Signet, which runs some 3,300 stores under various jewelry banners including Kay Jewelers, Zales, Jared, The Galleria Of Jewelry, H.Samuel and Piercing Pagoda, on Wednesday said it will shutter 150 underperforming stores during its current fiscal year — and that by fiscal year's end "it will have reduced its store base by 13% over a three-year period." The company closed down 262 during its just-completed full year, according to a company press release.
The news came as the company also reported that fourth quarter revenue fell to $2.15 billion from $2.3 billion in the year-ago quarter, as operating income swung to a loss of $83.5 million from profit of $323.5 million a year ago, the company said.
Same-store sales in the quarter fell 2% after a 5.2% decline the year before. By that measure, Piercing Pagoda is the company's standout: store comps in the quarter soared 17% there, while they dropped 1.6% at Kay and 8.4% at Jared and rose 2% at Zales.
Signet is reporting one of the worst holiday quarters out there, but Wall Street sent shares up a bit because things aren't as bad as investors thought.
That might continue to happen as the company trims its costs and unloads its worst stores. "I think from a real estate footprint standpoint, we have been aggressive in optimizing our real estate portfolio," CEO Gina Drosos told analysts, according to a Seeking Alpha transcript. "[I]t's really [great] to meet customers where they are and create that ideal omnichannel experience for them, but as we rationalize that store footprint, we are better able to target investments in creating a more digitally-enabled and more curated store experience."
The company may be especially aggressive in attacking its Jared's footprint. "For what it’s worth, we highlight that during the quarter, Jared ended the quarter with 270 locations, a net decline of 14; meaningfully higher than the usual cadence of one or two net opens/closures," Instinet analysts led by Simeon Siegel said in comments emailed to Retail Dive. "[T]his will be a dynamic worth monitoring going forward."
Some of the 150 will be "replaced by great off-mall locations that we have identified based on our trade market data analytics," Drosos also said, having noted earlier, "We have seen better performance from our off-mall locations. And so we have been moving systematically out of lower performing malls and simplifying by moving out of regional banners. So I am feeling very good about the work that we have done moving out of over 260 stores in fiscal 2019."
And inventory remains "inflated" even after "three quarters of incremental clearance," Instinet also warned. "[Signet] introduced guidance that depends on varying degrees of improvement over the year, but gave little quarterly color," Instinet also said. "And with 4Q EPS representing greater than 100% of FY EPS, the onus will be on [management] to execute and navigate the challenging environment."