(IDEX Online) - Signet Jewelers Limited the world's largest retailer of diamond jewelry, said that same store sales (SSS) decreased by 5.3 percent, while total sales decreased by 3.1 percent in the 9 week holiday season ended December 30.
The jeweler said that the implementation of strategic priorities drove double-digit eCommerce growth overall, while SSS increased by 4.0 percent at the Zale division.
Its fiscal 2018 EPS guidance is being updated to reflect current year benefits of U.S. tax reform passed last month.
Virginia C. Drosos, Chief Executive Officer of Signet Jewelers, said: "During the Holiday Season, we made positive progress on our strategic priorities, offset primarily by the negative impact of the credit outsourcing transition, as evident by the mixed performance across our banners and channels. Our overall eCommerce business grew double-digits, and our Zale division, where our strategic initiatives are beginning to take hold unencumbered by the credit transition, delivered same store sales growth with strength in both bridal and fashion. Conversely, progress in our Sterling division was overshadowed by the negative impact of the credit outsourcing transition in stores.
"Our strategic initiatives to bring innovation to both our bridal and fashion assortments and lead key market trends, supported by targeted marketing and promotional strategies, helped drive sales in Zale. Additionally, our efforts to enhance our digital presence and OmniChannel capabilities drove strong customer engagement and marketing efficiencies. We are resolutely focused on addressing credit transition issues in our Sterling division to return to growth there as well.
Signet reiterated its fiscal 2018 SSS outlook and updated its Fiscal 2018 EPS guidance to reflect the positive impact of the Tax Cuts and Jobs Act in the United States. Signet anticipates the reduction in the U.S. corporate income tax rate to result in an effective tax rate in the range of 14 percent to 15 percent for its current fiscal year. Excluding the estimated benefit of U.S. tax reform, the company expects Fiscal 2018 EPS within its previous guidance range.
The recent passage of U.S. tax reform will also require Signet to re-measure net deferred tax balances in Fiscal 2018. The company currently estimates the deferred tax impact of U.S. tax reform to result in a one-time non-cash benefit currently estimated in the range of $35 million to $45 million that will be recorded in the fourth quarter of Fiscal 2018. This is estimated to add between $0.50 and $0.67 to EPS in the fourth quarter and for the full year 2018. This one-time tax benefit is not included in guidance and is not included in the table above.
Signet expects the favorable impact of U.S. tax reform to moderate in future years as the savings from a lower corporate income tax rate in the U.S. will be largely offset by disallowances and limitations in certain tax deductions.
Signet's total sales were $1,881.7 million, down $59.2 million or 3.1 percent, compared to $1,940.9 million in prior year. SSS decreased 5.3 percent. Sales declines were primarily driven by weakness in the Sterling division, impacted predominantly by the credit outsourcing transition which accounted for approximately two-thirds of the decrease.
Signet's eCommerce sales were $210.5 million, up $68.0 million or 47.7 percent, compared to $142.5 million in prior year. eCommerce sales growth was led by the Sterling division, reflecting the R2Net acquisition and the successful implementation of several enhancements to its OmniChannel platforms, search efficacy, functionality, and digital and social media marketing. Investments in search engine optimization led to a 48 percent increase in page-1 keyword search results and drove a nearly 20 percent increase in traffic to Sterling banners. R2Net eCommerce sales were $50.6 million, up 38.6 percent.
Bridal performance in Zale division was positive driven by innovation and newness in assortment, including Enchanted Disney, Vera Wang Love, solitaires and fancy cut diamonds, supported by targeted marketing and promotional strategies. This was offset by softness in Sterling division, particularly Kay bridal sales in stores, primarily due to the credit transition.
The Fashion category delivered sales growth in Zale division, reflecting strengthened product assortment in key price points and leading trends such as stacking and layering and yellow gold. New styles, combined with targeted digital and social media marketing initiatives, helped deliver the solid performance in fashion.
By operating segment:
Sterling Jewelers division results were considerably impacted by the credit outsourcing transition, most notably in sales of bridal merchandise. The transition particularly affected sales at Kay, where customers tend to more frequently utilize credit in store, especially for bridal purchases, as compared to Jared. Pockets of strength in Sterling included double-digit eCommerce sales growth and the success of the Chosen collection at Jared, as well as new merchandise sales in fashion. In addition to credit, lower sales of Ever Us and less effective promotional events impacted Sterling division performance.
Execution of Signet's strategic initiatives drove solid growth in Zale division, including at Zales, Piercing Pagoda and Peoples. The new Enchanted Disney collection and line extensions in Vera Wang Love, in addition to an improved selection of solitaires and fancy cut diamonds delivered strong performance at Zales. Chains and gold jewelry drove improvement in Piercing Pagoda. Increased digital marketing helped drive successful promotions, providing an immersive OmniChannel experience across TV, online, and in-store.
UK Jewelry division sales declined due principally to bridal and diamond fashion jewelry, partially offset by higher sales in select prestige watch brands and strength in eCommerce.