Near-term challenges

Signet Jewelers (SIG) shares, which have increased ~32% since its first fiscal quarter earnings on June 6, are losing steam. Signet Jewelers is set to report its second fiscal quarter earnings on August 30. However, analysts think that the company’s operational issues and negative currency rates could hurt its financials. Signet stock fell 5.3% on August 27 and closed at $58.43.

Analysts expect Signet Jewelers to report net sales of $1.3 billion—down 4.4% on a YoY (year-over-year) basis. The company’s credit portfolio outsourcing will likely hurt the in-store sales and same-store sales growth.

Is Signet Stock Losing Steam before Its Second-Quarter Earnings?

However, benefits from the acquisition of James Allen and an improvement in the Zales banner are expected to support the top line. Signet’s operational issues related to the outsourcing of its credit portfolio are expected to be resolved. However, the operational issues are expected to hurt in-store transactions in the fiscal second and third quarter.

In contrast, Tiffany (TIF) reported net sales growth of 12% during the second fiscal quarter. Meanwhile, Tiffany’s comparable-store-sales improved 8%.

EPS is expected to decline

Analysts expect Signet Jewelers to report an adjusted EPS of $0.21 in the second fiscal quarter. The projected EPS reflects a steep decline from the same quarter the previous year when the company reported an adjusted EPS of $1.17.

Weak sales and a negative mix are expected to hurt Signet’s bottom line. However, the lower effective tax rate, cost savings, and a decline in the outstanding share count could continue to cushion the company’s earnings.

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