Signet Rebounds After Easing Concerns About Credit Businessby
Jeweler says its lending program was profitable last quarter
Investors had been worried it used easy credit to boost sales
Signet Jewelers Ltd. shares rose 9.4 percent after the jewelry chain showed improvement in its credit business, easing concerns that it had become reckless in financing customers’ purchases.
The company’s in-house finance programs generated $63.9 million in interest last quarter, more than the $60 million it lost in bad debt, according to a statement Monday. Signet also posted fourth-quarter earnings of $3.63 a share, excluding some items, topping the $3.58 predicted by analysts.
Signet, which runs about 3,600 stores under such brands as Kay, Zales and Jared, has drawn controversy for using credit to drum up sales. Critics said that Akron, Ohio-based Signet was becoming more of a finance company than a jewelry chain, increasing its risks in the process. Monday’s report helped alleviate fears that easy credit would come back to haunt the company, Nomura Securities analyst Simeon Siegel said in a report.
Signet “had gone from a most-loved consumer stock to an incredibly hated financial one,” Siegel said. “We believe the bears have been discussing downside fears without quantifying them.”
The stock climbed to $108.40 in New York, its biggest single-day gain since August. Signet had been down 20 percent this year through the end of last week.
The company boosted its quarterly divided 18 percent to 26 cents and announced a $750 million stock buyback program. Signet also expects as much as $250 million in savings from its Zales acquisition, more than previously predicted.