Signet Plugs Into an Outlet

It shouldn’t be a suprise that in these value-conscious times, the outlet sector has been one of the fastest-growing segments of retail. According to the trade publication Value Retail News, overall sales at outlets rose 10 percent in the last year. (How many retail sectors can say that?) Sales per square foot jumped 9 percent. The number of outlet centers has also steadily increased since the recession began, at a time when retail construction has been largely stalled. 

Why is this? Well, outlets promise consumers the brands and fashions they still have the taste for at the value prices they now search out. And given that most believe the consumer hunger for bargains will outlive the recession, it’s not unreasonable to think the outlet sector will keep growing. Jewelers have made up a not-insignificant part of the outlet boom, representing 5 percent of the tenant mix.

Outlets are also the one segment where (until now) Zale has seemingly had a leg up on Signet: Its Zale outlet chain has 139 stores, and represents 10 percent of the company’s profits. Signet, by contrast, has 31 Kay outlets, though it plans to open 10 more by the end of the year. 

But now, Signet is increasing its footprint in the outlet business in a big way by purchasing Ultra Stores—the nation’s largest jewelry outlet chain, as well as one of the largest jewelry chains period. It’s the company’s most significant purchase in years, and further evidence of retail consolidation in the jewelry market. (Signet’s last major purchase was of Marks and Morgan in 2000.)

Ultra has had a troubled history—including two bankruptcies in its 21 years of operation—and its most recent bankruptcy attorney said he doesn’t know if the company would have survived had its Chapter 11 case languished. I hear that Ultra had been for sale for a while, with Duff & Phelps acting as advisor. (The company declined comment.) Signet was an obvious buyer, given all the synergies involved.

Signet has been stingy with details of how this will work—not even indicating whether Ultra will be a separate division. (Will they be branded “Kay” outlets down the road?) Its spokespeople promise more details when the $57 million deal closes, although no timetable has been given for that, either. Signet’s press statement at least seems to indicate that some elements of Ultra will be retained, repeatedly referring to the latter’s “expertise.” We’ll stay tuned…

JCK News Director