Signet Jewelers will sell its prime credit portfolio for $1 billion later this year in a move that means about 900 of its Akron employees will end up working for the company’s new credit partners.
Signet, whose corporate headquarters is in Akron, on Thursday morning announced the long-awaited credit portfolio divestiture, aimed in large part at reducing financial risk, alongside the release of what it called “tough” first-quarter financial results. Signet is the world’s largest jewelry company whose brands include Sterling, Zale, Kay, Jared, Piercing Pagoda and others.
The company said the credit divestiture will be a “phased, strategic sale.”
Shares of Signet fell $4.23, or 7.8 percent, to $50.30. Shares are down 46.6 percent since Jan. 1 and are down 53.1 percent from a year ago.
Columbus-based Alliance Data will pay $1 billion to buy the company’s prime credit portfolio in October, Signet said. As part of that, Alliance will take on about 250 Signet employees in Akron and related facilities.
Genesis Financial Solutions will end up servicing nonprime Signet credit accounts, also starting in October. Genesis will retain about 650 Signet employees and related facilities in Akron as part of the transaction, the company said.
The moves involve the majority of Signet credit team members.
All of the employees have been told of the upcoming changes, spokesman David Bouffard said. The employees will continue to work where they are now after the portfolio sales, he said. Signet continues to discuss the outsourcing with the two other companies and does not comment on compensation practices involving its employees, he said.
The first phase of the credit portfolio sale makes up about 55 percent of Signet’s accounts receivable, the company said.
Signet’s separation of the remaining parts of its nonprime credit portfolio will be completed after this year, top executives said in a conference call with industry analysts.
“We believe today’s announcement regarding the first phase of the strategic outsourcing of our credit portfolio will unlock significant value,” Mark Light, Signet chief executive officer, said in a news release.
Signet said it will use the credit portfolio sales proceeds to reduce debt and buy back shares.
Light said the company’s first quarter results were disappointing and driven in large part by overall weakness in retail as well as a slowdown in jewelry spending.
For its first quarter ending April 29, Signet reported net income of $78.5 million, or $1.03 a share, on revenue of $1.4 billion. Net income was down 84 cents from a year ago. Revenue was down $175.5 million from the first quarter a year ago.
Sales of stores open at least a year were down 11.5 percent from the same period a year ago.
During a conference call with analysts, there was no mention of a Washington Post article in late February reporting allegations of widespread sexual harassment at the company. Its stock fell 12.8 percent in one day even as Signet called the report “patently misleading.”
The allegations grew out of a March 2008 gender discrimination arbitration that has since evolved into a class action. Earlier this month, the company said it reached an agreement with the Equal Employment Opportunity Commission that it says resolves all claims related to the pay and promotion of female retail sales employees at the company — even as the class action continues.
Even with the bad start to the fiscal year, the company reaffirmed its full-year fiscal guidance. Signet is upgrading its e-commerce platform in response to what Light called a “secular shift” among consumers to online purchases. Signet will close between 165 and 170 poor-performing, primarily mall-based stores in the current fiscal year while continuing to open new, “off mall” locations, he said.
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com.