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Every miss begins with Kay…

That’s likely what investors were thinking on Tuesday after Signet Jewelers lowered its earnings outlook for the year and posted disappointing quarterly results, citing disruptions to the transition of its credit portfolio, particularly at Kay Jewelers.

Shares in the company were down 29 per cent at pixel time to $53.15 — extending its year-to-date drop to more than 43 per cent and leaving it poised for its worst day since October 1992 after posting disappointing quarterly sales.

The company said it expects to earn between $6.10 to $6.50 a share in fiscal 2018, compared with its previous forecast for earnings of between $7.16 to $7.56 a share.

Signet blamed its bleak outlook on disruptions to the outsourcing of its credit portfolio — the company offers in-house credit — to Alliance Data and Genesis Financial Solution, which affected the jeweller’s ability to extend credit and prompted some customers to abandon the application process.

While the company had previously expected positive same-store sales growth in the crucial holiday quarter, it now expects that to be down in the low-to-mid single digits.

In its fiscal third quarter, same-store sales declined 5 per cent, reflecting a 120 basis point impact from the impact of a string of hurricanes and disruptions to the transition of its credit services.

Total sales declined by $29.3m from a year ago to $1.16bn, just shy of analysts’ estimates, primarily driven by “soft bridal sales and a lower number of customer transactions”. The company swung to a net loss of $3.9m or 20 cents a share in the quarter ended October 28, compared with a profit of $17m or 20 cents a share in the year-ago period.

The retailer’s reputation has also taken a hit. Last year the company was plagued by reports that customers bringing jewellery to be serviced by their company had their diamonds replaced with stones of a lower quality. Signet said at the time that it strongly objected to reports that its team members “systematically mishandle customers’ jewelry repairs or engage in ‘diamond swapping’” and added that “incidents of misconduct, which are exceedingly rare, are dealt with swiftly and appropriately”.

This year the company saw chief executive Mark Light step down in July, citing health reasons, at a time when Sterling Jewelers, a subdivision, was the subject of a private class-action arbitration case alleging discrimination, among other claims.

Looking ahead, new chief executive Virginia Drosos said the company is beginning to see positive customer reaction to enhancements in its omnichannel approach, which aims to provide a seamless shopping experience across various platforms and an “improved fashion assortment”. The holiday quarter is likely to remain “highly promotional”, but Ms Drosos thinks Signet has been successful in targeting promotions to customers more effectively.

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