Signet Jeweler’s new ‘transformation’ plan includes store closings
Signet Jewelers Ltd., parent of Zales, Kay Jewelers, Jared and other jewelry banners, will undertake a real estate review as part of a new, three-year strategy to revive the company and drive long-term profitability.
The jewelry giant anticipates closing more than 200 stores by the end of fiscal 2019. With three-quarters of the stores expected to close located in the same mall as another Signet banner, the company said it expects approximately 30% of revenue from closed stores to transfer to remaining Signet stores.
Signet intends to reposition its brick-and-mortar portfolio to drive greater store productivity through such efforts as the development and implementation of innovative store concepts to improve the in-store shopping experience and “opportunistic” store relocations.
As part of its three-year “ path to brilliance” plan, Signet is reducing “non-customer” facing costs across its operations, including strategic sourcing, distribution and warehousing, and corporate and support functions, to drive cost savings and operational efficiencies. These include initiatives to reduce costs related to logistics, information technology, third-party contracts and corporate expenses.
Signet’s new plan is expected to deliver net costs savings of $85 million -- $100 million is fiscal 2019, with further incremental cost reductions of $115 million to $125 million by the end of the three-year program.
A portion of the savings from Signets’ anticipated cost efficiencies will be reinvested in growth initiatives including online growth and capabilities, and innovation in product assortment and the store experience.
New initiatives to drive increased digital traffic and improve conversion include using R2Net product image visualization across banners, greater personalization of content and product offering from enhanced behavioral data management. Signet will also expand and enhance its omnichannel “wish list,” bridal configurator, online appointment booking and local store online viewing capabilities.
Signet released the details of its new plan in its quarterly earnings statement. For the fourth quarter, the retailer had a profit of $351.3 million, up from $297.5 million, in the year-ago period. Adjusted earnings per share were $4.28, which topped analysts’ estimate of $4.25.
Signet's total sales inched up 1.0% to $2.3 billion, in the quarter ended February 3. The sales increase was driven by the extra 14th week of sales, worth $84.3 million, as well as the addition of R2Net (acquired in September 2017) which contributed $64.4 million in sales in the quarter.
Same store sales, which excluded the impact of the 14th week from its calculation, fell 5.2%. R2Net sales were up 35.0%, compared to the prior year quarter. Online sales increased across all divisions and accounted for 11.1% of quarterly sales, up from 7.1% of total sales in the year-ago period.
By operating segment:
• Sterling Jewelers' same store sales decreased 8.6%, partially a result of the credit outsourcing transition, most notably in sales of bridal merchandise. While both Kay and Jared experienced issues related to the credit transition, impacts were more pronounced at Kay, where a greater percentage of customers utilize in-store credit for bridal purchases.
• In addition to credit transition issues, Sterling sales were driven by less effective promotional spending and lower. Average transaction value increased 1.7%, and the number of transactions decreased 12.8%.
• Zale Jewelry's same store sales 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. Average transaction value increased 3.8% and the number of transactions increased 1.1%.
• Piercing Pagoda's same store sales increased 4.6% driven by chains and gold jewelry. Average transaction value increased 8.1%, while the number of transactions decreased 2.6%.
• U.K. Jewelry's same store sales decreased 9.2%. Average transaction value increased 6.6% and the number of transactions decreased 15.2%.
“Fiscal 2018 was a challenging year for Signet," said CEO Virginia C. Drosos. "We gained sales momentum in our Zales banner in the fourth quarter as our strategic initiatives began to take hold, but we experienced challenges at our Kay and Jared banners, including execution issues related to the first phase of our credit outsourcing transaction. Looking ahead, fiscal 2019 will be an important transition year as we implement our transformation plan, and we expect to see improved operational and financial performance beginning in Fiscal 2020.”
Signet operates over 3,500 stores primarily under the name brands of Kay Jewelers, Zales, Jared The Galleria Of Jewelry, H.Samuel, Ernest Jones, Peoples, Piercing Pagoda, and JamesAllen.com.