Citi Says Remain Cautious On Signet Jewelers Heading Into Earnings

Various retailers have indicated weak mall traffic trends in February. These trends are likely to have hurt Signet Jewelers Ltd. (NYSE: SIG) “more than most” and the company may announce its F17 guidance significantly short of Street expectations, Citi’s Paul Lejuez said in a report.

Lejuez maintains a Neutral rating on Signet Jewelers, while reducing the price target from $90 to $66. The EPS estimate for F 2017 has been lowered from $7.02 to $6.80.

Weak Mall Traffic In February

According to ShopperTrak's Market Intelligence product, U.S. retail traffic declined 11 percent in February, following a 6-percent decline in January.

“Potential reasons for the traffic slowdown include later tax refunds, weather, holiday shifts, and/or the impact of store closures at year end,” Lejuez wrote. He added that while other retailers may be able to offset the weakness, it may be difficult for Signet Jewelers to do so because of Valentine's Day.

The fourth-quarter and first-quarter credit metrics would likely look weak, the analyst said.

Fiscal 2017 Guidance

Before Signet Jewelers reported weaker-than-expected sales for November and December, Lejuez had expected management to guide to F 2017 EPS of $7.30–$7.60. “However, following disappointing holiday sales (down 4.6 percent), and our expectations for a weak Valentine's Day, we expect guidance to be closer to what we model for F17E ($6.80) versus consensus of $7.75,” Lejuez concluded.

At last check, shares of Signet were down 1.98 percent at $64.30.

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