Top Picks 2021: Signet Jewelers (SIG)

Under its previous leadership, easy credit terms boosted sales but led to large losses in the in-house credit operations at Signet Jewelers (SIG), explains Bruce Kaser, editor of Cabot Turnaround Letter. 

That leadership also neglected to update the company’s merchandising and marketing, had an ineffective e-commerce strategy and had tolerated a toxic culture.

With capable new leadership since late 2017, Signet is now making impressive progress in reversing all of these problems.

Even with the pandemic, third-quarter same store sales rose 15% as positive physical same store sales were bolstered by surging (+71%) online sales. Adjusted operating profits were $47 million compared to a $29 million loss a year ago.

The company appears to be in sync with what its customers want while operating with much greater efficiency. Signet’s previously onerous debt burden is now arguably too low.

With the shares trading at only 10x forward earnings, the market hasn’t yet recognized that Signet’s turnaround has further to go. I consider the stock to be a conservative favorite for the coming year.

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