Fitch Ratings has upgraded Signet Jewelers Limited’s and Signet Group Limited’s ratings, including their Long-Term Issuer Default Ratings, to ‘BB+’ from ‘BB’. The Rating Outlook is Stable.
Fitch’s confidence in Signet’s ability to maintain EBITDAR leverage below 4.0x over the medium term underpins the upgrade. As of April 2024, Signet’s proforma EBITDAR leverage was around 3.5x. While a dip in discretionary spending could slow top-line growth in the near term, Fitch believes that Signet’s financial policies and debt reduction strategies will help sustain this leverage level.
Fitch said Signet, a leading U.S. specialty jeweller with about 9% market share, has shown strong execution in revenue and margin management, supporting long-term expectations of low single-digit revenue and EBITDA growth. Signet’s moderate leverage and strong free cash flow (FCF) position are key rating drivers. The company had approximately $475 million in debt outstanding post-April 2024 repurchase of preferred equity and targets public leverage at or below 2.5x, equating to Fitch’s 4.0x EBITDAR leverage.
Signet’s liquidity is robust, with $1.38 billion in cash as of February 2024 and expected positive FCF of $320 million to $380 million over 2024 and 2025. This strong liquidity supports potential debt repayment, share repurchases, dividends, and acquisitions. Signet’s recent acquisitions include Diamonds Direct and Blue Nile, funded by cash on hand.
Revenue is projected to stabilise around $6.9 billion in 2025, after a forecasted decline to $6.8 billion in 2024 due to reduced consumer spending and the loss of a 53rd week. Despite these challenges, Signet’s EBITDA margins are expected to trend in the mid-11% range, translating to EBITDA of around $780 million in 2024, supported by significant cost savings and operational efficiencies.
As of February 2024, Signet operated 2,698 stores under brands like Kay, Jared, Zales, and Banter by Piercing Pagoda in the U.S., Peoples in Canada, and H. Samuel and Ernest Jones in the UK. The company continues to benefit from its scale and investments in its omnichannel platform, enhancing its competitive position.