Wells Fargo Downgraded Signet Jewelers For This Reason

Shares of Signet Jewelers fell on Thursday as Wall Street digested a downgrade on the stock from Wells Fargo analysts.
Analysts at the bank lowered their rating on the stock to underweight from equal weight.

According to analysts led by Ike Boruchow, the company has historically performed well, with same-store sales rising in the mid- to high-single digits for six straight years after the Great Recession ended in 2009.

However the analysts noted, “the company has faced more challenges the past several years,”

In fiscal 2017, those challenges resulted in the first year-on-year decline in same-store sales since the recession, followed by an even bigger decrease in 2018.

The decline was 5.3% in fiscal 2018 and was 0.1% in 2019, which ended Feb. 2. The analysts forecast a decrease of 0.9% in 2020 and 0.4% in 2021.

The analysts wrote, “There appear to be a multitude of factors that have driven the deceleration, including e-commerce issues, credit disruptions, management turnover and diamond-swapping allegations at Kay.”

“Even more troubling in our view is that over the same period, the industry has been improving (low single digits), which has led to market share losses for this market leader.”

The analysts also lowered their price target on shares from $16 to $12.

Shares of Signet have fallen 43% over the past year.

Disclaimer: We have no position in Signet Jewelers Ltd. (NYSE: SIG) and have not been compensated for this article.