Signet Jewelers Ltd. reported its first drop in same-store sales in six years in its second quarter as the company continues to deal with rumors that it swapped expensive diamonds for cheaper stones.
Signet, whose banners include Zale, Kay Jewelers and Jared, posted a 2.3% drop in same-store sales in the quarter ended July 30. Wall Street analysts had expected a slight increase.
Net sales fell 2.6% to $1.37 billion.
Net income rose to $81.9 million from $62.2 million in the year-ago period.
“We are disappointed by our Q2 results and market conditions have been challenging particularly in the energy-dependent regions,” said Mark Light, CEO, Signet Jewelers. This has contributed to a downward revision in our annual guidance.”
Signet lowered its adjusted earnings per share guidance for the fiscal year to $7.25 to $7.55. Earlier, the company had forecast $8.25 to $8.55.
The retailer noted that it achieved some important wins in the second quarter with select diamond fashion jewelry, bracelets, and earrings selling well.
“We saw success in a variety of selling channels including outlets, kiosks, and on-line due to improvements in our consumer websites and mobile sites,” Light said. “The Zale integration is running well and synergies remain on target. We remain confident in the medium and long-term prospects of our business.”
Separately, Signet announced that affiliates of private equity firm Leonard Green & Partners, will invest $625 million in the company in form of convertible preferred shares.
“For more than 25 years, Leonard Green has successfully partnered with some of the best known companies in the retail sector and worked to create significant shareholder value,” said Light. “We view Leonard Green’s significant investment in Signet as a strong vote of confidence in our business and its long term growth prospects.”