Signet Jewelers, which logged sharp declines in first-quarter sales and profits, said it is getting out of the credit card business, starting with the sale of $1 billion in prime account receivables to Alliance Data Systems.
The sale, representing 55 percent of the company’s credit portfolio, is expected to be completed by October and will followed by a complete outsourcing of the business.
Chairman Todd Stitzer said: “By rolling out tailored outsourcing solutions for various tiers of our in-house credit program, we believe we will be able to substantially meet the strategic priorities we initially set for Signet: Eliminating material credit risk from our balance sheet, maintaining net sales and streamlining our business model, while minimizing the potential impact on our operations and creating value for our shareholders.”
Signet is one of the last retailers to still own the backend of its credit business, which can be lucrative in good times but is volatile and can muddle a company’s story to Wall Street.
The company, which operates Kay, Jared and Zales and other chains, plans to use the proceeds to reduce its debt and buy back stock.
The deal should give some cushion to the company, which touts itself as the world’s largest diamond jewelry retailer but struggled in the first quarter. It blamed at least part of its declines on a later Mother’s Day compared with last year.
Profits fell to $70.3 million, or $1.03 a share, from $146.8 million, or $1.87. Sales declined 11.1 percent to $1.4 billion from $1.58 billion. Same-store sales declined 11.5 percent, with a 330 basis point hit related to the later Mother’s Day.
Chief executive officer Mark Light said: “As anticipated, we had a very slow start to the year as continued headwinds in the overall retail environment were exacerbated by a slowdown in jewelry spending and company specific challenges. However, Signet’s first quarter same store-sales improved sequentially, when normalized for Mother’s Day, and we were pleased with the holiday’s results.”
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