Signet Jewelers fell hard on Wednesday as shares plunged 20%, after reporting a weak fourth quarter and a restructuring plan to stop the bleeding. Q4 total sales rose 1% or $23.2 million to $2.3 billion, with the extra 14th week contributing $84.3 million, according to a company press release.
But same-store sales not including the impact of the extra week, fell 5.2% in the quarter. Sales at the newly acquired R2Net were up 35% year over year and contributed 90 basis points positive to total same-store sales in the period. Overall e-commerce sales in the quarter, at all banner websites and R2Net, rose 52.8% to $253.8 million on a 14-week basis, or $247.2 million on a 13 week basis, accounting for 11.1% of quarterly sales, up from 7.1% in the prior year quarter, the company said.
Declaring its current fiscal year one of transition, the company announced a three-year transformation plan that includes cost efficiencies, growth initiatives fostering e-commerce growth and ominchannel capabilities, and innovation in product assortment and store experience. As part of the cost-cutting, the company anticipates closing more than 200 stores by the end of this fiscal year.
Although jewelry is a staple holiday category, Signet didn't enjoy the fourth quarter lift experienced by several other retailers. Some problems are of its own making, including a transfer out of its credit program. Speaking to analysts on Wednesday, CEO Gina Drosos kept to the sunny side when she launched her remarks, saying it’s "clear that Signet is working from a strong foundation."
"The company continues to be the market share leader in North America in a large growing and highly fragmented category, with the opportunity for additional share gains as we leverage our scale in innovation, marketing and procurement," she said, according to a transcript from Seeking Alpha. "We have a good balance between a steady bridal business, a fashion-gifting and self-purchasing business and a design, repair and maintenance business which continues to drive traffic to our stores after a purchase has been made."
But she acknowledged several missteps, including operational issues, a failure to develop e-commerce and omnichannel operations, weak product innovation and differentiation, over-reliance on discounts to drive sales and a slow response to declining mall traffic. In an uncharacteristic flip of the usual dynamic in retail these days, the company tends to lose market share to department stores, so its fashion partnerships with brands like Vera Wang and Disney are especially important, she noted.
The company has many banners, including Kay, Jared, Signet, Zale, Sterling Jewelers and several regional brands. This will help blunt the impact of the massive store closure plan, as about three-quarters of the stores expected to close are within the same mall as another Signet banner. As a result, the company expects approximately 30% of revenue from shuttered stores to transfer to sibling Signet stores.
Signet is especially focused on reaching younger shoppers, who have entered prime wedding years, Drosos said. That entails new marketing tests, including showing jewelry on models, (which has delivered double-digit conversion increases compared to previous approaches), allowing customers to check inventory online and better service in stores, including adding appointment booking to its websites.