Akron, Ohio–Signet Jewelers Inc. said continued issues with its in-store credit processes impacted holiday season sales at Kay and Jared, which dragged down comps for the company as a whole.
In a conference call held Wednesday morning, the retailer reported that same-store sales were down 5 percent year-over-year in the nine-week period ended Dec. 30.
Total sales declined 3 percent to $1.88 billion.
The company’s Sterling division, which includes Kay Jewelers and Jared the Galleria of Jewelry, recorded a 9 percent drop in comps.
While the average transaction value was up 3 percent, the number of transactions dropped 11 percent.
On Wednesday’s call, Signet CEO Gina Drosos said two-thirds of the holidays sales decline is attributable to in-store issues related to the outsourcing of Sterling’s credit program. These issues impacted both bridal and fashion sales at higher price points, where credit is typically used.
In the fall, Signet completed the outsourcing of $1 billion in prime-only credit accounts to Alliance Data System Corp. (ADS), which is now its primary provider of credit funding and servicing for customers of Kay, Jared and the regional brands under the Sterling umbrella. The outsourcing came after analysts questioned the amount of risk Signet was assuming with the credit it was extending and how that was being accounted for on the balance sheet.
Pressed to explain exactly what’s happening at the store level within the credit approval process that’s causing the retailer to lose sales and customers, Chief Financial Officer Michele Santana said it’s not one particular problem but a number of issues, including sales associates having to ask for the same information from customers multiple times, which “throws them off the sales process,” and a “learning curve” for sales associates to understand and explain the payment plans under ADS.
“We significantly underestimated the impact these changes would have on in-store sales,” she said.
Drosos allowed that the time it took to process transactions was longer over the holiday season, which also was an issue.
Both said there has not been a change in the number of customers being approved for credit since the transition to ADS, a question posed by numerous analysts on Wednesday’s call.
The company’s Zale division, meanwhile, turned in a stronger performance.
Same-store sales were up 4 percent, driven by the strength of the Vera Wang Love and Enchanted Disney collections, as well as pieces designed for stacking and layering, yellow gold, and jewelry repairs.
The average transaction value rose 6 percent while the number of transactions was flat.
Drosos called Zale a “good example” of how the changes Signet is making to improve its website, SEO and social media presence are impacting sales without having to account for the problems being caused by the credit transition. (Stores under the Zale umbrella are not having credit transition issues because Alliance Data has been providing credit services to their customers since 2013, prior to its acquisition by Signet.)
E-commerce sales for Signet, including both its Sterling and Zale divisions, rose 48 percent and accounted for 11 percent of total sales, compared with 7 percent last year.
For the fourth quarter and full fiscal year 2018, Signet projects a mid-single-digit decline in comps.
The retailer also said Wednesday that it expects a significant tax benefit in fiscal year 2018 thanks to the lower corporate tax rate brought in with tax reform, though it expects that impact to moderate in future years as the savings from a lower corporate income tax rate will be largely offset by disallowances and limitations in certain tax deductions.