Signet Jewelers Crashes After The Release Of Results For The Third Quarter

Summary

Although its industry is showing improving performance, Signet Jewelers is not showing good fundamentals.

After the release of Q3 earnings, its share price dropped 20-30%.

When I saw that share of Signet Jewelers were down more than 20% after Q3 results, I was wondering what kind of disaster the company reported.

 

With almost all retailers showing improving sales, comps and margins, where does a company like SIG stand? Even using "adjusted" numbers, the trend in comps has worsened from a positive 1.4% variation to a 3.8% decline from Q2 to Q3. Not what we would expect in this environment. Gross margin declined 170 bps and operating margin crashed to less than 0.5% from around 2.7% in the corresponding quarter of 2016. Obviously, the fundamentals have deteriorated, and there is no way to make the situation look better.

However, the company still has attractive characteristics. For example, the rich FCF which is OCF of 521.8 million.

Disclosure: I am/we are short SIG.