Why Signet Is Getting Crushed in Q3

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Signet Jewelers Limited (NYSE: SIG) reported its fiscal third-quarter financial results before the markets opened on Tuesday. The company said that it had $0.15 in earnings per share (EPS) and $1.16 billion in revenue, compared with consensus estimates from Thomson Reuters that called for $0.10 in EPS and $1.17 billion in revenue. The same period from last year had $0.30 in EPS and $1.19 billion in revenue.

During the quarter, same store sales (SSS) were down 5.0%, including an estimated 120 basis point negative impact due to weather-related incidents.

The company pointed out that it is experiencing greater-than-anticipated disruptions related to the complex credit transition process. As a result, Signet updated its guidance for SSS down mid-single digits and EPS in the range of $6.10 to $6.50, from SSS down low- to mid-single digits and EPS in the range of $7.16 to $7.56.

There are consensus estimates calling for $7.02 in EPS and $6.33 billion in revenue for the 2018 fiscal year.

On the books, cash and cash equivalents totaled $113.4 million, compared to $82.7 million at the prior year quarter-end.

Virginia C. Drosos, CEO of Signet Jewelers, commented:

Signet had a challenging third quarter. In addition to an anticipated sequential slowdown in our same store sales, unfavorable weather-related incidents, along with unexpected disruptions during the transition of our credit services, further negatively impacted results. Encouragingly, within this backdrop, we advanced our strategic priorities, which are beginning to deliver results.

She added:

While the identified systems issues are behind us, we expect some credit process disruption to continue and to negatively impact our fourth quarter and full-year performance. As a result, we now expect our fourth quarter same store sales to be down low- to mid-single digits, leading to Fiscal 2018 same store sales down mid-single digits and earnings ranging from $6.10 to $6.50 per share.

Shares of Signet closed Monday at $75.84, with a consensus analyst price target of $70.00 and a 52-week range of $46.09 to $101.46. Following the release of the earnings report, the stock was down about 17% at $62.80 in early trading indications Tuesday.