This company, primarily retailer of diamond jewelry, has been grouped into jewelry stores sector in personal items industry.
It seems that, based on the typical company data, the demand for diamond in North America market in the past two years has been weak as indicated by the continuingly declining same store sales ( around 3% annually in 2017 and 2016). We have seen a similar trend in international market during the same period of time. However, it seems that declining demand for gold-related jewelry may have gain support as further stabilization of gold price in 2017.
Facing the declining sales, companies with own manufacturing have managed to lower product costs to keep profitability. However, for pure retailers their profitability has been seen hurt due to deleverage of expenses (store related expenses) as the sales decreased.
The typical companies’ operating margin went down from 14% to 12% in 2017. Companies’ cash flow thus significantly decreased during the same period.
The typical average stock price/cash flow ratio is about 21.
It seems that the demand for its products of this company has been weak and sales has been continuingly declining in the past three years as indicated its decreasing same stores sales during same period. The fourth quarter same store sales down 5%.
The fiscal 2018 compared with the 2017
The same store sales decreased 5.3%.
The fiscal 2017 compared with the 2016
The same store sales decreased 1.9%.
The fiscal 2016 compared with 2015
The same store sales increased 4.1%.
Its gross margin (including occupancy costs and store operation costs)has decreased from around 36% in 2014 down to about 35% of 2017 due primarily to promotion and deleverage of store expenses as a result of declining sales. With a flat SG&A as percentage of sales (30%), its operating margin still decreased to about 5% in 2017.
Stock performance
This stock currently has a stock price/cash flow ratio of 16. We think that its stock is being relatively overvalued considering its relatively worse performance in its same store sales and its inability to improve margin.
