Coming into its first-quarter earnings report, Signet Jewelers (NYSE: SIG) appeared to be executing its business plan effectively. The world's largest retailer of diamond jewelry had successfully made the case that it is reinventing its business, expanding margins, and leaning into its competitive advantages, such as the digital channel and customer loyalty. It had also elicited cheers from investors when it announced a plan in April to repurchase convertible preferred shares, lifting its earnings-per-share guidance for the year by about 10%. Shares were trading near a five-year high coming to the update.

However, that momentum disappeared once the earnings report came out. Signet stock fell 14.9% on Thursday after it reported results that beat estimates but also showed some signs of weakness that seemed to spook investors. Same-store sales, for example, fell 8.9% year over year in the first quarter due to macroeconomic challenges, a weak consumer, a sluggish start to the quarter, and a competitive environment with heavy discounting.

As a result, revenue fell 9.4% year over year to $1.51 billion, matching analyst estimates and the company's own guidance. However, profits fell sharply along with the decline in revenue as adjusted operating income slipped from $106.5 million to $57.8 million. The company reported adjusted earnings per share of $1.11, down from $1.78 in the quarter a year ago.

Continue reading

Source Fool.com