Signet Jewelers Limited SIG is slated to report second-quarter fiscal 2019 results on Aug 30. Last quarter, the company’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters by 53.1%.
Which Way Are Top & Bottom-Line Estimates Headed?
The Zacks Consensus Estimate for second quarter stands at 21 cents per share, reflecting a year-over-year decline of 84.2%. We note that the Zacks Consensus Estimate has moved down by a couple of cents in the past seven days.
The Zacks Consensus Estimate for revenues of $1,328 million, which shows a 5.1% decline from the year-ago figure. We note that total revenues of this Hamilton-based company increased 5.5% in the last reported quarter.
Let’s delve deeper and find out the factors impacting the results.
Factors at Play
Signet holds a significant position in the world jewelry market due to its distinctive brand appeal. The company is well positioned to augment performance in the long run by leveraging capital investments made over the past several years in distribution, manufacturing and diamond-sourcing processes.
Moving on, Signet remains on track with its ‘Signet Path to Brilliance’ plan that focuses on driving growth in the long run. This plan is touted to continue for the next three years and will aim at pursuing cost effective strategies. A portion of this cost savings will be used to invest in growth initiatives, which include e-commerce development, omnichannel capabilities and product innovations. 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 with pre-tax charges expected to come in the range of $170-$190 million. During fiscal 2019, the company anticipates net cost savings of $85-$100 million with the remaining coming in by the end of the three-year program.
Further, the company is augmenting its digital marketing efforts and planned capital investments to uplift its performance. The acquisition of R2Net, which owns popular online jewelry retailer — JamesAllen.com and Segoma Imaging Technologies — will combine Signet’s retail jewelry business with R2Net’s solid digital operations. This move is in sync with Signet’s omni-channel transformation. The company is not only focusing on double-digit growth in e-commerce but is also striving to achieve 15% of total sales in fiscal 2021, up from 8% in fiscal 2018. The company is also trying to make online shopping simpler for customers by signing into Kay, Zales and Jared websites using Google and Facebook credentials.
However, Signet is reeling from soft comps and margins for a while now. Further, management continues to expect same-store sales in fiscal 2019 to decline in the range of low to mid-single digit owing to credit transition process. Also, second quarter adjusted earnings per share are expected in a band of 5-20 cents compared with the year-ago earnings figure of $1.33. Sales are projected in the range of $1.30-$1.35 billion, showing a decline from $1.40 billion a year ago. For fiscal 2019, management continues to anticipate earnings per share between $3.75 and $4.25 compared with fiscal 2018 figure of $6.51. Sales for the year are still projected in the range of $5.9-$6.1 billion, reflecting a decline from $6.3 billion in fiscal 2018.
What the Zacks Model Unveils
Our proven model shows that Signet is likely to beat estimates this quarter as the stock has 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.
Signet has an Earnings ESP of +13.27% and carries a Zacks Rank #3. This makes us reasonably confident of an earnings beat.
Other Stocks With Favorable Combination
Here are companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Big Lots, Inc. BIG has an Earnings ESP of +5.22% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Burlington Stores, Inc. BURL has an Earnings ESP of +1.42% and a Zacks Rank #2.
Dollar General Corporation DG has an Earnings ESP of +0.56% and a Zacks Rank #3.
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