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Signet--One business, two markets. Signet Group is the world's largest speciality retail jeweler and operates in the US and UK.
Signet Group PLC is the world's leading retail jewelry specialist. The London-based company operates more than 1,600 stores in the United States and England, under the names H. Samuel, Ernest Jones, and Leslie Davis in the United Kingdom, and under the Kay and Jared names in the United States. Some 70 percent of the company's sales come from Signet's more than 1,000 U.S. stores, operated through the company's Ohio-based subsidiary, Sterling Inc.. The mall-based Kay Jewelers store chain is the group's U.S. flagship, although its self-standing Jared superstore format is its fastest growing. The company also operates a number of regional store chains in the United States, including JB Robinson and Marks & Morgan. In the United Kingdom, where the company was known as Ratners until the early 1990s, Signet's H. Samuel chain is the country's leading retail jeweler, and the Ernest Jones format, which specializes in diamonds and watches, is number two. Signet's shares are listed on both the London and NASDAQ stock exchanges. The company is led by Chairman James McAdam and CEO Terry Burman.
Building a National Jeweler in the 1940s
Leslie Ratner opened up a jewelry shop in Richmond, Surrey, England, in 1949. Ratner, later joined by son Gerald, began to expand the business, opening new branches and launching a manufacturing wing, Jadales. That operation permitted the company to produce its own branded watch line, Carronade. By the beginning of the 1970s, Ratners, as the chain was called, boasted 45 shops and sales of more than £2 million.
Ratners expanded strongly through the 1970s, and by the end of that decade the chain had grown to more than 150 stores. In 1975, Ratners made its first attempt to go international, entering the highly fragmented Dutch market. The company's expansion into the 1980s had come in large part through organic growth; in the early 1980s, however, as Ratners made a push to become a national chain, the company launched a series of acquisitions. The first of these came in 1984, with the purchase of Terry's (Jewelers) Ltd., with 26 shops based in England's southeast region.
Gerald Ratner took over the business from his father in 1985. By then, Ratners had been losing money, in part because of its expansion moves, but also because of increasing competitive pressure, particularly from a new breed of discount jewelers that had been encroaching on the company's traditionally middle to low-end market. In response, the younger Ratner moved to expand the group's offering of mid-priced jewelry, while developing an unabashed low-price advertising campaign. In 1986, Ratners sold off its Jadales manufacturing subsidiary and shut down its money-losing Netherlands stores.
Gerald Ratner then set out to build the Ratners group into one of the world's largest jewelry specialists. With less than 200 shops of its own, Ratners targeted the larger H. Samuel Plc, then the United Kingdom's largest jeweler with some 350 stores. H. Samuel was also one of the oldest jewelers in the country, with operations dating back to the early 19th century.
Ratners then began expanding its two flagship chains, Ratners and H. Samuel, opening 35 new stores in 1987, and another 50 or so the following year. Yet the company remained focused on external growth. In 1987, the group made an offer for Combined English Stores Group (CES), but was outbid by retail group Next Plc. Instead, the group picked up Ernest Jones (Jewelers) Plc, which, with 61 stores, gave Ratners an entry into the middle to high-end bracket.
Yet Ratners had already taken an even bigger step. Despite the company's failure to penetrate The Netherlands' jewelry market, it held onto its interest in foreign expansion. In 1987, the company found a new acquisition opportunity, in the form of Sterling Inc., based in Ohio, then the fourth largest specialty jeweler in the United States. That company operated nearly 120 stores, Sterling Jewelers, Shaw's Jewelers, Hudson-Goodman, and Friedlander. These stores were located mostly in the midwestern regions, although the Sterling empire stretched from coast to coast as well.
International Powerhouse in the 1980s
The United States now became Ratners' primary growth market. Soon after the Sterling acquisition, the company picked up another major jewelry group, The Westhall Company, also based in Ohio, boosting the company's U.S. holdings to more than 150 stores. Next up was another Ohio-based company, Osterman's Inc., which added 56 retail stores in ten states, helping to strengthen Sterling's geographic mix. That purchase cost the company $60 million, raising the company's U.S. total to more than 275 stores. Plans for new store openings through the end of 1988, meanwhile, were to increase the company's U.S. operation to a total of 312 stores.
Back at home, Ratners made a number of significant growth moves as well. In 1988, the company acquired Time (Jersey) Ltd., giving it 16 jewelry shops and an additional six accessories shops in Jersey, complementing the group's existing four Channel Island stores.
Ratners' U.K. expansion took off in 1988, with the purchases of the 130-store Zales chain, 73 stores operating under the Collingwood and Weir names, and Salisbury's Handbags Limited. These stores had all been part of CES, and acquired by Next, which sold them to Ratners for £135 million, as well as the repayment of nearly £16 million in debt. While the company maintained the Zales store chain, the Collingwood and Weir stores were converted to the group's H. Samuel and Ratners store formats. The addition of the Salisbury's chain meanwhile allowed the group to branch out into handbags, costume jewelry, and related accessories. During the 1980s, also, the company picked up another retailer, Watches of Switzerland. By the end of 1988, Ratners' U.K. holdings had topped 650 stores, and total group sales topped £360 million ($684 million).
