The two suits say management should have told investors about stone-switching allegations
Signet Jewelers is now the target of two shareholder lawsuits, charging the company misled investors about a variety of factors that caused its stock to drop.
The twin suits, which seek class-action status, were filed last week by two different law firms on behalf of plaintiffs Lyubomir Spasov and Susan Dube in the Southern District of New York federal court. Using substantially similar language, they charge that Signet, as well as CEO Mark Light and chief financial officer Michele Santana, made “false and/or misleading statements and/or failed to disclose” material information.
The suits complain that, in its May 26 release announcing its first-quarter financial results, the company failed to disclose it “was experiencing difficulty ensuring the safety of customers’ jewelry while in the custody of Signet’s brands,” “employees at stores under at least one of Signet’s brands (Kay) were swapping customers’ stones for less valuable stones,” “[it] was experiencing a drop-off in customer confidence,” and “[it] was facing increasing competitive pressures.”
A May 25 BuzzFeed article detailed purported instances of stone switching involving customer repairs. That article, as well as questions about the company’s credit, caused its stock to drop 10.5 percent on May 26. The suits do not mention the credit issues, even though analysts say that also spurred the drop in its share price.
Signet has denied that stone switching is “systematic” at the company, and in a statement, said that “incidents of misconduct, which are exceedingly rare, are dealt with swiftly and appropriately.
“We manage more than 4,000,000 service and repair transactions each year, and over 99 percent are completed without negative customer feedback,” it added. “Of those generating negative customer feedback, many are related to either repairs taking longer than expected due to our high standards or shipping delays, which we work diligently to address in cooperation with our shipping partners.”
Signet declined comment on the suits, which seek unspecified damages. At press time it appears that only two suits have been filed, but other law firms that specialize in shareholder class actions have announced their intention to file suits.