Kay Jewelers store

Signet Jewelers has lost some of its luster.

The specialty jewelry retailer — parent to the Kay Jewelers, Zales, Jared, H. Samuel, Ernest Jones, Peoples Jewellers, Piercing Pagoda and jamesallen.com brands — fell short on both top and bottom lines during the most recent quarter, the period when the majority of stores were shut because of the coronavirus, and now has plans to close nearly 400 stores permanently. 

“Throughout the COVID-19 crisis, we have prioritized the health and safety of our team members and customers with every decision we make,” Virginia Drosos, chief executive officer of Signet, said in a statement. “Our excellent team, operating in a culture of agility and efficiency, has been integral in allowing us to rapidly adapt and respond to this environment, building on the first two years of our ‘Path to Brilliance’ strategy and accelerating our transformation into a digital-first, omnichannel retailer. We began our fiscal year with strong Valentine’s Day sales performance, and then quickly pivoted and further adapted our e-commerce operating model to serve customers during stay-at-home restrictions with new technology, virtual consultation and selling solutions. We are gathering valuable insights on customer behaviors and plan to use these learnings to enhance our competitive advantage and emerge stronger from the crisis with optimized virtual and physical footprints to meet our customers where and how they choose to shop. We have moved forward in our digital journey while also making significant progress controlling costs, prioritizing investments to drive sustainable growth, and preserving liquidity.”

For the three-month period ending May 2, revenues fell more than 40 percent to $852 million, down from $1.4 billion the same time last year. Operating losses widened to $291 million, compared with a loss of $2.6 million the same time last year. There was a slight uptick in e-commerce sales during the quarter, 6.7 percent, but not enough to offset losses. 

Like most retailers, Signet was forced to close all stores in North America last March in response to the pandemic. The first batch of stores didn’t begin reopening until May. As of Tuesday, more than 1,100 of the company’s 3,200 stores in North America and the U.K. have reopened, with store sales improving each week. Executives on Tuesday morning’s conference call with analysts say they hope to have about 75 percent of the store fleet open by the end of June.

Even so, the specialty jeweler said at least 150 stores in North America and 80 stores in the U.K. will remain permanently closed, with another 150 stores — possibly more — set to close by the end of the year. Meanwhile, the company continues to negotiate rent payments during the months its stores were closed. 

“Over the last few years, as part of our ‘Path to Brilliance’ strategy, we reduced our store footprint by 13 percent, largely moving out of all D malls and regional banners,” Drosos said on the call. “Now in the current environment, we are accelerating our optimization efforts further reducing our exposure to declining C and B malls. With these closures, [it will] bring the cumulative footprint reduction to more than 20 percent.”

A few bright spots from the quarter included Mother’s Day sales and Jared’s Virtual Wedding program.

Still, Signet ended the quarter with $1.3 billion in debt and $2.4 billion worth of inventory. To help mitigate losses, the company drew down on a $900 million revolving credit facility earlier this year, reduced capital spend and operating expenses, decreased planned inventory receipts, suspended its dividend program and is prioritizing clearances to help manage inventory. 

Shares of Signet Jewelers, which are down more than 26 percent year-over-year, fell more than 15 percent during Tuesday’s trading session. The company is not providing forward-looking guidance.

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