Signet Jewelers has come under fire from its shareholder, Select Equity Group, which has urged the diamond jewelry retailer to evaluate strategic alternatives, including a potential sale of the company. This call for action stems from concerns about Signet's undervalued shares, particularly in light of recent operational missteps that have impacted the company's performance.
Select Equity, which holds a significant 9.7% stake in Signet, expressed dissatisfaction regarding the company’s recent performance and criticized the management's governance approach, highlighting a concerning trend: the decline in same-store sales for eleven consecutive quarters. In a poignant letter directed at the board of directors of Kay Jewelers, the parent company of Signet, Select Equity delineated the various issues that have led to this predicament.
Among the main points raised was the problematic transition of James Allen and the recently acquired Blue Nile businesses to a new technology platform. This blunder occurred just before the critical 2023 holiday selling season, further complicating the company's already precarious situation. Select Equity described this as a major misstep that has severely hindered both organic and online sales.
The investor also pointed to Signet's history of poor capital allocation, citing nearly $500 million squandered on acquiring unprofitable businesses, including Blue Nile, in addition to the decision to repurchase shares at prices higher than their current value. The firm expressed that the public market’s perception of Signet’s future doesn't instill confidence, further stating that the management team's decisions have led to a deterioration of the company’s cash reserves, competitive position, and franchise reputation.
Signet’s shares showed a slight increase of 8.8% during Friday's trading session but remain down by 33% year-to-date. Select Equity concluded with a stark warning that investors are increasingly doubtful about the board and management team’s ability to navigate the company out of its current quagmire.
The prevailing sentiment in the market clearly reflects a lack of endorsement for Signet's current strategy and the competence of its leadership team..