Signet Jewelers cuts losses down to size in Q1

By

Robin Driver

Published
Jun 6, 2019

Global jewelry retail group Signet Jewelers Limited – owner of the Kay Jewelers, Zales, H. Samuel and Piercing Pagoda brands, among others – announced a significant reduction in its net losses for the first quarter of 2020 on Thursday, despite declining sales, as it continues to implement its transformation plan.
 

The company’s total sales for the quarter ended May 4, 2019 were $1.43 billion, down 3.3% (2.6% in constant currencies) from $1.48 billion in Q1 2019. Same-store sales fell 1.3% in the period.
 
The retailer’s e-commerce sales totaled $154.3 million, increasing 5.3% year over year and accounting for 10.8% of sales, up from 9.9% in the same period in the previous year. Brick-and-mortar same-store sales declined 2.0%.

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By region, Signet’s North American same-store sales decreased 0.9%, as a 6.6% rise in e-commerce sales was offset by a 1.8% decline in brick-and-mortar same-store sales. International same-store sales decreased 5.2%.
 
All of the company’s retail banners saw same-store sales fall, except Piercing Pagoda, which posted a 13.5% increase.
 
Despite these setbacks, Signet’s quarterly net loss was $10.0 million (a loss of $0.35 per diluted share), a significant improvement when compared to the loss of $496.6 million ($8.48 per diluted share) reported in the prior-year period.
 
“We delivered operating profit above our guidance range and strong free cash flow in the first quarter, with same store sales at the low end of our guidance,” said Signet CEO Virginia C. Drosos in a release. “Given the sales trends we experienced year to date and softening retail traffic, we are narrowing our Fiscal 2020 guidance while continuing to expect strong progress on cost savings across our business. We remain focused on executing our Path to Brilliance transformation initiatives to improve the trajectory of our same store sales and drive higher profitability over the long-term.”
 
In fiscal 2020, Signet expects same-store sales to decrease between 2.5% and 1.5%, while total sales are predicted to be in the range of $6.0 billion to $6.06 billion. Diluted EPS is expected to be between $1.88 and $2.38.
 
Through its Path to Brilliance transformation plan, the company expects to make savings of between $70 million and $80 million over the course of the year. The retailer also intends to shutter a total of 150 stores in 2020, having already carried out 44 closures in Q1.
 
For the second quarter, Signet has forecast a decline of 3.5% to 2.5% in same-store sales, with total quarterly sales predicted to be between $1.35 billion and $1.37 billion.