By Michelle Graff
Kay Jewelers returned to growth in the third quarter with comps inching up 0.7 percent. CEO Gina Drosos attributed the increase to consumers being receptive to the chain’s new advertising campaign and product, and improvements in the credit application process.
Akron, Ohio—Signet Jewelers Ltd. had a stable but not outstanding third quarter and said it is going to have to discount more heavily to compete with department stores in the fourth quarter.

The jewelry retailer’s same-store sales grew 2 percent year-over-year in the period ended Nov. 3.

Total sales inched up 3 percent at both actual and constant exchange rates to $1.19 billion, and the company raised its full-year same-store sales outlook to $6.26 to $6.31 billion, with comps flat or increasing 1 percent.

Signet recorded an operating loss of $48.8 million, or 4 percent of sales, in the quarter compared to operating income of $5.5 million, or 0.5 percent of sales, in the prior-year third quarter.

It said the decline was driven by a $46 million impact related to the outsourcing of its credit program, higher advertising costs, higher incentive compensation expenses and $9.5 million in charges tied to store closing costs, among other factors.

In North America, same-store sales were up 2 percent.

Piercing Pagoda continues to be the retailer’s top performer, with comps for the ear piercing chain climbing 16 percent.

Sales on were up 13 percent in the quarter, and Signet is preparing to open its first James Allen store, which is located in Washington, D.C., on Friday.

Though the site’s sales continue to grow, executives acknowledged that having to collect sales tax in more states in the wake of the U.S. Supreme Court’s decision to overturn Quill earlier this year had a negative impact during the quarter.

Zales’ comps increased 3 percent and Kay returned to growth with a 1 percent same-store sales increase. Sales at Jared were flat.

E-commerce sales, including, rose 55 percent to $125 million and now account for 11 percent of Signet’s total sales, up from 7 percent in the same period last year.

In bridal, solitaires, the Enchanted Disney Fine Jewelry collection and Love’s Destiny were the top sellers, while sales of the Ever Us collection and Tolkowsky declined.

In fashion jewelry, gold chains and bracelets, as well as diamond earrings and pendants, were the top sellers.

Signet’s average transaction value in North America rose 5 percent in the quarter while the number of transactions slipped 1 percent. The company attributed this to increased bridal and gold sales and the phasing out of its own bead brands, a low-priced item that drags down ATV.

On Thursday morning’s earnings call, CEO Gina Drosos discussed the retailer’s efforts to give each of its chains a unique identity through fresh product and marketing, and to celebrate “all kinds of love.”

WATCH: Jared’s “Dare to Be Devoted” Holiday Commercial

Ninety percent of Signet’s fourth quarter advertising is new this year, and it encompasses a broader spectrum of relationships, including the company’s first commercial featuring a same-sex couple. In addition, Kay has a new tagline, “Long Live Love,” as does Jared with “Dare to Be Devoted.”

Drosos said on Thursday’s call that the company is “highly focused” on delivering results in Q4 but noted that it faces “promotional environment headwinds” and will be forced to ramp up its own promotions to compete.

“The fourth quarter is always a competitive quarter, and we are seeing our competition, especially department stores, increase discounting,” she said.

Signet had 3,478 stores as of Nov. 3, including 2,984 in North America. That is down from 3,556 stores as of Feb. 3, including 3,052 in North America.

As previously announced, the retailer will close more than 200 stores this fiscal year (FY 2019) after shuttering about the same amount last year.

When asked by an analyst about plans for store closures in FY 2020, Drosos did not provide a specific number but indicated more closures could come.

She said as part of the retailer’s three-year turnaround plan, it remains “very agile” and will continue to scrutinize its real estate portfolio to ensure it has the right stores in the right places while also testing new store concepts.

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