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Signet Jewelers’ Surprise Q1 2019 Profit: Stock Rises 18.5%

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Improving trends but challenges persist

Signet Jewelers (SIG) reported its fiscal first quarter 2019[1. The quarter ended May 5, 2018.] results on June 6. The stock rose 18.5% on better-than-expected earnings and improving trends across most of its key banners.

Adjusted EPS of $0.10 easily surpassed analysts’ estimate of a loss of $0.09. However, it fell sharply YoY (year-over-year) from adjusted EPS of $1.03 in fiscal Q1 2018. Lower transactions, promotional spending, adverse mix, and credit portfolio transition issues negatively impacted its EPS.

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Key takeaways

Despite the steep decline, investors were positive about the company’s better-than-expected EPS performance. It’s also a positive sign that store issues related to credit portfolio outsourcing are slowly resolving.

Although operational issues are likely to hurt Signet’s EPS in its fiscal second and third quarters, the impact is expected to remain low. With an improvement in sales, cost-savings, and a cushion from share repurchases, Signet’s EPS could see sequential improvement. However, an adverse mix due to increased sales of low-margin products could remain a drag.

Signet’s management stood by its earlier guidance and expects fiscal 2019 adjusted EPS to be $3.75–$4.25. It expects its fiscal second-quarter adjusted EPS to be $0.05–$0.20.

On a year-to-date basis, Signet stock has fallen 7.6% as of June 6. In comparison, Tiffany (TIF) stock has risen 28.8% on the back of strong fiscal first-quarter earnings and an upbeat outlook.

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