Retail

Signet shares plunge 27 percent after the jewelry retailer slashes its forecast

Key Points
  • Shares of Signet plunged 27 percent Tuesday.
  • Signet lost 20 cents per share in the third quarter.
  • Same-store sales, a key metric for retailers, fell 5 percent, compared with an expected drop of 3.3 percent.
  • The jewelry retailer cut its full-year earnings and same-store sales forecasts.
Paul Sakuma | AP

He didn't go to Jared.

Parent company Signet's shares plunged 27 percent Tuesday after the jewelry retailer swung to a loss in the fiscal third quarter and cut its full-year forecast.

Signet now expects to earn between $6.10 and $6.50 per share, down from a prior forecast of $7.16 to $7.56 per share. It anticipates a same-store sales decrease of a mid-single-digit percentage, the low end of a previously estimated decline in the low- to-mid-single-digit percent range.

In the third quarter, Signet posted a loss of $3.9 million, or 20 cents per share, compared with earnings of $17 million, or 20 cents a share.

The retailer, whose other stores include Zales and Kay, said weather-related incidents shaved 10 cents a share off its earnings. It also was hit by costs of 14 cents a share associated with outsourcing its credit portfolio and 11 cents a share from the acquisition of R2Net.

Sales fell to $1.16 billion from $1.19 billion a year ago, and were shy of analysts' estimates of $1.17 billion.

Same-store sales, a key metric for retailers, fell 5 percent, compared with an expected drop of 3.3 percent.

"I and Signet's leadership team are committed to drive all changes necessary, strategic, cultural, and executional to deliver stronger and more reliable results going forward," Signet CEO Virginia Drosos said Tuesday on a call with investors. "This will take time, and we have more work to do. However, we believe we are on the right track to create a more competitive Signet that is positioned for sustainable, profitable growth."

With millennials marrying later or not at all, Signet's Jared, Kay and Zales stores released a line called Interwoven this month. The goal is to snag shoppers who might be in a committed relationship but might not be buying an engagement ring.

"Often they're weaving their lives together in different ways long before marriage," Drosos said. "So they might move in together, even have kids together before they're buying an engagement ring. So for the first time, what interwoven offers them is a journey to celebrate together with a new item that represents how their lives have come together."

Signet will tap social media influencers for the first time to promote the Interwoven brand. The practice of advertising through bloggers and Instagram personalities has become widely used in the consumer goods industry.

Signet overall is shifting more of its marketing spending to digital. Television viewers will see fewer commercials with memorable taglines like "Every kiss begins with Kay" and "He went to Jared" this holiday season. Signet is nearly halving its commercials this year, Drosos said. Meanwhile, digital marketing dollars will increase.

E-commerce sales grew 56 percent in the third quarter. The results were boosted by the acquisition of R2Net. Signet acquired the tech company in the hope of improving its ability to sell jewelry online through R2Net's various tools.