Sales slump leads Signet Jewelers Ltd. (NYSE: SIG) stock lower

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Signet Jewelers Ltd. (NYSE: SIG) stock plunged over 11.2% on 10th June, 2020 (as of  11:31 am GMT-4; Source: Google finance) after the company’s net loss for the quarter  widened to $198.6 million, from a loss of $18.2 million, in the year-ago period and intends to permanently close 380 stores as it looks emerge from the COVID-19 pandemic with a smaller store footprint. The company has temporarily shuttered its North American stores that operate under brands such as Jared, Kay Jewelers and Zales, during the height of the pandemic amid public health orders. The company expects to reduce capital expenditures by approximately 50% compared to last year, and will prioritize initiatives that support the digital efforts. The company generated negative free cash flow of $15 million in Q1, with cash and equivalents balance of $1.1 billion. The company has suspended common dividend, and the financial guidance, until the company gets greater market clarity. The August preferred dividend will be paid in kind. The company has advanced the omnichannel journey with new digital tools, in-depth virtual consultation and store footprint optimization.

SIG in the first quarter of FY 21 has reported the adjusted loss per share of $1.59, beating the analysts’ estimates for the adjusted loss per share of $2.97, according to the FactSet consensus. The company had reported 40.5 percent fall in the adjusted revenue to $852.1 million in the first quarter of FY 21, missing the analysts’ estimates for revenue of $861.7 million. The same-store sales decreased by 38.9%, missed expectations of a 35.4% decline. E-commerce sales rose 6.7%. The company posted the gross margin of $204.2 million, declined due to lower sales from the COVID-19 pandemic, which led to a de-leveraging on fixed costs. This decline was partially offset by cost reductions and lower occupancy costs.

The company had began a staggered store reopening in May, but plans to not reopen at least 150 stores in North America and 80 stores in the U.K., and plans to close an additional 150 stores by the end of the fiscal year. The company currently operates about 3,200 stores. Signet has reopened about 1,100 stores in states including Arizona, California Georgia, North Carolina, Ohio and Virginia, with the most reopened stores in Texas and Florida. As of June 2, more than three-quarters of Signet’s reopened stores are open to the public. Store performance is better than expected, with revenue able to cover four wall operating costs rather quickly.

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