The company's focus returned to the United States in 1989, when the company paid £39 million for the acquisition of Seattle's Westfield Inc. That purchase gave the company 87 new stores in nine states, including seven markets that were new to Ratners. Combined with the group's new store openings, Ratner's U.S. division topped 400 stores by the end of 1989--a figure that neared 500 stores by the middle of the next year.
Yet the company was now poised to take a leading position among the world's specialty jewelry retailers. In 1990, the company agreed to acquire Kay Jewelers Inc., one of the largest in the United States with nearly 500 stores--including 426 primarily East Coast-located Kay stores and 82 stores in the regionally operating JB Robinson chain--as well as 48 Marcus department store boutiques. Following the Kay acquisition, Ratners' U.S. store portfolio neared 1,000, making that market the company's largest for the first time.
Stumbling Through the 1990s
In just five years, Gerald Ratner had succeeded in expanding the company founded by his father into one of the world's largest jewelry retailers. Expansion came at a cost, however, and the company entered the 1990s heavily in debt--and ran headlong into an international recession. If the company's low- and mid-priced focus at first appeared to weather the initial drop in the jewelry market, it finally stumbled, in large part because of an unfortunate joke made by Ratner.
Speaking before an audience at the Institute of Directors, Ratner had been discussing the company's pricing policies. He singled out a low-priced decanter and glasses set, labeling the products as "total crap," and going on to claim that even a prawn sandwich would outlast a pair of earrings carried at the company's store. Ratner went on, judging another popular product, an imitation book, as being "in the worst possible taste." Ratner's comments, which might have been shrugged off in a better economic climate, raised a furor among British consumers. Almost overnight, the company's stock plummeted, losing some £500 million in value. Ratners' irate shareholders called for Gerald Ratner's head. He was forced to step down from the chairman seat, at first taking the CEO position before being ousted altogether by the end of 1992 from the company his father had founded.
Following Ratner's departure, the company changed its name, to Signet Group, and converted the Ratners store chain to the H. Samuel and Ernest Jones format. Signet was now faced with rebuilding consumer confidence, a task made all the more difficult because of the persistence of the economic slump in the United Kingdom. The company's new chairman set out to restructure the company, which had suffered from a loose organizational and logistics structure during Ratner's tenure.
The company sold off Watches of Switzerland in 1992, which was followed by the sale of the Salisbury's chain in 1994. The company also exited the Channel Islands, selling its stores there to the Asprey Group, which also had acquired Watches of Switzerland. In the meantime, Signet began slashing its retail portfolio in the United Kingdom--shutting down nearly 300 stores by the end of 1994.
The company's difficulties continued into the mid-1990s, when it faced a shareholder revolt in 1995. The company's preference shareholders, who had not received a dividend since the beginning of the decade, tried to force the company to break itself up, selling off its U.K. holdings in order to focus on its more profitable U.S. division. The company resisted this effort, winning the shareholder revolt. Nonetheless, by 1996, Signet had begun entertaining offers to buy out the U.K. branch--including interest from Gerald Ratner. Unable to find a suitable price, however, the company decided ultimately to retain control of its slimmed-down U.K. operations.
As Signet worked to dig out from the mountain of debt brought on by the group's 1980s expansion, it faced a renewed attempt to break up the company in 1997, as shareholders resisted the company's plans for restructuring of its capital.
Revitalized for a New Century
Signet at last returned to profitability in 1999. By then, the company's U.S. division had a new and fast-growing format: the Jared jewelry "superstore." Originally launched in 1993, the superstore format took shape in the mid-1990s. The larger, self-standing stores--the company's Kay and other stores were typically located in shopping malls--featured much larger sales space and inventory, as much as five times the size of the group's other stores, as well as onsite jewelers offering jewelry repair services, and other amenities, such as children's play areas, making it a destination for wealthier jewelry shoppers.
By the end of 1999, the company had opened some 20 Jared stores--with plans to expand the chain to as many as 200 stores in the new century. The Jared format now became the company's fastest-growing segment, and Terry Burman, named as group CEO in 2000, expected the chain to be worth some $1 billion in sales.
Signet's return to health was confirmed by its first acquisition in nearly a decade, when it paid more than $161 million to acquire Marks & Morgan Jewelers Inc., the ninth largest specialty retailer in the United States with a strong presence in the southeastern region. Signet then decided to convert a little more than half of the 137-store Marks & Morgan chain to the Kay retail brand.
The Jared chain continued to grow strongly into the 2000s. By the end of 2003, the chain had grown to 70 superstores--yet already represented some 25 percent of the group's total U.S. sales surface. Helped by the growth of the superstore format, but also by strong profits at its U.K. branches, Signet once again sparkled as a leader in the world retail jewelry market.
Principal Subsidiaries: Ernest Jones Limited; H. Samuel Limited; Leslie Davis Limited; Signet Trading Limited; Sterling Inc. (U.S.A.); Signet Holdings Limited; Signet US Holdings, Inc. (U.S.A.); Checkbury Limited.
Principal Competitors: Kroger Co.; Fred Meyer Inc.; Kmart Fashions; Douglas Holding AG; Zale Corporation; Gold Meister GmbH; Tiffany and Co.; Don Quijote Company Ltd.; Nice de Mexico S.A. de C.V.; Finlay Enterprises Inc.