Kay Jewelers Owner Denies Engaging in ‘Diamond Swapping’

(Bloomberg) -
A Kay Jewelers diamond pendant. (PRNewsFoto/Kay Jewelers)
A Kay Jewelers diamond pendant. (PRNewsFoto/Kay Jewelers)

Signet Jewelers Ltd., owner of the Kay, Zales and Jared chains, denied systematically switching customers’ gems for lower-quality stones after reports alleged the company repeatedly engaged in the practice.

“We strongly object to recent allegations on social media, republished and grossly amplified, that our team members systematically mishandle customers’ jewelry repairs or engage in ‘diamond swapping,'” the Hamilton, Bermuda-based jeweler said in a statement. “Incidents of misconduct, which are exceedingly rare, are dealt with swiftly and appropriately.”

The remarks follow a BuzzFeed story about customers complaining that their diamonds had been unknowingly replaced with lesser-quality gems. The allegations reverberated through the markets on Thursday when an influential newsletter from James Grant addressed them, sending Signet’s stock down as much as 14 percent in intraday trading. Grant also renewed criticism about Signet’s financing business, which it uses to help customers afford its jewelry.

The BuzzFeed story focused on a Maryland woman who said her $4,299.99 engagement ring — purchased at a Kay Jewelers — had its diamond swapped out for a manmade stone while it was being serviced.

In its statement on Friday, Signet said it hasn’t received an unusual number of complaints about jewelry under its care. The company said its design and service centers handle more than 4 million service and repair transactions every year, and more than 99 percent have no negative feedback. Signet has a total of about 3,600 stores.

“Signet has in place vigorous product quality procedures that are consistently monitored,” the company said. “Our teams review the characteristics of the item with the customer both when they drop their jewelry off and when they pick it up following service or repair to ensure their confidence in the safe return of their original piece.”

Signet’s assurances did little to soothe investors, who sent the shares tumbling again on Friday. The stock fell 4.4 percent to $88.14 in afternoon trading; for the week, it has declined more than 10 percent.