Signet Jewelers - The World's Largest Retail Jeweler

Quantitative analysis 

Liquidity 

Current ratio 

Signet Jewelers had a current ratio of 3.99 in 2015. The current ratio reduced to 3.86 in 2016 and further went down to 3.32 in 2017 (GuruFocus, 2018). The current ratio in the company recorded a downward trend in the three fiscal years. That indicated a drop in the company's ability to pay its short term and long term financial obligations. Thus, a reduction in the same would not have been good for the company's performance in the market. The decrease in the current ratio was also an indicator of the reduction in the value of assets and the increase in the costs that the company had to cater for in its operations. 

Quick ratio 

Signet Jewelers had a quick ratio of 1.85 in the fiscal year 2015. The quick ratio recorded a decrease in 2016 compared to 2015 and stood at 1.82. In the financial year 2017, the quick ratio further reduced to 1.12 (GuruFocus, 2018). The reduction in the quick ratio of Signet Jewelers was a clear indicator of the company's reduced ability to use its most liquid assets to meet its short-term financial obligations. A further reduction in the quick ratio would render the company financially incapable of fulfilling its short-term commitments efficiently. 

Solvency 

Debt to equity ratio 

The debt to equity ratio at Signet Jewelers was 0.45 in 2015. The debt to equity ratio then increased to 0.57 in the fiscal year 2016. The ratio at the company then reduced to 0.29 in 2017 (GuruFocus, 2018). The increase in the debt to equity ratio between 2015 and 2016 indicated an increase in the financial help from the lenders, suppliers, and creditors versus what signet's shareholders offered the company. That was an indicator of an increase in the financial risks in the company. A drop in the debt to equity ratio in 2017 indicated the increased in the financial capability of the shareholders of the company versus the other sources of finances for the company. 

Long-term debt to total assets ratio 

The long-term debt to total assets ratio was 0.21 in both 2015 and 2016. That indicated that 21% of the total assets at Signet Jewelers were financed by debt. The ratio had a reduction in the fiscal year 2017 to stand at 0.13 (GuruFocus, 2018). That signified a decline in the debt-financed assets of the company. It was also a clear indicator of the reduction in the long-term debts that the company owed the external financial institutions. That was a good sign for the financial performance of the company in the coming years. 

Profitability 

Gross profit margin 

The gross margin for Signet Jewelers was 37% in the fiscal year 2015. In the following year, the gross margin recorded a fixed percentage and had a slight reduction to 35% in the fiscal year 2017 (GuruFocus, 2018). The company had a higher proportion of money left after accounting for the cost of goods sold by the company in both 2015 and 2016 than in 2017. Therefore, the company recorded an increase in the cost of goods sold in the financial year 2017. 

Return on equity 

Signet Jewelers recorded a return on equity of 15% in the fiscal year 2015. The ROE in the company rose to 22% in the financial year 2016 and had a slight reduction by one percent to be 21% in the fiscal year 2017. ROE measures the percentage of the net income of the company that has been returned to the shareholders. The increase in the ROE was a sign of the rise in profitability of the business from the shareholders' perspectives (GuruFocus, 2018). 

Qualitative analysis 

Employee satisfaction 

Signet Jewelers is domiciled in Hamilton, Bermuda and is headquartered in Akron, Ohio, the United States of America. For the close to seventy years that the company has been in operation, Signet Jewelers has been at the forefront of the deliberating on and implementing employee satisfaction strategies (Signet Jewelers, 2018). In 2016, Signet Jewelers had more than 29000 employees in all its stores (Signet Jewelers, 2018). People who are currently working for the company and those who have worked for the company gave their reviews on the factors that influence employee satisfaction and how they have been catered for at Signet (Indeed, 2018). The employees said that the company has a shoddy work to life balance with moist employees working extra-long shifts and getting disconnected from their families. The management has had many faults, as revealed by the employees. In conclusion, the employees of the company are lack satisfaction in the organization due to the above factors hindering them (Indeed, 2018). 

