NEW YORK (Reuters) - Signet Jewelers Ltd has reached a $240 million settlement of a shareholder lawsuit accusing the company of concealing sexual harassment allegations against senior executives and losses in its customer financing credit portfolio.
The preliminary settlement of the proposed class action was filed on Thursday with the federal court in Manhattan, and requires approval by Chief Judge Colleen McMahon.
Signet, whose brands include Jared, Kay Jewelers and Zales, also posted higher-than-expected operating profit and revenue in its fiscal fourth quarter ended Feb. 1, with same-store sales rising 2.3%.
It said it expects to pay about $35 million of the settlement, with insurers funding the remainder.
Shares of Signet soared, and in early afternoon trading were up $2.86, or 39%, at $10.19.
The settlement resolved claims that Signet concealed how it had once been “rife with sexual harassment” of female employees, including by senior executives, and downplayed its alleged misconduct as involving merely allegations of gender discrimination in pay and promotions at individual stores.
Shareholders led by the Public Employees’ Retirement System of Mississippi also said Signet concealed losses on subprime loans that once comprised 45% of its $1.7 billion customer loan portfolio, and which it later sold at a roughly $160 million loss.
The accord covers shareholders from Aug. 29, 2013 to May 25, 2017 who said Signet’s violation of federal securities laws caused them to suffer losses on their stock.
In a statement, Signet said it takes its legal disclosure obligations seriously and believed the lawsuit lacked merit, but settled to eliminate “the risks, ongoing resource needs, and the distraction of this litigation.”
In its fiscal fourth quarter, Signet posted net income of $187.1 million, compared with a year-earlier $107.9 million net loss.
Adjusted profit totaled $3.67 per share on revenue of $2.15 billion. Analysts expected profit of $3.47 per share on revenue of $2.12 billion according to Refinitiv IBES.
To bolster financial flexibility during the coronavirus pandemic, Signet said it has drawn down an additional $900 million from a secured credit facility, and temporarily suspended its common stock dividend.
Reporting by Jonathan Stempel in New York; editing by Diane Craft