Signet Jewelers announced it has completed the first phase of the outsourcing of its in-house credit program.
The first phase, announced last year in response to analyst concerns about its credit book, has three prongs:
– Signet’s prime-only credit quality accounts have been purchased by Alliance Data Systems for a par value of $960 million.
That $960 million will go to repurchase stock, repay its $600 million securitization facility, and finance its $350 million purchase of R2Net, owner of James Allen.
Signet will also receive future payments from Alliance.
– It has outsourced the credit servicing function of its existing and future nonprime accounts receivable to Genesis Financial Solutions.
– It will implement a lease-to-own program in partnership with Progressive Leasing. This is meant to provide an option for customers who don’t qualify for, or don’t want, credit. Signet believes this could be an incremental growth opportunity.
The industry’s biggest retailer still hasn’t found a buyer for its subprime accounts, which represent approximately 45 percent of its credit book, and was what raised the credit concerns in the first place. For now, those accounts will be serviced by Genesis, but remain on Signet’s books. Signet will also continue to originate new subprime accounts.
Signet says it plans to locate a new home for its subprime accounts in the second and final phase of its credit outsourcing.
“We are in ongoing discussions with a number of interested parties related to the second phase of our credit outsourcing,” says spokesman David Bouffard, “and expect to announce one or more partners that will fund the nonprime portion of our credit portfolio in the first half of next year.”
Signet CEO Gina Drosos said in a statement that the transaction was designed to minimize the impact on customers and maintain the company’s net sales.