Signet Becomes De Beers Sightholder, Rolls Out Redesigned Kay Stores

Signet Jewelers announced it has officially become a De Beers sightholder and is redesigning its Kay stores with branded boutiques and a more technologically oriented presentation.   

Getting sightholder status “is a very exciting event,” said CEO Mark Light in a conference call following the release of its third-quarter financial results. “We have been working on a De Beers sight for years.… They really understand rough [and] can really cater that box more for our customers.” 

The executives said they didn’t know whether direct access to rough would save it money.

“This really is about securing a consistent source of diamond supply,” said chief financial officer Michele Santana. “That is the primary benefit.” 

For the time being, direct procurement of rough diamonds represents less than 10 percent of its diamond purchases, the company said, but that will increase to around 20 percent long term.

The initiative will never supply “anywhere near the majority of purchases,” Light said. “We need to stay in the polished market.” 

The 3,602-store chain’s desire to become a De Beers sightholder was heavily telegraphed by its purchase of a factory in Botswana in 2013. It has been a client of Rio Tinto Diamonds since 2012.

The company also announced that it is rolling out a new store design for 150 new Kay stores (out of 1,098 total), which features side-by-side selling, branded boutiques, and an “innovative use of technology,” Light said. He added that the company has been testing the new design for two years.

Courtesy Signet Jewelers

The new Kay store design

It is also introducing several new brands, including its Earthly Treasures Smithsonian line for Jared and its Sofia Vergara So Sofia line for its Kay stores.

The news came as the company announced generally positive financial results for the third quarter of fiscal 2015 (ended Nov. 1), with sales increasing 52.7 percent to $1.1. billion (with the addition of the Zale division), and comps jumping 4.2 percent.

However, the company posted a loss of $1.3 million for the quarter, compared to a $33.6 million profit the previous year. The decrease was driven by the Zale division’s net loss of $13.2 million as well as $10.6 million in expenses related to the acquisition. 

Comps at Kay and Jared stores rose an impressive 7.5 and 6.5 percent, respectively. Light singled out the company’s Neil Lane, Leo, Le Vian, and Diamonds in Rhythm brands as exceptionally strong performers. 

Same-store sales at its Zale division fell 0.9 percent, with declines among each of the Zale divisions—including Zale, Gordon’s, and Piercing Pagoda—save a 0.5 percent comp increase for Peoples Jewellers in Canada.

E-commerce sales grew by 96.5 percent to $44.8 million, with the inclusion of the Zale division, and a still-healthy 27.6 percent without.

During the conference call, Light said that the company was still working out how it will handle owning traditional competitors Zales and Kay, and it’s enlisted consulting firm Bain & Co. to study its store brand positioning.

In a test, it’s adding Vera Wang product to some Kay and Jared stores and Neil Lane, Le Vian, and Jane Seymour items to Zales and Peoples stores. It’s too soon to get a reading on how that’s working, Light said.

It also has changed Zales’ advertising and will up its frequency this holiday; has reconfigured the merchandise mix for Zales’ Vera Wang and Unstoppable Love brands; and is retraining Zale employees on its bridal selling practices.

“We were able to make some changes but not loads of changes,” Light said. “We have owned the company for only several months, and a lot of things were in place. We are still confident and feel very good about the changes we will make over the next two and three years.”

Light said there were opportunities to take the Vera Wang brand, which he called one of the top engagement ring brands in America, to the next level, as well as to enhance Zales’ repair and fashion diamond business.

He said to expect more promotions from the Zale division this holiday but not from its Sterling or U.K. divisions. 

The U.K. division, which has saw mixed results in the last few years, also saw a strong 3.7 percent comp gain, its best third-quarter results in seven years.

JCK News Director