take a conservative approach in its FY26 outlook. The company expects full-year same-store sales to be down 2.5 percent to up 1.5 percent, reflecting continued uncertainty in discretionary spending.

Regarding tariffs, Signet has not yet provided specific guidance on how potential U.S. import duties may affect costs. However, with much of the jewelry supply chain dependent on global markets, additional tariffs on imported goods could pressure margins in future quarters.

Fiscal 2026 Guidance and Strategic Initiatives

For fiscal year 2026, Signet provided an initial outlook:

- Total sales: $6.53 billion to $6.80 billion

- Same-store sales: -2.5 percent to +1.5 percent

- Adjusted operating income: $420 million to $510 million

- Adjusted EPS: $7.31 to $9.10

The company also unveiled a new strategy called Grow Brand Love, which focuses on strengthening customer loyalty through enhanced product design, expansion in self-purchase categories, and continued investment in bridal. In addition, the company’s reorganization plan aims to fund incentive compensation resets and drive further efficiencies beyond FY26.

Technical Outlook: Resistance at $56

While shares of SIG are up approximately 10 percent in reaction to the earnings, they face significant resistance levels. The 50-day moving average sits at $56, and a prior gap-down level could act as additional resistance. This suggests that while the stock is rebounding, breaking above these levels may require further positive catalysts.

Conclusion: Encouraging Signs, But Cautious Outlook

Signet’s Q4 performance came in better than expected, particularly after the company lowered guidance in January. Strong cost controls, an improving merchandise mix, and positive January sales trends helped offset some of the holiday season weakness. However, with a highly discretionary product offering and macroeconomic uncertainty, the company remains cautious in its full-year outlook.

Looking ahead, investors will be watching consumer spending trends, the impact of potential tariffs, and whether Signet can successfully execute its reorganization strategy. While the near-term outlook appears stable, the company will need to demonstrate continued execution to sustain its recent stock price recovery.

Ask Aime: What was the impact of Signet Jewelers' fourth-quarter earnings report on the stock market?