Talk to vendors about Signet’s troubles and you hear puzzlement over what has happened to a company traditionally considered a model of button-down professionalism.
“I’ve dealt with Sterling for decades and I’ve never seen it like this,” says one. “When Signet gets sniffles, we get a cold,” another tells me, adding that it now seems like Signet has pneumonia.
While no one foresees financial issues for Signet, many were disturbed by the resignation this week of chief operating officer Bryan Morgan for “violations of company policy unrelated to financial matters.” For one, many saw Morgan, a Harvard MBA with a decade at the company, as a potential future CEO. It’s also the latest in a stream of resignations of high-ranking company officials that have left Signet, long known for its experienced, cohesive upper management, with only two company veterans in its top ranks: chief retail and strategy officer George Murray and CEO Mark Light.
Signet’s latest travails again raise doubts about its 2014 acquisition of Zale Corp. For one, nabbing Zales gave Signet a lot more exposure to the mall sector at a time when consumers are turning away from that channel. The acquisition also added a Canadian division, and Canada has had a bumpy time of it lately as well. Of course, Canada’s problems will eventually reverse themselves; the issues at malls may not. In the latest conference call, Light said that only 6 percent of Signet’s sales are off-mall. Within a few years, he expects that to jump to 50 percent.
For another, acquiring Zale propelled the company into the big leagues (including the S&P 500), making it a far juicier target for short sellers, lawyers, and journalists. As good as Signet management is at selling jewelry—and it is among the best at it in the world—it’s not always easy defending yourself from criticism. Look at how United Airlines initially handled its travails. Signet, too, struck an off–key note in some of its early responses. And its stock has never recovered from the short attacks.
In isolation, Morgan’s resignation is unfortunate but not a big deal. But when added to the credit controversy, the stone-switching allegations, the sexual harassment allegations, and the steep drop in first-quarter sales, it is no wonder the industry is concerned. On the inside, I’ve heard, it’s mostly business as usual. From the outside looking in, it all seems very disconcerting.