SWGAY Swatch Group AG (PK)

By Jessica Menton 

Some struggling jewelry retailers have taken on a new shine.

Shares of Signet Jewelers surged 27% Thursday, posting their biggest one-day gain since 1996, after the world's largest retailer of diamond jewelry delivered profit and revenue in the latest quarter above Wall Street estimates. The company also raised its adjusted profit outlook for the year.

This better-than-expected earnings report comes as mall-based jewelry retailers have struggled in recent years amid declining foot traffic, while competition from e-commerce has squeezed sales. They also have had to grapple with other headwinds including debt-laden millennial customers who have sought more affordable engagement rings.

The challenges have battered shares of jewelry chains, with Signet's stock shedding 78% over the past 12 months even after Monday's rally, while luxury jewelry company Tiffany & Co. and Swiss watchmaker Swatch Group Ltd. have lost 27% and 30%, respectively.

Signet, which owns Kay Jewelers, Zales and Jared The Galleria of Jewelry, last year said it would close more than 200 stores but open new ones outside of shopping malls in a bid to offset a drop in sales at its existing locations. Since then, Signet has reported surprisingly positive results thanks to its efforts to reduce costs and improve its e-commerce operations.

"The e-commerce mix that Signet has been able to build up over the past six quarters has been quite impressive," said Tim Vierengel, senior research analyst at Northcoast Research, who added that this is the first year the company has spent more on online advertising as opposed to traditional outlets such as television and radio. "That's clearly paying off and it's driving people to click on their websites."

To be sure, foot traffic for the industry remains weak. Tiffany posted a decline in second-quarter sales as the company continued to see fewer foreign tourists in its U.S. stores. Meanwhile, Swatch's sales in the first half of the year missed analysts' expectations, though the company projected strong growth ahead.

Write to Jessica Menton at Jessica.Menton@wsj.com

(END) Dow Jones Newswires

September 05, 2019 16:51 ET (20:51 GMT)

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