Should Other Jewelers Be Wary of Signet's Warning?

Signet Jewelers Ltd. (NYSE: SIG) shares were crushed on Thursday after the firm reported its holiday season sales. While these numbers were disappointing for Signet, it’s possible that they could be reflective of a bigger problem within the jewelry industry.

As a result of these lackluster sales, Signet revised its fourth-quarter guidance. The firm now expects to see EPS in the range of $3.77 to $3.92 and total sales between $2.14 billion and $2.16 billion, with same-store sales down to $1.6% to 2.5%. Consensus estimates calls for $4.43 in EPS and $2.2 billion in revenue for the fourth quarter.

Looking ahead to the 2019 full year, Signet expects to see EPS of $3.53 to $3.69, as well as $6.24 billion to $6.26 billion in revenue, with flat same-store sales. Analysts expect $4.25 in EPS and $6.29 billion in revenue.

In its November quarter, Tiffany & Co. (NYSE: TIF) issued guidance for its fiscal fourth quarter ending in January. Ultimately the guidance was not up to par, and many believe this is the result of the Chinese economy and consumers not willing to pay for these luxury goods. By the looks of it, Signet is feeling the sting from this as well.

CEO Virginia C. Drosos commented:

Our holiday season performance fell short of our expectations. Early improvements in refreshed merchandise assortment, digital marketing and OmniChannel were more than offset by larger than expected declines in legacy product lines. In addition, the competitive promotional environment we saw early in the season intensified in December and, despite our increased promotional investments, we experienced reduced traffic during key December gifting weeks. Combined with higher than expected credit costs, these factors negatively impacted our profitability.

Shares of Signet were last seen down about 22% at $26.00, in a 52-week range of $25.33 to $71.07. The consensus analyst price target is $43.38.

Tiffany shares traded at $84.23, with a consensus price target of $113.21. The 52-week trading range is $73.04 to $141.64.