Signet to close stores, boost e-tail as US and UK ops struggle

UK and North America-focused jewellery giant Signet is planning to close over 200 stores as it announces a three-year Path to Brilliance 'transformation’ plan and faces an increasingly tough market for its US stores.


Jewellery sales proved to be a challenge for Signet in Q4


That plan involves turning it into an omnichannel “category leader” but comes as the Kay and Jared chains struggled in Q4 and the full year.

Yet the weak reception for Kay and Jared’s offer wasn’t repeated across all of its chains in Q4 and CEO Virginia C Drosos said the company “gained sales momentum in our Zales banner” during the period.

As well as the store closures, Signet expects profits to fall in 2019, despite a tax gain having boosted its profits for the latest quarter to February 3. 

In addition to its US chains, the firm also owns the Ernest Jones and H Samuel chains in Britain. Although now registered in Bermuda and listed in New York, it began in the UK and used to be known as Ratners.

SHARE PRICE DROP

Its shares plunged nearly 20% Wednesday on the news of the store closures and profit issues, despite the headline profits figure being up 19.1% to $351.3 million in Q4. Revenue had risen a tiny 1% to $2.29 billion, even though the quarter included the key Christmas period, as well as the important ‘season’ when many couples get engaged, and at least a few days of the pre-Valentine’s season.

Yet company-wide comparable sales were down as much as 5.2%, driven by falls at those Kay and Jared stores. The Sterling Jewelers unit, under which Kay and Jared operate, saw an 8.6% comp sales decline.

However, Zale Jewelry's comps increased 4.3%, driven by the new Enchanted Disney collection, line extensions in Vera Wang Love and an improved selection of solitaires and fancy cut diamonds. And Piercing Pagoda's comps rose 4.6%.

But UK Jewelry's comparable sales fell 9.2% due principally to diamond and fashion jewellery issues, partially offset by higher sales in select prestige watch brands and strength in e-tail. Average transaction value increased 6.6% but the number of transactions fell 15.2%.

TRANSFORMATION PLAN

As mentioned, more than 200 of its 3,500 stores will be shuttered. But the transformation plan also has some more positive elements and will see Signet focusing more on its e-tail ops. While it still plans to open up to 40 stores this year, the e-tail move is the key one for the firm.

New initiatives to drive increased digital traffic and improve conversion include better use of data, improving website tech and making the store/website connection more seamless. With these investments, Signet aims to grow its digital sales as a percentage of total revenues to at least 15% in FY2021, compared to 8% in 2018.

But it expects profit to be down to between $3.75 to $4.25 per share this year after it made profit of $519.3 million, or $7.44 per share, for the financial year just finished. 

And annual revenue will range from $5.9 billion to $6.1 billion this year after $6.25 billion last time. Yet it doesn’t think that the store closures will weigh as heavily on sales as they might because around three-quarters of the stores expected to close are within the same mall as another Signet banner. Around 30% of revenues from closed stores are expected to transfer to remaining Signet stores.

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