Kay Jewelers Offers Discounts after Diamond-swap Scandal
(CBS NEWS) Kay Jewelers is ramping up the discounts to revive its sparkle with consumers.
Signet Jewelers (SIG), the parent company of Kay and sibling mall chain Zales, has shed more than 20 percent of its market valuation during the past month after it was rocked by allegations that some stores were swapping out diamonds with fakes. On top of that, a negative report in Grant's Interest Rate Observer said the company's debt-collection techniques could raise regulatory eyebrows.
Signet CEO Mark Light told Bloomberg News that the company is adding "incremental promotions" to attract customers. With the bridal season in full swing, Kay is offering a 20 percent discount on all bridal jewelry, which the company said is part of its discount strategy to get consumers to return. Light also said the accusations were overblown.
"There are some promotions that we are doing to stimulate and excite the customers more," the company said in a statement emailed to CBS MoneyWatch. "There are existing promotions in place and we have planned them, but there are some incremental promotions to make them even stronger."
Signet said Kay is offering 50 percent off Father's Day gifts as part of its strategy. Through July 4, Kay is also offering $100 in its rewards program for every $300 spent online or in stores.
Light said the company hadn't received higher levels of complaints since the allegations arose, and he said that customer problems are minimal. Still, customers have been venting their grievances on Kay's Facebook page, with many complaining about faulty repairs and airing their suspicions about gem-swapping.
"After reading about the diamond swapping issues everything makes more sense. My wife's engagement ring came back with a very obvious occlusion in the diamond that wasn't there when it was sent out," one consumer wrote earlier this month on Kay's Facebook page. "I have made all my jewelry purchases from you but after this I don't know if I would ever purchase from you again."
The company said it's reviewing its repair procedures. "We'll report on our progress as we learn more," the company said.
While it's unclear how many complaints are valid, the negative publicity has tarnished Signet's reputation. In a statement sent to CBS MoneyWatch earlier this month, the company challenged the allegations that its employees "systematically mishandle customers' jewelry repairs or engage in 'diamond swapping.'"
Light told The Wall Street Journal that the company hasn't yet seen a sales decline it can link to the allegations.
Still, the company disappointed some investors last month when it forecast same-store sales will rise 2 percent to 3.5 percent in its current fiscal year, compared with an earlier forecast for as much as 4.5 percent. The company at the time also said it had hired Goldman Sachs (GS) to evaluate its credit portfolio.
More than 3,000 personal bankruptcy filings listed Signet or one of its brands as a creditor in the second quarter, up from 1,900 in the first quarter of 2015, according to Grant's Interest Rate Observer. The federal Consumer Financial Protection Bureau also has dozens of complaints about aggressive phone tactics from consumers who have bought jewelry from Signet through its credit offerings.
Signet's Light told the Journal that the company is focused on polishing its reputation with customers.
"We take it personally. We take it seriously when someone is questioning our integrity," he said. "We will do anything in our power to regain our customers' trust."