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Factors Likely to Influence Signet's (SIG) Earnings in Q4

Zacks Equity Research

Signet Jewelers Limited SIG is slated to report fourth-quarter fiscal 2019 results on Apr 3. It has outperformed the Zacks Consensus Estimate in the trailing four quarters, with the average being 85.2%.

Which Way are Top & Bottom-Line Estimates Headed?

For the to-be-reported quarter, the Zacks Consensus Estimate for earnings has remained stable over the past 30 days at $3.77 per share, reflecting a year-over-year decline of approximately 11.9%.

The Zacks Consensus Estimate for revenues is $2,142 million, which reflects about 6.6% decline from the year-ago quarter. Notably, total revenues of this jewelry retailer increased 3% year over year in the last reported quarter.

Let’s see how things are shaping up prior to this announcement.

Signet Jewelers Limited Price and EPS Surprise

Signet Jewelers Limited Price and EPS Surprise | Signet Jewelers Limited Quote

Factors to Consider

Sluggish Holiday Sales to Hurt Q4 Results

In spite of Signet’s new merchandise assortment, digital marketing and omni-channel efforts, the company posted weaker-than-expected sales figures in the recent holiday season. Signet’s total sales in the nine-week period ended Jan 5, 2019 decreased 2.5% and same store sales fell 1.3% from the year-ago period. Management stated that fall in sales of legacy collections, aggressive promotional environment and waning traffic during important gifting weeks of December were the primary reasons behind the unimpressive holiday sales numbers.

Following this, management trimmed sales and earnings view for fourth-quarter and fiscal 2019. For the quarter to be reported, adjusted earnings are expected within $3.77-$3.92 per share compared with $4.35-$4.59 anticipated earlier. Same-store sales are anticipated to decline in the band of 1.6-2.5% compared with previous forecast of down 1.5% to up 1%. For the fiscal year, same-store sales are expected to be flat compared with the prior estimate of flat to up 1%. Adjusted earnings are projected in the band of $3.53-$3.69 per share compared with earlier expectation of $4.15-$4.40.

Weak International Segment & Soft Margin are Concerns

The company is grappling with soft performance of its International segment over the last two quarters. Notably, sales in the segment decreased 5.5% during the third quarter of fiscal 2019 on a reported basis and fell 4.2% on a constant-currency basis. Comps in the segment declined 3.1% from the prior-year quarter. The dismal comps performance mainly stemmed from soft-traffic trends and a tough consumer environment. The declining trend in this segment may weigh on the company’s performance in the to-be-reported quarter.

Efforts for Revival

Signet is concentrating on cost-containment efforts, optimization of store base and management of inventory level. The company is on track with the ‘Signet Path to Brilliance’ plan, which is designed to augment savings, engage in customer-centric growth and bolster e-commerce growth. Under this transformation plan announced in March 2018, management expects to generate $200-$225 million of net cost savings over the next three fiscal years, out of which $85-$100 million are anticipated during fiscal 2019.

What the Zacks Model Unveils

Our proven model doesn’t show that Signet is likely to beat estimates in the to-be-reported quarter as the stock doesn’t have the right combination of two key ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Currently, Signet has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

The Estee Lauder Companies EL has an Earnings ESP of +1.49% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Philip Morris International PM has an Earnings ESP of +1.13% and a Zacks Rank #2.

Dave & Buster’s Entertainment PLAY has an Earnings ESP of +1.32% and a Zacks Rank #3.

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