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Signet (SIG) Q3 Earnings to Benefit From E-Commerce Strength

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Signet Jewelers Limited’s (SIG - Free Report) third-quarter fiscal 2021 results, slated to release on Dec 3, are likely to reflect strength in e-commerce sales, especially due to the pandemic-led social distancing. The company’s e-commerce penetration remained high in the last reported quarter owing to temporary store closures. However, on its last earnings call, management said that even after stores reopened, it has been seeing elevated levels of e-commerce penetration. The penetration remained high in August at 20%.  The company further stated that its robust second-quarter e-commerce momentum continued in the third quarter.

Notably, Signet has been boosting online shopping experience with advanced virtual and digitally native experiences. Toward this end, the company has been focusing on developing channel-agnostic retailer capabilities. This enables the store staff to cater to customers from home via technologies such as chat, video, social media and virtual by-appointment private consultations. The company’s investments in virtual selling are aiding higher levels of conversion in digital and retail foot traffic. During the second quarter of fiscal 2021, the company served more than 300,000 customers via virtual consultations, which led to higher than historical conversion rates.

The company also increased e-commerce distribution throughput fivefold. Incidentally, e-commerce sales skyrocketed 72.1% to $270.1 million in the last reported quarter, primarily led by e-commerce growth of 99% across the company’s bricks and mortar banners. To further support growth in the digital arena, the company is broadening online assortments alongside search and browse capabilities.

In fact, omnichannel and e-commerce capabilities are also key aspects of the company’s ‘Signet Path to Brilliance’ Plan, which focuses on customer-centric growth actions, enhancing efficiency and driving cost effectiveness. The initiative includes the customer-first approach, per which the company strives to build brands that meet consumers’ needs more effectively. Owing to COVID-19 and the consequently evolving retail backdrop, Signet is accelerating its Path to Brilliance initiatives. It will continue providing customers with expertise and merchandise selection. Also, it has been optimizing its virtual footprint via enhancing site capabilities. All said, we expect Signet to have benefited from its endeavors to boost online sales.

Signet Jewelers Limited Price, Consensus and EPS Surprise

Other Trends

Signet is not fully immune to the ill impacts of the ongoing pandemic. The impact of the resurgence of coronavirus in major trade areas, supply-chain hurdles and uncertainty surrounding consumers' spending capacity, especially in discretionary categories like jewelry, cannot be ignored. We note that Signet has been struggling with weak same-store sales. Although same-store sales improved in August, management remained unsure about the continuation of such trends in the rest of third-quarter fiscal 2021. (Read More: Signet to Report Q3 Earnings: What's in the Cards?)

The Zacks Consensus Estimate for Signet’s third-quarter revenues is pegged at $1,095 million, indicating a drop of 7.8% from the figure reported in the year-ago quarter. Further, the consensus mark for the quarter stands at a loss of 86 cents, which has narrowed from a loss of 90 cents in the past 30 days. The consensus mark is wider than the loss of 76 cents a share recorded in the same quarter a year earlier.

Signet currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3 Other Key Stocks From the Retail Space

Capri Holdings (CPRI - Free Report) , which currently carries a Zacks Rank #1, has a long-term earnings growth rate of 4.1%.

Tapestry (TPR - Free Report) , with a Zacks Rank #1, has a long-term earnings growth rate of 9.3%.

L Brands (LB - Free Report) , with a Zacks Rank #1, has a long-term earnings growth rate of 13%.

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