Signet’s Broken Stride

Why has the king of the jewelry hill hit a rough patch?

The most surprising part of Signet’s second-quarter results wasn’t just that it reported negative comps for the first time in six years, even after it boosted promotions. During its earnings call, chief financial officer Michele Santana implied that comps in upcoming quarters will likely fall as well. For a company that’s become the unquestioned king of the jewelry hill, Signet has hit an atypical rough patch. 

CEO Mark Light had a few explanations for the slipping sales, including problems in oil-dependent regions, Brexit, and the “unusual” U.S. presidential campaign. But Brexit wasn’t really an American issue, and the election has been a debacle for almost a year. Just last quarter, Light was calling the bridal jewelry consumer “robust.”

Since then, though, Signet weathered a furious burst of negative publicity, centered on allegations of gem swapping at flagship brand Kay. Light said he didn’t know whether the bad press hurt sales, noting that Kay’s results slid less (0.5 percent) than its other brands. Still, in the prior quarter, Kay’s comps were up 4.7 percent; the quarter before that, they jumped 7.4 percent.

More likely: The PR problem took everyone’s eyes off the ball, depressing results across the board. When company executives must devote their days to defending the company on CNBC or reviewing take-in procedures, that’s less time spent driving the business forward. Maybe that’s why the company’s best-performing division last quarter—actually, the only U.S. division that performed well—was Piercing Pagoda, the least affected by the allegations.

During the earnings call, executives offered a striking number of sops to the financial community and company critics. It bought back an “unprecedented” amount of stock. It will do something different with its credit portfolio. It touted Leonard Green’s $625 million investment as a “vote of confidence.” And it’s installing a new system to map stones.  

All of which makes sense. Executives have responded forcefully and intelligently to these issues, even though these results have snuffed out any hope for an immediate recovery for the company’s stock. At times, though, the company’s response seems a little muddled. On the earnings call, Santana referred to “unsubstantiated claims against Signet’s business integrity.” Clearly, it’s ridiculous to suggest that Signet has systemically engaged in or condoned gem swapping. Yet, some of the individual instances of stone switching likely did occur. A group of damage-control experts speaking to The Wall Street Journal argue that, to truly win back consumer trust, Signet needs to be far more open about the instances in question.

Still, its size may always leave it vulnerable to these charges. A company statement noted that it “manages 4 million service and repair transactions each year, and 99 percent are completed without negative feedback.” That’s impressive. But if we assume that customers have issues with only 0.5 percent of those transactions, that’s still about 20,000 problematic repairs a year. And with jewelry work, there isn’t much room for error. If an Amazon order gets screwed up, a consumer might get peeved, but not as mad as they’d become over the botched resizing of a $3,000 ring. Which may be why the bad publicity nudged so many negative experiences out of the woodwork.

The last few months have undoubtedly been humbling for Signet, but sometimes it’s good to be humbled. Last September, execs hinted at more acquisitions. Yet it is still in the process of integrating an 1,100-store chain. Hopefully, these travails will send a clear message: Even a great retailer—and I would put Signet in that category—can stumble when there is too much on its plate.  

JCK News Director


  • etienne@etienneperret.com

    When Tiffany is down 8% for same store sales being down only 3% at Signet seems pretty good to me, especially with all the bad PR that Jared has had.

    • Rob_Bates

      And yet the markets responded more favorably to Tiffany’s results, because of different expectations …

  • benjanow

    No, very doubtful that service or stone-switching problem is the cause of the decline. The public can be counted on to ignore such events, even with mall competitors of Signet making a point of it. Far more likely is the other aspect referred to by the spokesman, the “odd” election year. It’s not the election itself, but rather the dramatic display of economic stress expressed by both Trump’s and Sanders’ followers. The gap between the 10% and everyone else has become huge, and is now out in the open. Signet sits right in the mid-market, and is now confronting a public that has pulled back on discretionary spending, a condition that may not turn around soon, but may in fact get worse.
    Tiffany is also confronting a changing market, but at a different level. The big contributors to its sales – China, Russia, Brazil, Near East – have all seen strong downturns, each with its own reason, and that situation will also probably take a long time to reverse. But Tiffany is making business decisions that essentially are adaptations to the changes in the luxury market (as are many other luxury brands in the fashion field). The stock market likes that. The stock market renders a different verdict on Signet. The telling point is a big investment going to buy back stock rather than develop business, a sure sign that management knows it faces a potentially shrinking target market.
    It’s hard to see miraculous changes in the near future.

