Transformation costs compound effect of slipping sales at Signet Jewelers
Signet Jewelers Limited announced a net loss of $36.1 million, or $0.86 per diluted share, for the second quarter ended August 3, 2019 on Thursday, compared to a loss of $23.0 million, or $0.56 per diluted share, in the prior-year period. The widened loss at the global jewelry retailer reflected the effects of falling sales in its international segment, which were exacerbated by charges related to the company’s ongoing transformation plan.
Signet's total quarterly sales were $1.36 billion, a decrease of 3.9% (or 3.4% in constant currencies) when compared to the $1.42 billion reported by the company in the same period in the previous year. Same store sales declined 1.5% year over year.
The retailer did see progress in its e-commerce channel, where revenue increased 4.4% to $156.9 million, accounting for 11.5% of the company’s total sales. The brick-and-mortar channel, on the other hand, posted a same store sales decline of 2.3%.
By region, it was Signet’s international segment, which includes the London-based H. Samuel and Ernest Jones banners, that struggled the most in Q2, with same store sales dropping 7.0%, reflecting cross-category declines impacted by a difficult operating environment in the UK.
In North America, where the company operates Kay, Zales and Piercing Pagoda, among other retail banners, total same store sales decreased 1.0%, with a rise of 5.3% in e-commerce being offset by a 1.8% drop in the brick-and-mortar channel.
The retailer’s fashion category did well in the region, led by the popularity of gold fashion jewelry, Disney-branded pieces and the Love+Be Loved collection, but the bridal, watches and other categories all posted disappointing sales results.
The company’s Path to Brilliance transformation plan, which is expected to deliver $200 million to $225 million of net cost savings in the period 2019-2021, resulted in charges of $27.8 million in the second quarter, with the retailer’s bottom line also suffering from goodwill impairment amounting to $47.7 million.
As part of its restructuring efforts, Signet closed 66 stores and opened 16 over the course of the second quarter, ending the period with a total of 3,284 retail locations worldwide.
Looking at the first six months of the year, the positive effects of the company’s transformation plan are more easily recognized. Although total sales decreased from $2.90 billion to $2.80 billion, Signet managed to cut its net loss to $46.1 million, or $1.21 per diluted share, a significant improvement when compared to the net loss of $536.0 million, or $9.27 per diluted share, reported in the same period in the previous year.
“We continue to gain traction on our transformation initiatives and delivered second quarter results that exceeded our same store sales […] expectations,” explained Signet CEO Virginia C. Drosos in a release. “As we enter the competitive holiday season, we believe we are positioned to execute our product strategy by launching additional flagship brands, delivering relevant on-trend new merchandise and offering a highly competitive assortment for value-oriented shoppers.”
In the third quarter, Signet expects to see total sales of between $1.14 billion and $1.16 billion, with same store sales falling between 2.0% and 1.0%. Diluted loss per share is predicted to be in the range of $1.48 to $1.21.
In a separate press release issued on Thursday, Signet also revealed that it is currently planning to enter into new five-year $1.6 billion senior asset-based credit facilities. Among other projects, the new credit facilities will be used to finance a tender offer for the company’s outstanding senior notes due in 2024 and to refinance its existing credit facilities.
Copyright © 2022 FashionNetwork.com All rights reserved.