Supplier satisfaction 

The upholding of the appropriate ethical principles while dealing with its suppliers is one of the pillars that are meant to maintain a strong relationship between Signet Jewelers and its vast network of suppliers (Signet Jewelers, 2018). Being one of the largest retailers of diamond, the company has been forced to go an extra mile and ensure that the suppliers are satisfied. Signet Jewelers' plans to maintain a strong stable and reliable bond between the organization and the suppliers who come from different countries across the globe. Therefore, the company has had workable efforts in satisfying the suppliers. From time to time, the company urges its stakeholders to follow the code of ethics that the company has developed so that their bond with the suppliers grows even stronger (Signet Jewelers, 2018). 

Customer satisfaction 

The company has integrated many strategies to bring about the satisfaction of the customers at the company. To begin with, the company had had elaborate and personalized marketing strategies to reach out to its customers who are in the United Kingdom, the United States of America and Canada. The continuous investment in the advancement of technology by Signet Jewelers has further advanced the customer service experience, which has been reported to increase the happiness and satisfaction levels of the customers as they interact with the company In its various stores (Signet Jewelers, 2018). The availability of the employees to take care of the customers' needs is another fact that has helped the company to establish roots in its industry attract more customers and significantly satisfy the already existing consumers in the company. The company has thus been keen on the implementation of the customer satisfaction efforts to increase the loyalty of its customers (Signet Jewelers, 2018). 

Competitive advantage 

Signet Jewelers has faced a significant level of competition in its sector. Some of the other players in the jewelry industry are Birks group, Inc. and fossil group, Inc. one of the strategies that signet has integrated into its business operations to have an established competitive advantage over the other players in the industry is to differentiate its products. Apart from the jewelry product, the company has invested in watches for both men and women. That has enabled the company to stand out amongst the other companies in the market dealing with jewelry. Signet has also captured the market in the different counties effectively. Operating from the United States of America, the United Kingdom, and Canada, the organization has been able to attract more customers from outside the three countries. That is expected to increase its opportunities of earning to improve its financial performance compared to its competitors. 

Trend analysis 

Revenue and cost analysis 

In the financial year 2015, the revenue of Signet Jewelers was recorded to be $ 6,802,800,000. The revenue of the company reduced to $ 6,690,900,000 in the year 2016 (GuruFocus, 2018). The reduction in the revenue was as a result of the reduction in the number of products that signet sold to the market. The revenue further decreased to $ 6,511,100,000 in the fiscal year 2017. The constant drop in the sales of the company was a clear indicator that the company had not been performing well and thus had a reduction in the customers or the individual sales of their products (GuruFocus, 2018). 

The cost of goods sold by Signet Jewelers was recorded as $ 4,109,800 in the fiscal year 2015. The COGS reduced to $ 4,047,600,000 in the financial year 2016 (GuruFocus, 2018). There was a slight increase in the COGS in the fiscal year 2017 to $ 4,063,000,000. The increase was an indicator of the company's need for more money to finance its projects. That could be one of the factors that led to the reduction in the revenue of the company particularly in the fiscal year 2017 (GuruFocus, 2018). 

The net income has had unpredictable changes in the company through the three financial years. In 2015, the net income for Signet Jewelers was recorded as $ 467,900,000 (GuruFocus, 2018). The net income registered a rise in the fiscal year 2016 to $ 543,200,000. The year 2017 saw the company have a reduction in the net income by a slight margin. The net income of the company was recorded as $ 519,300,000. The reduction in the net income and its instability could be a cause of concern for the various stakeholders of the company. That is because the return on equity is heavily dependent on the trend of the net income (GuruFocus, 2018). 

