Down 50%, Is Signet Jewelers a Buy on the Dip?

Signet Jewelers (SIG 3.87%) has long had many of the elements of an attractive value stock.

The company is the world's largest retailer of diamond jewelry and has a stable of well-known brands, including Kay, Zales, Jared, and Blue Nile. It also has a history of delivering profits and returning cash to shareholders through dividends and share repurchases.

Over the last four months, however, Signet shares have fallen sharply. This followed a disappointing fiscal 2025 third-quarter earnings report, a weak holiday sales update in January, and declining consumer sentiment, which investors see as a headwind for the discretionary retailer.

Even after the stock popped on Mar. 19 thanks to better-than-expected results for its fiscal fourth quarter (ended Feb. 1), it's still down 50% from its 52-week high.

Is the recent pullback a buying opportunity or a warning sign? Let's get into the details.

Image source: Getty Images.

A quick turnaround

In mid-January, the company reduced its Q4 guidance after reporting a 2% decline in same-store sales for its holiday season (the ten-week period ended Jan. 11). Its revenue forecast decreased from $2.42 billion at the midpoint to $2.33 billion. The same-store sales outlook of 0% to 3% growth was also revised to a 2.0% to 2.5% decline.

The resulting sell-off in the stock was understandable as the fourth quarter is Signet's most important and generates the majority of its profit. However, Signet's actual Q4 results showed same-store sales declining 1.1%, while revenue declined 5.8% year over year to $2.35 billion. Both figures beat management's revised guidance from two months ago.

Better yet, Signet said same-store sales were positive both in January and year to date. Its latest guidance calls for same-store sales growth of 0% to 2% in the first quarter of fiscal 2026, and full-year adjusted earnings per share of $7.31 to $9.10, which compares to $8.94 in fiscal 2025. The January performance was also boosted by a strong month for engagements; the company had been anticipating a recovery in engagements after a slowdown during the pandemic.

A new strategic plan

With the earnings report, the company announced a new strategic plan it's calling "Grow Brand Love". This includes a shift in its focus from banners to brands and prioritizing brand loyalty rather than promotional sales. It's also streamlining its leadership around four retail categories, moving to a flatter organizational structure; aiming to grow market share in core areas like bridal and gold; and making a push in opportunities like self-purchasing and giving.

In an interview with The Motley Fool, CFO Joan Hilson noted the company has only a low-single-digit share in self-purchasing, so there's a greater opportunity for it to gain market share in that area. "If we grow a point of share in self-purchase, it's worth five times what a point of share in bridal is to us," she explained.

The new strategic plan comes just months after new CEO J.K. Symancyk took over following the retirement of Gina Drosos. But given the declines in comparable sales in recent quarters, a strategic overhaul may be the right move for the company.

Additionally, major shareholder Select Equity Group sent the board a letter at the end of February expressing dissatisfaction with Signet's performance and leadership and called on the company to consider strategic options, including a sale of the business.

Is Signet a buy?

Even after the stock's 17% rebound on Mar. 19, Signet continues to look like a deep value play, trading at a price-to-earnings (P/E) ratio of just 6.4 based on trailing adjusted earnings. It's also valued at just 5.6 times trailing free cash flow.

Management is raising the quarterly dividend by 10% to $0.32, giving the stock a dividend yield of 2.3%.

The return to same-store sales growth is encouraging, though management's full-year guidance still calls for a decline of 0.5% at the midpoint. Overall, Signet's valuation seems low enough that the risk-reward ratio for the stock seems favorable. Investors should just be prepared for ongoing volatility, at least until there are signs the company's new strategic vision is working.