After competitors went out of business during the global recession, Signet Jewelers Limited (SIG) became the largest mid-market jewelry retailer in the world. Jewelry sales are hot again and Signet is cashing in. This Zacks #1 Rank (strong buy) is a hidden gem, with a forward P/E of only 13.8.
Signet operates 1,852 stores, including 1,314 stores in the U.S. under the names of Kay Jewelers, Jared The Galleria of Jewelry and others and 554 stores in the U.K., under the brands of H.Samuel, Ernest Jones, and Leslie Davis.
Same Store Sales Jumped 10.2% in Q1
On May 26, Signet reported its fiscal first quarter 2012 results for the period ending Apr 30, 2011 and saw total sales rise 10.2% to $887.3 million.
Same store sales also rose by 10.2% which bested the 5.8% same store sales gain in the first quarter of the prior year. U.S. same store sales soared 12.5% while U.K. sales rose just 0.2%. The U.K. economy is in the middle of austerity and is contracting which makes for a difficult sales environment.
U.S. sales were boosted by the popularity of several lines including the Tolkowsky Diamond program and the Neil Lane Bridal line.
The Neil Lane Bridal line is cashing in on the obsession with celebrities as Neil Lane has designed many celebrity engagement rings. Signet is offering an affordable way for consumers to get the same “look.”
Zacks Consensus Estimates Rise
Given the better-than-expected first quarter results and the company’s bullishness on the conference call about a strong start to the second quarter, it’s not surprising that most of the analysts have revised full year estimates higher.
The fiscal 2012 Zacks Consensus Estimate has jumped 23 cents to $3.34 per share since the earnings report.
This is earnings growth of 25.5% compared to last year.
The fiscal 2013 Zacks Consensus also jumped to $3.76 from $3.59, further earnings growth of 12.7% over this year.
Shares Near 3-Year High But Valuations Still Solid
Even though shares have soared off the March 2009 low, earnings have also popped. That still leaves Signet with attractive valuations.
It’s P/E of 13.8 is much lower than its peers who have an average forward P/E of 21.3.
It also has a solid price-to-book ratio of 2.0 which is under the 3 cut-off I use for value stocks.
Additionally, the company has a solid ROE of 13.7%, far above its peers at 2.2%.
Signet is well-positioned to tap the middle market as consumers increase discretionary spending and the shares are still attractively priced.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.
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