    • Randy

      Yes people are afraid..their discretionary income is shrinking..even Macys is cutting 100 of its profit generating stores..not a good sign for brick and mortar stores

  • I’m with Ben and Etienne, there are also other factors at play as well.

    Signet’s poor performance isn’t just about Signet. If we look at their decline, Tiffany’s decline, the closing of 350 independent stores last quarter, the upcoming closing of 100 Macy’s stores, the re-purposing of jewelry districts around the country, and other news it’s clear that bad publicity can only explain a piece of the Signet puzzle.

    The recent(ish) changes in consumer buying behavior are unprecedented…and it’s only just begun in jewelry. Some stores will lose and will lose big. Some will win and will win big. And, if history in other markets is any sort of predictor in this market, new entrants into the space will enjoy significant profits as they disrupt the entire industry.

    • Rob_Bates

      Hey all. I don’t disagree there are other factors at play; many retailers are hurting. But until recently — until, in fact, yesterday — it appeared that Signet had largely bucked those trends.

      • Good point. In fact, as I review your article that IS the point of your article. It really IS significant that so many, including these guys are struggling.

        It’s fun to talk with those that are winning to hear how and why.

  • Guillaume Coziol-Lespérance

    It smells like a recession is coming…

  • Shiv C

    “CEO Mark Light had a few explanations for the slipping sales, including problems in oil-dependent regions, Brexit, and the “unusual” U.S. presidential campaign. But Brexit wasn’t really an American issue, and the election has been a debacle for almost a year. Just last quarter, Light was calling the bridal jewelry consumer “robust.”

    I am not sure the explanation (excuses) made by CEO Mark above such as ” problems in oil-dependent regions, Brexit, and the “unusual” U.S. presidential campaign ” had much to do with USA stores sales declines. It sounds like another CEO that has lost touch with the consumer market and blaming irrelevant things for the decline. If they do not know what the real problem is how can they fix it.

    I personally believe when a company chooses to completely ignore problem such as stone switching and think it will go away. I doubt it goes away but it actually lingers for a long time with the public. It should be not a big reason for huge decline in sales for a giant like signet.

  • Mike Lepper

    Having worked at Kay Jewelers as a Salesman, MIW, Store Manager, and District Manager for some ten years and knowing Mark Light, the C.E.O. on a first name basis, I am confident that any stone switching that may have taken place is a rare thing indeed, almost never! Sometimes an individual employee may make a poor choice and do something that is wrong, but that is not the position of the company, nor it’s leadership. Sterling, Inc. maintains a very good Loss Prevention, Training, and Human Resources Department and takes every step to insure honesty and good business practices. I’ve been associated with the Jewelry Industry since age ten an worked with Kay Jewelers (Sterling/Signet) for over ten years and never had any issues with stone switching. Mike Lepper…

    • Rob_Bates

      Hi, Mike. I agree with everything you said here, and if there were incidents, they were few and far between.

      • Mike Lepper

        All people and companies have good and not so good times financially. Too many have taken “the market” to a greater level than Customer Service, Quality Products, Employee Satisfaction, Customer Service Happiness, etc…..So many current era C.E.O.’s are all about shareholder return and often forget the original ingredients that created the great success of the past. Mark Light is a good man, I like him a good bit. Thanks for commenting on my posting regarding this bad PR about stone switching, it’s so very rare and uncommon and has happened but remains primarily a ‘consumer legend” as in “my Grandmother took her watch to a jeweler for repair and hole took the jewels out” “You are not going to steal my jewels out of my watch are you?”…….LOL…..EVERYTHING IS GOING TO BE ALRIGHT!