Akron, Ohio–Signet Jewelers Ltd. recorded another quarterly comp decline, this one attributable in part to long wait times for customers applying for credit and, as a result, lost sales.
In the third quarter ended Oct. 28, Signet recorded a 5 percent year-over-year drop in comps. Same-store sales were down across all banners with the exception of Piercing Pagoda, which recorded a 2 percent increase.
Total sales were $1.2 billion, down 2.5 percent (2.8 percent on a constant exchange rate basis) when compared with last year.
Gross margin also dropped to 27.8 percent of sales due in part to the acquisition of R2Net, the parent company of Segoma Imaging Technologies and JamesAllen.com.
Signet completed the acquisition in September.
The retailer has begun integrating the company’s technologies into its websites, including its build-a-ring platform onto Jared the Galleria of Jewelry’s website. And it saw its e-commerce sales for the quarter increase 56 percent in part due to the acquisition, but the addition of an online retailer also was a drag on margins.
On the company’s earnings call Tuesday morning, new CEO Gina Drosos described the company’s third quarter as “challenging,” citing the hurricanes–Signet has a strong footprint in both Texas and Florida–and problems with the company’s credit outsourcing processes as the contributing factors.
Signet completed the previously announced outsourcing of more than 2 million credit accounts to Alliance Data System Corp. during Q3. (The company is still looking for a buyer for the remainder of its portfolio, and Drosos said Tuesday it expects to find one in the first half of next year.)
There were technology as well as process and change issues associated with the transition that resulted in longer-than-usual wait times for customers applying for credit, which frustrated them and, in some cases, resulted in them walking away from the sale. The problems impacted bridal sales specifically, which are higher-ticket sales and, thereby, more often involve customers applying for credit.
“We’re all disappointed that this didn’t go more smoothly,” Drosos said.
Signet expects the problems with the transition of its credit portfolio to continue into the critical fourth quarter, and has downgraded its forecast. It now anticipates a mid-single-digit decline in same-store sales.
The retailer already has begun advertising its key collection for the fourth quarter, “Interwoven,” which is targeted for gifting by younger couples.
Interwoven is comprised of 36 SKUs, most of which will be priced below $1,000.
The collection is part of the retailer’s expanded range of $200 to $700 fashion jewelry introduced this year, joining the Disney Enchanted collection it has expanded to all Zales and Peoples stores, as well as Emmy London, a line of fashion jewelry by British shoe designer Emmy Scarterfield sold at Kay Jewelers.
While there are TV ads for Interwoven, Signet said overall it has cut the number TV commercials it’s running in Q4 nearly in half as it shifts to more digital advertising.
Drosos said that digital will make up about 30 percent of Signet’s overall marketing spend in Q4, nearly double the 19 percent from last year.
Some of that money is being allocated to social media.
Signet launched its first social media influencer campaign in the third quarter, Drosos said, and will be extending it to 100 influencers in the fourth quarter. She said they expect them to generate 100 million impressions on social media.