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Signet's Economics

Pranav Singh profile picture
Pranav Singh


  • Diamonds are expected to become more expensive in the medium and long term.
  • Mother's Day will be a big teller of trend in the August financials release.
  • Financing could allow Signet to gain some extra income moving forward.

Signet (NYSE:SIG) is a strong company in the luxury space with a historically diverse and consistent top line. This past quarter was disappointing by some measures and external factors have pulled down the stock. The coming quarter, as well as an evolving economy around the luxury business, could create an opportunity in the future for this firm.

In terms of economics, luxury goods are almost always the first to be cut out and last to be added to the average budget. The Federal Reserve and other indicators show it is reasonable to expect consumers to continue to increase spending. Below is the University of Michigan Consumer sentiment indicator, which is at all-time highs since the 2008 bust.


The other side of expenditures is money in consumer pockets. In come the mixed signals. The unemployment rate has been dropping overall, yet wages have not come under pressure and have not kept up with the increased employment. The last unemployment rate increased showing that either workers are less flexible with under-employment or companies are being stricter in employing new talent. Either way, this implies the market is getting tighter with and possibly will increase in wages in the future. As shown below unemployment has decreased past pre-2008 levels indicating we are past full employment.


However real wages, as shown from Payscale below, have not recovered and are still moving at a negative rate. Real wages measure the difference between wage growth and inflation. Effectively showing the difference between what is going into consumer pockets relative to what is coming out. As mentioned above, this trend may change in the coming months.


On one hand, sales for luxury products should pick up with this expected growth, but without the money to do so the consumer will start to cap off expenditure growth before it can

This article was written by

Pranav Singh profile picture
Pranav Singh is the Chief Publisher of DAC1 and TOTD at Monthly Cash Thru Options, an options advisory newsletter, and educational service provider. For more information about the services and track record please visit www.monthlycashthruoption.com. If you have questions for Pranav please email him at pranav@monthlycashthruoptions.com He also manages a personal naked options portfolio. His main strategies focus on event driven stocks with sound value and technical basing.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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