**some performance numbers:**
**Q4 revenue:** $2.35B (-6% YoY), but beat guidance
**Same-store sales:** \-1.1% (improved from -3.4% full year)
**Adjusted gross margin:** 42.6% (-70 bps YoY)
**Full year FCF:** $438M (88% conversion rate from adj. operating income)
**FY26 guidance:** Comps -2.5% to +1.5%, EPS $7.31-$9.10
**bull case:**
Trading at 3.8x EBITDA, 17% FCF yield, and 5.0x pre-tax earnings
Repurchased \~$1B shares, reducing diluted count by \~20%
$723M remaining in buyback authorization
Strong balance sheet: $1.7B liquidity, $604M cash, no near-term debt
Dividend increased 10% (fourth consecutive annual increase)
Strategic repositioning: Closing 150 underperforming stores, relocating 200 to higher-traffic areas
Cost-saving initiatives targeting $100M annualized benefit
**risks:**
Lab-grown diamonds disrupting traditional diamond market
$369.2M in impairment charges for digital brands (Blue Nile, James Allen)
Declining marriage rates creating structural headwinds for bridal
Hidden risk: Lab-grown diamonds likely reducing warranty & service revenue (high-margin segment)
Management credibility issues after recent guidance cuts
**activist catalyst:**
Select Equity Group disclosed 9.7% stake
Pushing for strategic alternatives including potential sale
Most realistic buyer would be PE, not strategic players
Classic LBO candidate with strong FCF and clean balance sheet
**thesis:**
Intrinsic value (by Value Sense)
**DCF Value** \- $225.9
**Relative Value** \- $111.3
Both frameworks indicate $SIG remains substantially undervalued
**At current valuation, a 15% IRR is achievable through:**
Multiple expansion to 5.8-5.9x EBITDA (still below retail peers)
Aggressive share repurchases reducing count by up to 40% in three years
Modest EBITDA growth to $760M (+17% over three years)
The ideal scenario? Stock stays cheap and management keeps buying back shares aggressively.
Signet is priced for permanent decline at 3.8x EBITDA, but has multiple pathways to significant shareholder returns even with flat revenue. Key is management's capital allocation and whether the warranty/service revenue stream can withstand lab-grown diamond disruption.
Disclosure: I'm long on SIG