Signet Jewelers Limited (NYSE:SIG)'s third-quarter earnings report has revealed that the world’s largest retailer of diamond jewelry continues to grow its share of an improving bridal market, analysts at UBS noted as they maintained a ‘Buy’ rating on the company’s stock.
It also reinforces their conviction that sales should gradually accelerate, the analysts wrote in a client note as they raised their price target for Signet to $110 from $93.
“Plus, we believe SIG's self-help initiatives along with improving top-line trends should drive meaningful margin recapture in FY25E (CY24E),” the analysts said.
“Over the long-term, we think SIG is well positioned to gain share given its omnichannel and data analytics investments.”
The analysts listed three learnings from Signet’s 3Q report that added to their bullish case for the company: a rebounding engagement market; more gross margin gains; and an improved selling, general and administrative (SG&A) ratio.
Gross margin gains will be supported by inventory management, discipline around markdowns and higher cost savings, while the company expects a 50 basis points benefit from synergies within its digital banners as well as lower deleverage as sales rebound, the analysts said.
While the UBS analysts maintained their 4Q earnings estimates, they raised their full-year 2025 sales estimates given the increasing conviction that the bridal segment's recovery should lead to meaningful topline growth acceleration.
They also increased their operating margin forecasts due to several “margin unlocks,” including lower diamond sourcing costs and declining occupancy costs after it divested 15 stores in the UK.
Signet’s shares traded 6.1% up at $95.39 by midday in New York on Wednesday.
Contact the author at stephen.gunnion@proactiveinvestors.com