Signet Jewelers Ltd. (NYSE:SIG) announced its second quarter results for FY27, on September 9. On a same store sales (SSS) basis, the company posted a 2.2% year-over-year increase, while total reported sales declined 0.5% to $1.528 billion. The adjusted operating income jumped from $85.4 million during Q2 FY26 to $107.2 million for the reported quarter. It resulted in adjusted diluted earnings per share of $2.19, compared to $1.61 during the same period last year. Based on tariff refunds, additional share buybacks, and resilient operating performance so far during FY27, the management raised its full-year guidance for the adjusted EPS by more than 10%.
Tariff Refunds, AUR Growth and Margin Gains
For the second quarter, there was a 6% jump in merchandise average unit retail (AUR) compared to the same period last year. The company reported AUR growth in both its Fashion and Bridal categories. The company posted 39.4% gross margin, which is an 80 basis point jump relative to the prior year period. That margin expansion incorporated around $15 million in tariff refunds, along with lower inventory and distribution expenses. Adjusted operating margins also went up from 5.6% in Q2 FY26 to 7% in the reported quarter.
For its core brand priorities, management is pushing forward with some effective measures, including refreshed merchandise. Other strategic initiatives include a more advanced and emotionally captivating marketing drive, as well as improved in-store and digital customer experiences.
During the second quarter, management also carried out an $87 million buyback of 1 million common shares. In addition, the company is planning on a $125 million Accelerated Share Repurchase program in the near future.
Sales and Cash Flow Concerns
There was some weakness observed across certain metrics during the second quarter. Total reported sales dropped modestly from $1.535 billion in Q2 FY26 to $1.528 billion in the reported quarter. Comparable Fashion sales also went down marginally by 1%. This was primarily due to softer results for its Banter brand, and weaker demand trends across low-priced offerings such as metal pieces.
In terms of cash flow generation, there are prominent areas of concern. The company used $73.5 million in cash related to its operating activities during the first half of the fiscal year, although it reflects some improvement compared to $89.0 million operating cash outflow during H1 FY26. Amid higher capital expenditures, the recent quarter’s free cash flow dropped to $30.8 million, in comparison to $62.3 million during the same period last year. For the first six months of the fiscal year, Signet generated negative free cash flow of $138.4 million.
