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Bear of the Day: Signet Jewelers (SIG)

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The retail market has come back to life in recent months thanks to a solid earnings season and slightly better outlooks. However, this trend isn’t hitting all corners of the retail world, as the jewelry segment has largely struggled.

Sluggish earnings reports here and concerns over spending in the luxury market have sunk stocks and outlooks for this segment, pushing down analyst expectations as well. This has actually led to a bottom 10% industry rank for the segment, leaving investors with few good options in this industry. Take for example Signet Jewelers (SIG - Free Report) which is currently the worst positioned company in this industry by our metrics.

SIG in Focus

SIG sells diamond Jewelry at its retail outlets in malls and other locations across the U.S. It owns well-known brands such as Kay Jewelers and Jared, making it a popular choice in the industry. Despite its popularity, recent trends in the space have made this a weak time to be in the diamond jewelry business, and that was evidenced in SIG’s latest earnings report.

In that release, SIG easily missed expectations for earnings, posting EPS of just $1.14 compared to estimates of $1.47/share. This represents a miss of over 20%, and it helped to continue the trend of SIG in earnings season, as the company now has a four quarter average surprise of about -9%.

Worst of all for SIG investors though, is that the company was forced to slash guidance, cutting its 2017 fiscal year expectations by roughly a dollar a share down to $7.25-$7.55/share. Additionally, the outlook on the sales front for the current year is negative, with sales expected to slump worldwide for the time frame.

Recent Estimates

With these market conditions, it shouldn’t be surprising to note that analysts have been ratcheting down their expectations for upcoming SIG earnings. The current quarter consensus has fallen from about 50 cents per share sixty days ago to just 19 cents per share today, while the full year consensus has fallen 11% in the same time frame.

Price, Consensus and EPS Surprise

Price, Consensus and EPS Surprise | Quote

It is really hard to find analysts that disagree with this sentiment too, as 100% of analysts that are revising their estimates are moving them downward, both for the current year and the following year. No wonder SIG currently has a Zacks Rank #5 (Strong Sell) and why we are looking for more weakness from this name in the weeks ahead.

Other Picks

The jewelry market is pretty weak right now, so if investors want a top retail name they will have to look elsewhere. One area to watch these days is the regional department store area of the market, which has an industry rank in the top 10% and no stocks that are ranked ‘sell’ at time of writing (for the full list of top ranked stocks, click here).

Two companies are especially intriguing right now in this market, Macy’s (M - Free Report) and JC Penney ( (JCP - Free Report) . Both of these stocks are coming off of nice earnings beats in the most recent quarter and have optimistic outlooks for the near term. This makes either one a potentially better retail choice these days, and especially instead of SIG as we head into the holiday season.

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Signet Jewelers Limited (SIG) - free report >>

Macy's, Inc. (M) - free report >>

J. C. Penney Company, Inc. (JCP) - free report >>

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