The Signet Jewelers stock price jumped by over 17% on Wednesday after the company published better-than-expected results and unveiled a reorganization plan. SIG shares jumped to a high of $60.27, up by 32% from its lowest point this year. It remains about 48% below its highest level in 2024. Still, SIG stock has formed a bearish pattern pointing to a crash.
Signet stock price soared after earnings
Signet is one of the biggest companies in the jewelry industry globally. It owns thousands of stores across nine brands, including popular names like Kay, Zales, Jared, Diamonds Direct, and James Allen. These brands cater to different customers, with Zales targeting fairly wealthy customers.
Signet Jewelers published weak but better-than-expected financial results. Its fourth-quarter sales dropped to $2.352 billion from $2.49 billion a year earlier.
Its operating income crashed to just $152 million from $416 million in the same quarter a year earlier. This drop happened as its margins continued to deteriorate.
The management has now embarked on a strategy change as it seeks to boost its growth and lower operation costs. It has created a new strategy known as ‘Grow Brand Love’ and is meant to improve product quality and its sales.
Signet to change strategy
The company’s change of strategy will see it reorganize its business by increasing its focus on online sales. It also plans to continue closing some of its top underperforming stores in the US and other markets.
The strategy will see the company focus on improving its top brands like Jared, Zales, and Kays. By nurturing brand royalty, the management hopes that it will bring in about $500 million in revenue.
The strategy will also see the company grow its market share in its core bridal and gold businesses and then expand to adjacent categories. It hopes that putting more emphasis on this business will boost its market share from about 30% to over 40% over time. It also expects to grow the adjacent segments like fashion.
Signet stock price also jumped after the management noted that it would simplify its structure and functions like marketing and merchandising. The CEO said:
“We will be reorganizing our store operations team to a brand-specific structure to manage efficiencies and improve speed of decision-making and execution. This will also enable each brand to identify and deliver more distinct experiences for their customers sharply.”
Analysts believe that Signet Jewelers business will continue experiencing slow growth in the coming years even as the number of weddings rise. The average estimate is that its annual revenue will be $6.7 billion this year, followed by $6.83 billion next year.
These analysts expect the Signet stock price to jump to $79 in the long term from the current $56.65.
Signet stock price analysis
The weekly chart shows that the SIG share price bounced back to a high of $56.65, up from its lowest level this month. This rebound happened after the stock hit a key support at $49.84, the neckline of the triple-top chart pattern at $106.55.
The Signet share price has moved below the 50-week and 200-week Exponential Moving Averages (EMA). These two averages are about to make a bearish crossover, which would form a death cross-chart pattern. A death cross is one of the most bearish patterns in the market.
Signet stock price is hovering at the 50% Fibonacci Retracement levels. Therefore, there is a risk that the SIG share price will have a bearish breakdown, potentially to the psychological point at $40. A move above the resistance point at $68.71, the 38.2% retracement point will invalidate the bearish view.
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