SIG - Signet Jewelers

[porcupine]

They're getting booted from the S&P 500 on Monday (03/19/2018), so there should be some forced selling pressure.

 

I tried to look this up but couldn't find a source. How do you know they are losing their S&P 500 position?

 

https://www.google.com/url?rct=j&sa=t&url=https://www.prnewswire.com/news-releases/take-two-interactive-software-svb-financial-and-nektar-pharmaceuticals-set-to-join-sp-500-others-to-join-sp-midcap-400-and-sp-smallcap-600-300611768.html&ct=ga&cd=CAEYACoUMTQ1NjMwMDc3MTA0MjM2MjAxMjAyGjY4NmM4NGY2YTBhODkxMDg6Y29tOmVuOlVT&usg=AFQjCNERHiTB74xYVX0prOlf337RS0MKiQ

[BG2008]

Gut reaction here

 

I feel like Jewelery retail is one of the worst businesses in that it has a lot of what you don't want in a business

 

- Low inventory turn

- Operating leverage through long term leases

- Large ticket items which most people will research and look for the best price (It's the opposite of a low % of total cost, yet mission critical)

- Requires financing which equates to balance sheet risk

- Retail - so your competitors can copy you quickly

- Most guys loath going to a jewelry store, yet they are often the decision maker

[Stuart D]

Cannot fully guarantee the validity of the following story (or where I got it from) but it is about a jewelry store manager who is away and decides to mark down the price on some slow moving inventory. The manager phones the store and the employee misunderstands and marks them up. The marked-up items sold in no time.

Food for thought.

 

Yeah, I remember that story as well. I think it was from Cialdini's book "Influence"

 

 

[Cigarbutt]

Cannot fully guarantee the validity of the following story (or where I got it from) but it is about a jewelry store manager who is away and decides to mark down the price on some slow moving inventory. The manager phones the store and the employee misunderstands and marks them up. The marked-up items sold in no time.

Food for thought.

Yeah, I remember that story as well. I think it was from Cialdini's book "Influence"

 

Hi and welcome Stuart D,

 

Have you looked at SIG?

The company

-has abandoned its in-house credit program and has outsourced the credit part of the transactions.

-is in the midst of a transformation (more e-commerce and less exposure to lower grade malls)

-keeps showing negative same store sales

-has seen its share price decline ++ after a period where debt was used to buy stock at much higher prices...

-appears 'cheap' on a lot of value metrics, especially if they start moving in the right direction

 

Is it an opportunity now?

My take: transformation in today's evolving retail landscape is tricky and I don't have confidence in their capital allocation skills, given their history. Also, I find it discomforting that such a high percentage of their discretionary sales (which include leasing (!)) depends on a financing option (around 50%).

Do you have an opinion here?

[Stuart D]

HI Cigarbutt,

 

Thanks for the welcome and background on Signet.

 

I was looking at it in Jun-2019, when the market cap was ~$1b. It was interesting but with the declining same store sales & questionable capital allocation, like you mentioned (e.g. buying back shares when the price was 5x higher and cutting the share buyback at current prices), I wanted more margin of safety.

I listened to the most recent conference call last night & the management were not inspiring me with confidence. Also, I agree with your point about the difficulty of transformation in today’s retail environment.

 

I think with this one I’ll set an email alert at a market cap of ~$400m (share price $7.60) and have a closer look if it gets that low.

Thanks again - this seems like a cool website/forum.

 

[DTEJD1997]

hey all:

 

I think the "jewelry leasing" is simply a disguised purchase transaction.  Perhaps it is set up this way to avoid usury laws?

 

I looked at the last few press reports & quarterly earnings.  The numbers are just so tempting, but the management does not look like they are focused on the right things for shareholders.

 

They talk about diversity, empowerment of women, and a lot of SJW & virtue signalling.  Not a lot about business execution and making money.  I wonder how LONGTIME shareholders feel about this?  Are they triggered that they have lost so much money?  Should there be trigger warning on quarterly & annual reports?

 

Management has not given confidence that they are capable/going to run the company from an economic perspective.  Shareholders are far down the list...

 

We will see!