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Shopping mall jewelry giant planning to weed out hundreds of stores

March 14, 2018

Signet Jewelers Ltd., which operates thousands of jewelry stores in shopping malls throughout the United States, is betting that a shift online can help pull the company out of a sales slump.

The company—which owns Kay Jewelers, Zales, Jared, Osterman and Piercing Pagoda, among other store brands—plans to close more than 200 stores over the next year, the company said Wednesday, with three-quarters of the closings coming in malls that have multiple Signet properties.

In the Indianapolis area, Signet operates at least 18 stores—nine Kay stores, three Zales stores, two Jared locations, three Piercing Pagodas and one Osterman Jewelers.

The store directories at Greenwood Park Mall and Castleton Square both feature four Signet properties. Greenwood Park has a Kay Jewelers, Zales, Jared and Piercing Pagoda. Castleton Square has a Kay Jewelers, Zales, Osterman and Piercing Pagoda.

Circle Centre mall is home to a Kay Jewelers and a Piercing Pagoda.

Signet has not yet released a list of stores that will be closed.

After posting another quarter of disappointing results—which sent the shares down as much as 11 percent on Wednesday—Signet CEO Gina Drosos announced a three-year comeback plan that includes a big e-commerce push. The idea is to both grow and shrink the company: She is shuttering hundreds of poor-performing locations and slashing distribution spending, while simultaneously aiming to become the No. 1 jeweler both online and in brick-and-mortar stores.

Signet is already the world's largest retailer of diamond jewelry, but the company has been “too slow to capture our fair share of the online channel,” Drosos said on a conference call.

Drosos, who took the CEO job last year, has a tough road ahead of her. Comparable sales tumbled 5.2 percent last quarter, a worse performance than Wall Street expected. Foot traffic has declined at many malls, and Signet is often competing with itself. Its three major chains—Kay, Zales and Jared—have locations near one another in many of the same shopping centers.

An effort to outsource its credit division—the business that helps customers finance their diamond rings and bracelets—also has hurt results. Shoppers looking for wedding jewelry at Kay curbed their spending last quarter because of troubles getting credit, the company said on Wednesday.

‘Brilliance’ plan

A key part of the turnaround plan, called “Path to Brilliance,” is investing in e-commerce operations. The company wants to get more internet traffic, add new features and make it easier to book appointments online. The goal is to have digital sales represent 15 percent of its business by fiscal 2021, up from 8 percent now.

Investors remain skeptical. The stock fell 17 percent in morning trading Wednesday, to $39.90 per share. That follows a 15 percent decline this year through Tuesday’s close, bringing the shares to their lowest point since 2012.

Total sales for the fourth quarter were $2.3 billion, up 1 percent over the same period of the previous year, but same-store sales dropped 8.6 percent.

By closing stores in malls with multiple locations, the hope is that 30 percent of revenue from the shuttered sites will just transfer to the company’s other stores.

It’s also completing a plan to offload its credit business, including an agreement to transfer money it’s owed by nonprime credit-card customers.

“Operational issues have been exacerbated by several changes in the retail environment, which we have been slow to respond to, including declining mall traffic and shifts in customer buying behavior,” Drosos said. “The good news is many of our problems are fixable. We can and we will correct them.”

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