Is Investments in Luxuries such as Signet Shariah Complaint? 

Date: Sept 11, 2024

Topic: Is Investments in Luxuries such as Signet Shariah Complaint? 

Author: Handzalah

In today’s publication, we want to put out our opinion on investing in such companies. We took a good look into the industry and the company performances. Although it may look like an amazing opportunity, investors must be aware of its Shariah Compliance status. Although some brokerages and sources may say Signet Jewelers (NYSE:SIG), is Shariah Compliant, we believe that it isn’t. Signet’s main business is the business of diamond and gold retailer. This business model in itself isn’t prohibited but the sale transactions is. You see, Signet is divesting a lot of its brick and mortar stores to expand their online presence and increase margins. They plan to reduce non-performing stores and this in theory should lead to higher operating margins. But the problem here lies with the online business. Based on the most recent quarterly report, Signet’s ecommerce sales as percentage of total sales are 22.37%. And this segment of sales is projected to grow. Again ecommerce by itself isn’t a problem. It’s what they sell and how they do it that is. They predominantly sell diamond rings. A great portion of those rings have some composition of gold. Gold is a ribawi item, thus it must be exchanged with cash immediately and hand to hand. Due to ecommerce prevalence in Signet’s sales, there is haram transaction occurring. If we assume all ecommerce transactions include gold (extreme but modest approach since we can’t accurately calculate amount of gold per transaction) then this means prohibited revenue as a percentage of total revenue is 22.37%. Which is more than the allowable 5% prohibited revenue. We loved the company’s valuation and their capital allocations, namely their share buybacks. But we cannot let that compromise our Islamic values and principles.