For Immediate Release
Chicago, IL – January 20, 2020 – Zacks Equity Research Signet Jewelers SIG as the Bull of the Day, Urban Outfitters Inc. URBN asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Smile Direct Club SDC and Align Technology ALGN.
Here is a synopsis of all four stocks:
Signet Jewelers is a leading retailer of diamond jewelry and watches, and operates under the Zales, Kay Jewelers, Jared, and other banners. In the U.S., Signet operates more than 2,900 stores, but its brands are found in the U.K., Canada, Puerto Rico, Ireland, and the Channel Islands as well.
Blowout Holiday Sales
Coming soon after a rating downgrade and price target cut from Wells Fargo earlier this month, Signet posted strong holiday sales numbers.
For the nine weeks ended Jan. 4, 2020, total same-store sales grew 1.6% thanks to the 2% increase in same-store sales in North America. Notably, e-commerce sales jumped 13.5% compared to brick-and-mortar sales decline of 0.2%.
Signet’s management was confident enough in these numbers that they boosted its Q4 and fiscal 2020 guidance.
Fiscal 2020 same-store sales are expected to increase 0.1%, up from prior guidance of 1% to 1.7% decline. Total revenue for the year is forecasted at $6.1 billion compared to previous guidance range of $6.01 billion to $6.05 billion. And, new adjusted earnings per share guidance of $3.61 to $3.69 is up significantly from analysts’ consensus of $3.26 per share.
CEO Virginia Drosos said in a press release that “We delivered holiday same store sales growth ahead of our guidance as we continued to implement year two of our Path to Brilliance transformation. Product newness, investments in our digital capabilities, and more targeted marketing campaigns drove both e-commerce and brick and mortar growth in North America.”
SIG on the Rise
Shares of SIG are up over 62% in the last six months, and the jewelry stock surged over 40% last week alone after it released its holiday sales numbers. Comparatively, the S&P 500 has returned about 11.3%. Earnings estimates have been rising too, and Signet is a Zacks Rank #1 (Strong Buy) pick right now.
For the current fiscal year, two analysts have revised their bottom line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 30 cents from $3.09 to $3.41. 2020 looks pretty strong too, with earnings and revenue expected to continue positive year-over-year growth.
SIG currently trades around 8.8X its forward full-year earnings estimates, slightly above the broader Retail-Jewelry industry (17X).
Last year, Signet battled numerous obstacles, from tariffs to tough year-over-year comparisons. But, its “Path to Brilliance” transformation initiative is successfully settling in, and thanks to these great 2019 holiday results, the jewelry retailer looks to continue capitalizing on its digital and product strengths. If you’re an investor searching for a broader retail stock to add to your portfolio, make sure to keep SIG on your shortlist.
Headquartered in Philadelphia, Urban Outfitters Inc. is a specialty lifestyle retailer that offers women’s and men’s apparel, accessories, footwear, and home décor under five brand banners: Urban Outfitters, Anthropologie, Free People, BHLDN, and Terrain.
Holiday Sales Disappoint
Earlier this month, Urban released sales figures for the two months ended Dec. 31, 2019 that failed to impress Wall Street.
Net sales gained only 2.9% year-over-year, though this slight decline in retail sales was offset by 3% growth across its digital platforms. Comparable sales fell 1% year-over-year at the company’s namesake brand, while comps grew 5% and 8% at Anthropologie and Free People, respectively.
What’s more, gross margin is now expected to be low in the fourth quarter, mostly due to promotions and discounts during the holidays. Plus, delivery and logistics expenses jumped in order to “meet customer delivery expectations,” most likely due to the shortened holiday season.
Analysts have turned bearish on Urban Outfitters, with twelve cutting estimates in the last 60 days for fiscal 2020
Earnings are expected to see double-digit negative growth for the year, and the Zacks Consensus Estimate has dropped 17 cents for that same time period from $2.29 to $2.12 per share.This sentiment has stretched into 2021, though sales and earnings growth could return to positive territory.
URBN is now a Zacks Rank #5 (Strong Sell).
Shares of the retailer are down 15.7% in the last one year, and URBN took a hit after announcing underwhelming holiday sales. The S&P 500 is up over 27% in comparison.
Bottom Line
These holiday sales figures definitely aren’t the best news for Urban, especially coming off its disappointing third quarter. Like many apparel-focused retailers, the company has been impacted by tariff pressures and high inventory levels. Despite consistent growth in its digital channels, investors seemed to have lost confidence in the stock.
Additional content:
Smile Direct Club (SDC): The Comeback Story
Smile Direct Club has been a wild ride for investors since the company went public in mid-September and is finally on the upswing. Below you can see SDC’s progression since its IPO.
SDC started off on a rocky note. Its first day on the public markets demonstrated the worst IPO in decades, with traders pushing this stock down 27.5% day one. The stock then proceed to break down to just a fraction of its IPO price, with the primary catalyst being legal concerns. The fundamentals of the business remained strong, and all it took was some positive news to push SDC shares right back towards their IPO price.
In the 2 weeks of 2020, SDC shares have appreciated over 60% in value due to a couple of critical announcements. Smile Direct Club announced that it would be partnering with Walmart to sell some of its supplementary products on January 6th. Investors and traders pushed the stock price up over 20% initially after the news but then traced back down.
On January 14th, news was released that SDC would now be selling its aligners to orthodontists. This was the catalyst that was needed to propel these shares towards analysts’ target price. Analysts have been calling this a buy for months now, and the stock is finally making its way towards the $20 average price target that analysts have set for it.
Since Tuesday (January 14th), Smile Direct Club’s stock price has rallied 35%, and its primary competitor, Align Technology, has dropped over 5%. Selling its products to orthodontists significantly broadening SDC’s reach into a much more legitimate realm, and now poses a more substantial risk to Align Technology’s clear aligner. Having real orthodontists using Smile Direct’s aligners gives this product validity for those wanting to try its direct-to-consumer channel.
The Business
This company is a driving force in the next era of medical treatment, where ease and convenience are the underlying stimulus. Millennials and Gen Z’s value appearance with social media making all your images are worth a thousand words. SDC offers consumers a more convenient and cheaper option to straighten out your smile compared to traditional orthodontists.
Take Away
Zacks Ranking is putting SDC at a #4 (Sell) right now, but once analysts have adjusted their models for this most recent news, this ranking should be pushed up. The markets have smothered SDC since its IPO. I don’t think that these shares recent rally is over. If the broader market can stay afloat, I am confident that SDC has legs to run.
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Align Technology, Inc. (ALGN): Free Stock Analysis Report
Urban Outfitters, Inc. (URBN): Free Stock Analysis Report
Signet Jewelers Limited (SIG): Free Stock Analysis Report
SmileDirectClub, Inc. (SDC): Free Stock Analysis Report
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