Financials

Signet’s Q1 Sales Dip, Retailer Lowers Guidance for the Year

FinancialsJun 06, 2019

Signet’s Q1 Sales Dip, Retailer Lowers Guidance for the Year

The company narrowed its full-year guidance, as it expects same-store sales to continue declining.

A pear-shaped Swiss blue topaz and diamond necklace in 10-karat gold ($599) from Zales’ “Enchanted Disney” Aladdin Collection. Enchanted Disney was among the lines that performed well in Signet Jewelers’ first quarter.

Akron, Ohio—Signet Jewelers’ fiscal year got off to a lackluster start as a decline in foot traffic weighed on revenue and the retailer narrowed guidance for the year ahead.

First quarter revenue for all Signet stores, both in North America and the United Kingdom, totaled $1.43 billion, dipping 3 percent year-over-year from $1.48 billion.

Same-store sales, which include both online and in-store sales, fell 1 percent.

Quarterly e-commerce sales were up 5 percent to $154.3 million, accounting for nearly 11 percent of overall sales compared with 10 percent last year.

“We continue to expect growth in our overall e-commerce business for the year,” new Chief Financial Officer Joan Hilson said Thursday morning on her first earnings call with the company.

Also on the call, CEO Gina Drosos detailed the retailer’s plans to invest in its mobile experience and build out its customization capabilities. She noted that the number of orders placed using the company’s “design-your-own tools” nearly doubled in the quarter.

Brick-and-mortar same-store sales, meanwhile, were down 2 percent.

In North America, which constitutes the bulk of Signet’s business and includes Kay, Zales and Jared stores, sales totaled $1.3 billion, with same-store sales essentially flat.

While the average transaction value increased more than 1 percent, the number of transactions fell more than 2 percent.

Piercing Pagoda shined brightest, with same-store sales for the chain of ear-piercing kiosks climbing nearly 14 percent.

Kay Jewelers and Zales both saw same-store sales dip 1 percent while comps at Jared the Galleria of Jewelry and James Allen both fell around 2 percent.

Same-store sales at Canadian chain Peoples Jewellers fell nearly 5 percent while regional banners performed the worst, with comps falling 11 percent.

Category-wise, Signet said sales of new merchandise increased while “legacy” collections continued to struggle.

Flagship brands, such as the “Enchanted Disney” and “Vera Wang Love” collections, performed well.

Bridal sales were down slightly on a same-store sales basis with non-branded bridal especially underperforming.

Gold jewelry was a top seller in the fashion category alongside Disney jewelry and the “Love + Be Loved” collection, while legacy fashion collections like Le Vian fell out of favor, the company said.

The Love + Be Loved collection was launched in the fourth quarter of the previous fiscal year and expanded in this year’s first quarter. The retailer ran an ad campaign for Mother’s Day and said a few styles sold out.

Sales in the “others” category, which includes company-owned bead brands and Pandora, were down.

Looking

to the second quarter, Signet expects total sales to be in the range of $1.35-$1.37 billion with same-store sales dipping between 2.5-3.5 percent.

The retailer lowered its outlook for the year ahead, expecting sales of $6-$6.06 billion with same-store sales falling more than 1 percent.

The trade tensions between the United States and China have had “no meaningful impact on our business,” Drosos said on the call.

The tariffs have been introduced in phases, she said, and while the first three have not impacted business, the fourth phase, introduced in May, which raised the tariff rate to 25 percent, might.

About 30 percent of the company’s merchandise spend involves exposure to Chinese goods, she said. The company has begun looking for opportunities to work with vendors to reduce the impact on pricing.

Signet reaffirmed its commitment to its Path To Brilliance turnaround plan and expects to see between $200 million and $225 million of net cost savings in fiscal years 2019 to 2021.

Its cost-cutting plan for the fiscal year includes closing 150 stores, including 44 closures in the first quarter, but opening 20 to 25 stores.
Lenore Fedowis the associate editor, news at National Jeweler, covering the retail beat and the business side of jewelry.

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