Could Q3 Earnings Boost Signet Jewelers Stock?

Signet Jewelers (SIG) plans to announce its third quarter of fiscal 2020 earnings before the markets open on December 5. We expect Signet’s revenues and earnings to remain subdued. Notably, Signet Jewelers has exceeded Wall Street’s estimates in the last seven consecutive quarters. However, its stock is down about 49.4% year-to-date.

Signet stock’s underperformance despite solid positive surprise history is due to its struggle to lift sales and earnings. Continued sales and margin headwinds are taking a toll on its performance.

We expect Signet’s third quarter to be no different, and we expect its top line to continue to decline. Meanwhile, Signet is expected to post negative earnings per share.

Signet Jewelers’ earnings: Headwinds to stall growth

Signet’s financial performance has been erratic, and its comparable sales remain weak across all regions and product segments. Although the company improved its average transaction value, the number of transactions continues to decline. Also, weakness in the United Kingdom could further remain a drag on its growth.

Weak comparable sales and the heightened promotional environment is taking a toll on its margins and, in turn, its EPS. Notably, Signet’s adjusted earnings per share have declined in the last six quarters.

Analysts expect Signet to post revenues of $1.14 billion in the third quarter, implying a year-over-year decline of 4.2%. Meanwhile, Wall Street expects Signet to post adjusted net EPS of -$1.08 in the third quarter.

In comparison, analysts expect Tiffany’s (TIF) third-quarter revenues to improve by 2.4% on a year-over-year basis. Meanwhile, its bottom line is likely to return to growth after declining in the last four consecutive quarters. Analysts project Tiffany’s adjusted EPS to mark about 11% growth in the third quarter.

While Tiffany’s sales and earnings could improve, strengthening of the US dollar could remain a drag. Moreover, the unrest in Hong Kong poses additional challenges for Tiffany.

SIG’s second-quarter performance

Signet Jewelers posted revenues of $1.36 billion in the second quarter, which exceeded Wall Street’s estimate of $1.34 billion. However, the company’s sales fell by about 4% year-over-year.

Signet’s comparable sales decreased by 1.5%, reflecting weakness across all product categories. Signet posted adjusted earnings per share of $0.51, which fell about 2% year-over-year. However, its adjusted EPS beat analysts’ estimate of $0.24.