Will Soft Holiday Sales Weigh Upon Signet (SIG) Q4 Earnings?

Signet Jewelers Limited (NYSE:SIG) is slated to report fourth-quarter fiscal 2018 results on Mar 14. Last quarter, the company’s earnings came in line with the Zacks Consensus Estimate. However, the bottom line has missed the consensus mark in the trailing four quarters, with an average of 4.1%.

Factors at Play

Signet Jewelers’ dismal holiday sales performance might weigh upon its performance in the fourth quarter. The company’s soft holiday sales results were primarily due to negative effect of the credit outsourcing transition and weakness at the UK Jewelry division. Furthermore, challenging retail landscape, aggressive promotional strategies and waning mall traffic were the other reasons behind lower-than-expected results. As a result, management issued a more conservative outlook for fiscal 2018. Signet Jewelers now expects earnings (excluding the impact of U.S. tax reform) in the range of $6.17-$6.22 compared with $6.10-$6.50 projected earlier. Earnings (including the impact of U.S. tax reform) are estimated to be in range of $6.45-$6.50. Meanwhile, the company continues to expect same store sales to decline by mid-single digits.

Nevertheless, Signet Jewelers’ focus on effective cost management, digital marketing and higher e-commerce sales bode well. Total e-commerce sales in the holiday season surged 47.7% to $210.5 million from the year-ago period. Sharp increase in e-commerce sales were primarily driven by R2Net buyout. Additionally, in an effort to drive growth in the long run, the company has been implementing certain strategies including expansion in mid-market and the best in bridal segment. The company is also focusing on diversifying store base and opening more stores at off-mall locations.

However, margins which have been declining since the past few quarters are likely to remain under pressure in the to-be-reported quarter due to rise in investment and promotional expenses.

Signet Jewelers Limited Price, Consensus and EPS Surprise

Zacks Model Shows Unlikely Earnings Beat

Our proven model does not show that Signet Jewelers is likely to beat earnings estimates this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Signet Jewelers has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $4.23. Although, the company’s Zacks Rank #3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.

Stocks Poised to Beat Earnings Estimates

Here are some better-ranked stocks from the same space with the right combination of elements to deliver an earnings beat:

American Eagle Outfitters, Inc. (NYSE:AEO) has an Earnings ESP of +0.53% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here

The Kroger Co. (NYSE:KR) has an Earnings ESP of +0.40% and a Zacks Rank of 2.

Ross Stores, Inc. (NASDAQ:ROST) has an Earnings ESP of +1.37% and a Zacks Rank #2.

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