Signet Sees Comps Drop, Begins Outsourcing of Credit

Signet Sees Comps Drop, Begins Outsourcing of Credit

Akron, Ohio–Same-store sales sank nearly 12 percent in the first quarter for Signet Jewelers Ltd. due to a slowdown in jewelry spending in an already challenging retail environment.

Total sales for Signet in the first quarter ended April 29 were $1.40 billion, down 11 percent year-over-year.

At Kay Jewelers, Jared the Galleria of Jewelry and the regional stores under the Sterling Jewelers umbrella, same-store sales declined 13 percent, and they dropped the same amount at the stores under the Zale Jewelry umbrella, which includes Zales Jewelers, Gordon’s, Peoples and Mappins.

Piercing Pagoda posted the best performance, with same-store sales there declining only 1 percent on the back of strong sales of 14-karat gold chains, children’s jewelry and religious jewelry.

Same-store sales were down about 4 percent in the stores that Signet operates in the United Kingdom.

“As anticipated, we had a very slow start to the year,” Signet CEO Mark Light said on the company’s earnings call Thursday morning.

He attributed some of the drop in sales to Mother’s Day being later this year, which pushed all those dollars into the second quarter.

Light mentioned several times during the call the investments the company is making in digital marketing and improving the online experience for its customers–faster page downloads on its website, better SEO, online appointment booking, local store inventory search–and said they are starting to see these improvements “take hold.”

E-commerce was the only area in which Signet recorded positive first quarter results, with sales rising 1 percent from $80.1 million to $81 million.

Signet also has adopted a new clienteling system at its stores that, Light said, will better enable salespeople to optimize their interactions with customers before, during and after they visit stores.

“It’s all about making sure that we give our customers the superior, customer-first omnichannel experience.”

Signet plans to close 165 to 170 stores in fiscal 2018 and open about 90 to 115; its net selling square footage will remain flat or decline 1 percent. The stores the retailer is closing primarily will be in malls, where foot traffic has declined sharply in recent years, while the openings will mainly be Kay off-mall locations.

Also on Thursday morning, Signet announced that it has begun the outsourcing of its in-house credit program.

Expected to be fully implemented by October, the first phase of the outsourcing involves Signet selling $1.0 billion of its prime-only credit quality accounts receivable to Alliance Data System Corp. at par value.

Signet also inked a seven-year agreement with Alliance Data to become its primary provider of credit funding, servicing and associated program functions to customers of Kay Jewelers, Jared the Galleria of Jewelry and its regional brands. (Alliance Data has been providing credit services to customers who shop at the stores under the Zale umbrella since 2013.)

For now, Signet will keep the non-prime accounts on its balance sheet and continue to open new accounts, but will outsource the credit servicing functions to Genesis Financial Solutions for an initial term of five years.

In addition, Signet has signed a seven-year deal with Progressive Leasing–a subsidiary of lease-to-own retailer Aaron’s Inc.–that will allow customers who don’t quality for any sort of credit to do a lease-purchase on their jewelry. The leasing program is expected to be available in Signet’s U.S. stores by July.

Signet executives said during Thursday morning’s earnings call that under the terms of its deal with Progressive, the latter will buy the jewelry from Signet and then enter into the lease contract with the customer.

By the end of the first phase of outsourcing, Signet will have sold more than half (55 percent) of its credit portfolio to Alliance Data.

About 250 employees who worked on in-house credit for Signet will become employees of Alliance Data and about 650 employees will go to Genesis Financial Solutions, with the remaining employees being retained by Signet for customer care operations.

Signet started taking a hard look its in-house credit program in 2016 after analysts began questioning the amount of risk the retailer was assuming.

Signet plans to eventually outsource its entire credit program, but company executives said on Thursday’s call they don’t have a timeline for that yet.

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