Signet Slips As Citi Cautious, Discrimination Headlines Continue
Shares of Signet Jewelers (SIG), the owner of Kay Jewelers and Jared, are slipping after Citi analyst Paul Lejuez cut his price target on the stock and said caution is warranted heading into earnings. The company has been making headlines amid reports of a class action lawsuit accusing its leaders of presiding over a culture that fostered sexual harassment and discrimination. The company has since responded to the claims, calling them "distorted and inaccurate."
CAUTIOUS NEAR-TERM: In a research note this morning, Citi's Lejuez lowered his price target for Signet to $66 from $90 ahead of the company's fourth quarter results. Weak mall traffic in February hurts Signet more than most, the analyst contended, adding that he expects the company to provide "disappointing guidance" relative to consensus. Additionally, Lejuez pointed out that he expects fourth quarter credit metrics to look weak. The lower percentage of recent new accounts and balances may cause increased concerns around the quality of Signet's credit portfolio, he argued. Given his estimate for continued sales weakness, disappointing 2017 guidance, weaker credit stats and the potential for management distraction and disruption following recent negative press, the analyst remains cautious on Signet in the near-term. He reiterated a Neutral rating on the name.
DISCRIMINATION SUIT: Last week, media reports emerged regarding a class action lawsuit accusing Signet leaders of presiding over a culture that fostered sexual harassment and discrimination. Lawyers and academics who specialize in gender discrimination said the statements from hundreds of former employees that are part of the class-action case accusing Sterling Jewelers, a unit of Signet Jewelers, of pay discrimination against women provide a "rare insight" into how a company's policies work in real life, according to an article by The New York Times published yesterday. Whether it is a not-so-confidential tip line or an in-house court, some widely used corporate procedures can mask problems that women often face in the workplace, the publication added. According to the testimony of Jeanette Digennaro, who worked in several Sterling chains, after she called the TIPS line to report sexually harassing comments, a human resources associate followed up to chastise her for making the call, the NY Times noted.
SIGNET RESPONDS TO CLAIMS: In a statement, Signet's Sterling called the media reports "distorted and inaccurate." "It's critical to understand that an arbitration claim was brought against Sterling in 2008 that alleged gender discrimination in pay and promotion. None of the 69,000 class members have brought legal claims in this arbitration for sexual harassment or sexual impropriety. [...] These allegations publicized by claimants' counsel and reported in the media create a distorted, negative image of the company. Indeed, the distorted and inaccurate picture of our company presented in these allegations does not represent who we are. [...] The company takes any concerns seriously and had - and continues to have - multiple processes in place to receive and investigate allegations of misconduct. We continue to encourage all employees to use these processes to raise any workplace concerns so we can investigate and take appropriate action. Regarding the alleged gender discrimination in pay and promotion allegations, our company is guided by our core values of fairness, opportunity, integrity and respect and has created strong career opportunities for many thousands of women working at our stores nationwide," the division of Signet Jewelers said.
UPCOMING EARNINGS: Signet is scheduled to report its fourth quarter results on March 9, with an associated conference call to be held at 8:30 am ET.
PRICE ACTION: In late morning trading, shares of Signet dropped over 4% to $62.86.
Disclosure: None.