Signet Jewelers sells plenty of bling, but the company is attracting attention for all the wrong reasons again Tuesday.
Signet Jewelers (ticker: SIG) said that its chief operations officer, Bryan Morgan, resigned on Friday following violations of company policy. Signet, which owns Kay, Jared and Zales jewelry stores, didn’t provide any details about the violations, other than to say that they were nonfinancial in nature. Morgan had only been at his post since late January, when he was promoted to COO after serving as an executive vice president from 2015 to 2017.
The shares slid 1.7% to $51.97 this morning but were 1% higher to $53.36 in afternoon action. Count us skeptical. Morgan’s resignation is the latest blow in a string of bad news for Signet, and bargain hunters should beware.
Signet shares have seen big gains and down swings of late, but year to date the stock is down roughly 45%, hurt, like so many other retailers, by anemic sales and online competition.
Signet reported disappointing first-quarter earnings in late May: All four of its operating segments—Sterling Jewelers, Zale Jewelry, Piercing Pagoda, and UK Jewelry—saw same-store sales decline. Nor does it see that changing in the near future, as it forecasted low- to mid-single digit comparable sales declines for the full year, even while reaffirming earnings guidance ahead of analysts’ expectations.
In addition to consumer trends shifting online, Signet’s mall-heavy portfolio of stores has left it exposed to lower traffic.
However, Amazon.com (AMZN) is hardly Signet’s only problem: A class action lawsuit alleging discrimination against women embroiled the company earlier this year, with claims that Signet didn’t pay or promote female employees fairly amid a corporate culture that fostered discrimination and sexual harassment.
Signet denied there was any merit to the lawsuit and reached an agreement with the Equal Employment Opportunity Commission to resolve claims related to female workers’ pay and promotion last month, but the company’s stock still hasn’t recovered.
Barron’s argued that investors should avoid Signet in the wake of the allegations, and the shares are down more than 18% since that article’s publication, a period that saw the Standard & Poor’s 500 gain 2.1%.
Signet is even cheaper now, trading at less than 7.5 times forward earnings, and investors may be tempted by the 2.4% dividend yield. However, the shares are cheap for good reason. A cloud of uncertainty envelops Signet much like the cyclonic dirt storm that encircles Pig-Pen from Peanuts. Moreover, analysts expect earnings per share to tumble nearly 10% year over year this year, and expect just 5% EPS growth longer term.
Signet has been trying to get back on track, as it sold part of its credit card portfolio toAlliance Data Systems (ADS) and confirmed its diamonds were conflict-free for a fourth straight year.
Yet the company still seems to have a long way to go toward fixing its internal problems, while external threats abound. It’s no diamond in the rough.