Many retailers are finding themselves in a unique position with consumer demand high and inventory lower than normal. Given the supply chain issues the country is facing, retailers have been able to increase prices as opposed to previous years when customers would seek to take advantage of the best deals they could find.
– Zacks Department store CEOs have repeatedly stated in recent months that they have been able to pass on higher costs to customers and have even been able to cut back on item discounts, pushing profits higher. Customers are worried that desirable products may not be in stock for long and are willing to pay more in fear of not finding the same product at a later date. But at this point in time, the U.S. consumer remains healthy and higher prices haven’t caused them to reduce spending.
According to the National Retail Federation (NRF), holiday sales are expected to hit a record, with the organization predicting a range of $843.4-$859 billion – an increase of 8.5-10% over last year. E-commerce sales are expected to top $200 billion for the first time. The fact that holiday sales could meet or even exceed these expectations in the face of a more than 30-year high in inflation is a testament to the true strength of the U.S. consumer.
NRF’s senior director Katherine Cullen stated recently that she expects an uptick in in-store shopping as we approach Super Saturday, which is the Saturday before Christmas. Heading into the final weeks of December, Cullen believes shoppers may run into deadlines and other issues relating to online orders, driving them to shop at storefronts.
These are all big positives for jewelers whose customers like to span the different jewelry displays and try on certain items. Jewelry-industry expert Edahan Golan estimates that overall U.S. jewelry sales are up more than 50% compared with pre-pandemic levels and up 56% over the same period last year. Sales in October rose to $7.3 billion, an increase of 37% from 2020 based on data from the U.S. Department of Commerce. For the year, U.S. jewelry sales have totaled $67.8 billion, and Golan expects holiday jewelry sales to end the year strong rising between 40-42%.
The fine jewelry market is estimated to be worth approximately $300 billion globally. A wedding industry set to break records next year will provide another boost for jewelry companies as more and more couples tie the knot. The Zacks Retail – Jewelry industry group is currently in the top 7% of all 254 industry groups and has vastly outperformed the market this year with an 81% return YTD.
Focusing on stocks within the top Zacks Ranked Industries can dramatically improve your stock picking success. Let’s take a look below at three jewelers contained within this top-performing industry group.
Signet Jewelers Limited (SIG)
Signet Jewelers is based in Bermuda and sells jewelry, watches and associated services. The company operates primarily in the US, UK, the Republic of Ireland and the Channel Islands. Founded in 1950, SIG is often considered the leading retailer of diamond jewelry.
A Zacks #2 Buy, SIG has been gaining from growth in e-commerce and enhanced marketing efforts. The company has also been succeeding in their brick-and-mortar locations, where same-store sales surged 130.8% year-over-year during Q2.
SIG management expects to keep gaining from its prudent growth efforts and consumers’ favorable responses toward its new product line. The company recently raised guidance for the third quarter of fiscal year 2022, now expecting sales to be in the range of $1.42-$1.45 billion, up from $1.26-$1.31 billion.
SIG shares have surged over 220% this year alone and yet still trade at a very reasonable 8.10 P/E. Having exceeded earnings estimates for the last four years running, SIG is in prime position to continue its record advance. The company most recently reported EPS of $1.43 earlier this month, a 113.43% surprise over consensus and has averaged a 77.23% surprise over the last four quarters.
Signet Jewelers (SIG) Price, Consensus and EPS Surprise
Image Source: Zacks Investment Research
The trends in sales and earnings are expected to continue, with the Zacks Consensus Estimates coming in at $7.45 billion (42.55% growth) and $10.87 (415.17% growth), respectively. Backed by expectations of continued business growth, SIG looks to maintain its strong momentum heading into 2022 with its first earnings report scheduled for March 17th.
Movado Group Inc. (MOV)
The Movado Group is a global premier watchmaker who designs, manufactures, and distributes watches under ten of the most recognized brands including names such as Movado, Concord, Coach and Hugo Boss. MOV’s collection is sold throughout North and South America, Europe, Asia and the Far East.
Movado Group, a Zacks #2 (Buy) stock, trades at a relatively attractive valuation (12.28 P/E compared to industry 23.6 P/E) and has beaten earnings estimates in each of the past four quarters. MOV most recently reported earnings back in October of $1.36, a 94.3% surprise over consensus. The company has a trailing four-quarter average earnings surprise of 86.67%.
Movado Group (MOV) Price, Consensus and EPS Surprise
Image Source: Zacks Investment Research
MOV stock has been on a phenomenal run this year, advancing over 148% on the heels of above-average earnings growth. In the last 30 days analysts have upped their earnings consensus for MOV by +15.59%. The current Zacks Consensus Estimate for full-year earnings stands at $3.41, representing a 270.65% increase in EPS over 2020. MOV is slated for its next quarterly earnings report on 3/24/22.
Brilliant Earth Group, Inc. (BRLT)
Brilliant Earth Group is a digital-first jewelry company headquartered in San Francisco, CA. Founded in 2005, BRLT sells direct-to-consumer and has accrued more than 370,000 customers in the United States and abroad. The company enjoyed its IPO back in September of this year.
BRLT sells lab-created and recycled diamonds, neither of which require new mining. Blockchain technology is used to track the diamond’s origin and ownership. Brilliant Earth Group, currently a Zacks #3 stock (Hold), most recently reported earnings back in November of $0.08, an astounding 800% positive surprise over consensus estimates.
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Signet Jewelers Limited (SIG): Free Stock Analysis Report
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