In a recent analysis by UBS Securities, the revenue trends for Signet Jewelers have shown signs of weakening in July, raising concerns that the fiscal second-quarter sales could decline more than previously expected. The brokerage has revised its revenue target down to an estimated $1.49 billion, indicating a significant year-over-year decline of 7.5%.
This revision comes from an initial projection that forecasted sales would decrease by 6.5% to $1.51 billion. The current market consensus for Signet's revenue stands at $1.51 billion, as stated in the report released this Tuesday. Despite these challenges, UBS anticipates adjusted earnings per share (EPS) for Signet at $1.16, aligning with market consensus but reflecting an annual decline of approximately 25%.
The report also suggests that gross margins may experience a slight increase, anticipated to rise by 15 basis points year-over-year to reach 38%, thanks to effective sourcing cost savings and robust revenue performance in services. The underwhelming performance for the quarter may force Signet, which operates well-known brands such as Kay Jewelers, Zales, and Jared, to adjust its fiscal 2025 EPS guidance toward the lower spectrum of the management's estimates, which range from $9.90 to $11.52 per share.
This financial forecast adjustment comes from a collective analysis by UBS analysts, including Mauricio Serna. Following this news, shares of Signet Jewelers closed down by 4.3% on Tuesday. Furthermore, UBS has revised its full-year EPS target for Signet Jewelers to $10.40, down from an earlier estimate of $10.90, reflecting a cautious outlook on profitability.
The consensus among analysts is for adjusted EPS of $10.50 for the current year. Additionally, the revenue growth forecast has been curtailed, anticipating a decline of 5.4%, setting expectations at $6.79 billion for the fiscal year. Seven analysts surveyed by Capital IQ predict the revenue for fiscal 2025 to be slightly lower at $6.78 billion. Signet Jewelers is scheduled to announce its results for the second quarter on September 12.
Despite the overall decline, UBS noted a few positive indicators stemming from fundamental improvements in the July quarter. Notably, comparable sales in North America have improved, tracking down 5%, a marked recovery from the 9.2% decrease observed in the first quarter. Industry data indicates that store visits have also improved, reflecting a year-over-year decline of just 1.2% in the calendar second quarter, in contrast to a steeper 5.2% decline in the first quarter. "A key message is that while dynamics softened in July, trends have picked up in August," stated Serna, indicating a recovery trend that could influence future performance metrics..