The stocks of Signet Jewelers in 2018 have been reported to be $ 67.13 per share (GuruFocus, 2018). In 2017, the cost of a share in the company was recorded as $ 64.58 on average. The company filed an increase in the value of the shares, which is a commendable trend especially at a time when the stockholders of the company have raised concerns on the pattern of the company's financial health. Nonetheless, the closing price of the stocks back in September 2016 indicated that the cost of a share at Signet Jewelers was $ 75.81. Compared to the value of the stocks in 2016, the company has been underperforming in the financial years 2017 and 2018. That has been brought about by both direct and indirect factors. The first factor is the reduction in the productivity of the employees at the company. That has led to the significant decrease in the sales of the company. The company's grip on the market niche has gradually been loosened. The other factor is the depletion of the markets in the jewelry industry in the USA, the UK, and Canada. The company has to explore the rest of the potential market across the globe to increase its income. Looking at the past trend of the stock prices in the company, it is predictable that the stock price of the company may reduce further in the fiscal year 2018. That is because the management of the company has not yet looked into some of the factors that would contribute to the financial performance. That may force the potential investors and stakeholders of the company to stay away from Signet Jewelers (GuruFocus, 2018). 

Opinion about the company’s financial position 

The amount of stock at Signet Jewelers has gradually dropped in three years starting from the fiscal year 2015 to 2017. In 2015, the value of inventory at the company was $ 2,453,900,000, the amount of the stock dropped to $ 2,449,300,000 in the fiscal year 2016 (GuruFocus, 2018). The value of the inventory was recorded as $ 2,280,500,000. The reduction in the amount of inventory at signet was expected to be beneficial to the company concerning the decline of the risks that are associated with the storage of the stock at the organization (GuruFocus, 2018). 

The current assets of the company recorded an increase from the fiscal year 2015 top 2016. The current assets of Signet Jewelers were valued at $ 4,588,100,000 in 2015 and had a rise to $ 4,642,600,000 in 2016 (GuruFocus, 2018). The increase in the current assets indicated an increase in the company's capability to liquidize its assets for use at the company. The ability of the company to have liquid assets at its disposal reduced further towards the financial year 2017 as the company recorded a decrease in the current assets to $ 3,446,100,000 (GuruFocus, 2018). 

Just like the current assets, the total assets of the company have been increasing and decreasing in worth thus portraying instability from the company's outlook. In the financial year 2015, Signet Jewelers recorded $ 6,464,900,000 in the amount of assets in the form of money that the company owned. The assets burgeoned in the fiscal year 2016 and were documented to be $ 6,597,800,000 (GuruFocus, 2018). The assets dwindled to $ 5,839,600,000 in the fiscal year 2017. The reduction in the assets that the company owns reduced the company's size regarding the property and equipment it owns. That was expected to affect the other financial metrics of the company such as the total revenue (GuruFocus, 2018). 

The long-term debt of the company has continuously become smaller during the financial year 2015 to 2017. In 2015, Signet Jewelers owed $ 1,321,000,000 concerning liability to the commercial lenders outside the company (GuruFocus, 2018). Through the various and cost reduction strategies, the company was able to reduce the debt to $ 1,317,900,000 in the financial year 2016. The company's debt reduction efforts further bore fruits in the fiscal year 2017 as the debt of the company further reduced to $ 688,200,000 (GuruFocus, 2018). The reduction of the long-term debt in the company is an indicator of the financial health that the company once anticipated. The shareholders of the company will also have reduced worry in the investment in the company (GuruFocus, 2018). 

References 

GuruFocus. (2018). 30 Year financial data of Signet Jewelers Ltd (SIG). Retrieved from https://www.gurufocus.com/financials/SIG 

Indeed. (2018). Working at Signet Jewelers: 304 reviews . Retrieved from https://www.indeed.com/cmp/Signet-Jewelers/reviews 

Signet Jewelers. (2018). Corporate responsibility - Supplier code of conduct . Retrieved from https://www.signetjewelers.com/corporate-responsibility/supplier-code-of-conduct/default.aspx