Signet Jewelers Institutes Drastic Measures With Store Closures

It's not every day that a retailer announces that it is going to close a couple of hundred stores, and certainly not a jewelry retailer. But that's what Signet Jewelers reported in its fiscal 2018 year financial report that it is going to do. A wide package of measures is expected to reduce costs by $200 million-$225 million over the next three fiscal years.

To say that it was challenging year is clearly an understatement. Same store sales plunged 5.2% in the fourth quarter, and were down 5.3% in full year fiscal 2018. It expects to close more than 200 stores following an evaluation of its real estate footprint, utilization, and cost structure, aiming to "reposition its portfolio to drive greater store productivity".

"Signet anticipates, pending the outcome of this evaluation, to close more than 200 stores by the end of Fiscal 2019. As approximately three-quarters of stores expected to close are within the same mall as another Signet banner, the company expects approximately 30 percent of revenue from closed stores to transfer to remaining Signet stores," the jeweler said in attempting to sweeten the pill.

Nonetheless, the outlook for its fiscal 2019 year remains tough, with guidance for same store sales down to low-to-mid single digits, with total sales of $5.9 billion -$6.1 billion.

“Fiscal 2018 was a challenging year for Signet," said Signet Jewelers Chief Executive Officer Virginia C. Drosos. "We gained sales momentum in our Zales banner in the fourth quarter as our strategic initiatives began to take hold, but we experienced challenges at our Kay and Jared banners, including execution issues related to the first phase of our credit outsourcing transaction."

Clearly, 2019 is going to be a pivotal year for the retailer as it looks to save costs and leverage its assets. "Today we are announcing a three-year company-wide comprehensive strategy to reinvigorate Signet and transform the company to be a share-gaining, OmniChannel jewelry category leader. Our 'Signet Path to Brilliance' plan will advance our strategic priorities across our Customer First, OmniChannel and Culture of Agility and Efficiency pillars. Plan initiatives build on the strength of the Signet banners and focus on 1) investing in eCommerce and product innovation, 2) enhancing customer value, and 3) increasing cost competitiveness. We will also look to further optimize our real estate portfolio through opportunistic reinvestment in innovative store concepts, relocations to off-mall locations, and strategic store closures. Looking ahead, Fiscal 2019 will be an important transition year as we implement our transformation plan, and we expect to see improved operational and financial performance beginning in Fiscal 2020.”

Members of staff are also going to be feeling the pressure to sell more and be more committed, with the help of a little cash along the way. As Signet commented, it will be "focusing on reigniting employee engagement in our store operations through training and development opportunities. The company will also provide a one-time special cash award to all hourly non-managerial team employees in Fiscal 2019 to enhance employee commitment as we begin our transformation efforts, funded by US tax reform, as well as a three-year transformation incentive program for all employees."

The jeweler also announced the second phase of credit outsourcing in an agreement to sell the remaining, non-prime portion of its accounts receivable for proceeds of $401 million - $435 million to investment funds managed by CarVal Investors with proceeds used to fund share repurchases of approximately $475 million.

If further proof were needed of the way the retail jewelry sector is changing and the drastic steps needed to get in line with those changes, it certainly appears to have been provided by Signet. Tough times demand tough measures, so Signet can at least be congratulated for having the courage to push them through.