Signet Jewelers Ltd. faced a challenging first fiscal quarter, reflecting ongoing market conditions in the US. Despite this, the company remains resilient, with plans for future growth and strategic adjustments.
The company, which owns major brands including Zales, Jared, and Kay Jewelers, released detailed financial results and future expectations in its recent press announcements.
First Quarter Financial Results
For the 13 weeks ending May 4, Signet reported a 9% year-on-year decrease in revenue, totalling $1.51 billion. Same-store sales, measuring performance at locations open for at least a year, also fell by 9%. Net profit for the quarter dropped significantly by 47%, amounting to $52.1 million.
Signet CEO Gina Drosos highlighted a slow start in February but noted improvement later in the quarter. “Trading was ‘sluggish’ in February before improving during the quarter, ‘with an even stronger May,’” Drosos stated. She expressed optimism for continued momentum in the second quarter and a positive same-store sales inflection in the second half of the fiscal year.
Regional Performance
In North America, Signet’s largest market, revenue decreased by 9% to $1.4 billion. This decline was influenced by a 1.6% reduction in the average transaction value (ATV). International sales saw a sharper decline, falling 17% to $77.2 million, primarily due to a 15% drop in ATV, which partly reflects the sale of several prestige-watch locations.
Drosos cited “macro-pressure” on consumers and a competitive promotional environment as factors impacting performance. She also noted an accelerated recovery in engagements, anticipating a 5 to 10 percent increase in engagement ring sales this year.
Strategic Adjustments
Despite the first-quarter challenges, Signet maintained its annual sales outlook of $6.66 billion to $7.02 billion. The company is also undergoing structural changes to improve efficiency and profitability. These include the closure of 20 to 30 stores and the renovation of 300 existing locations within the year. Signet’s Chief Financial Officer, Joan Hilson, mentioned the company is focused on enhancing its U.K. business by closing 23 stores, primarily Ernest Jones locations.
Product and Market Trends
Signet’s services category outperformed its merchandise sales in the quarter. Drosos reported a 4% increase in engagement ring sales in North America, excluding digital sales from James Allen and Blue Nile. The integration issues at these digital banners, which led to fulfillment challenges, are being addressed.
Lab-grown diamonds (LGDs) have shown significant growth within Signet’s portfolio. Over the past five years, LGD production efficiency has increased, reducing costs and providing more attractive options for price-conscious customers. In Q1, Signet saw a 14% year-over-year increase in lab-grown diamond fashion revenue.
In an effort to bolster natural diamond sales, Signet has partnered with De Beers Group to promote natural diamonds, particularly in anticipation of a predicted increase in engagements over the next few years. Signet expects a 25% increase in engagements, particularly among zillennial couples, within the next three years as the impact of pandemic lockdowns diminishes.
Future Outlook
Looking ahead, Signet expects second-quarter sales to range between $1.46 billion and $1.52 billion, with same-store sales projected to decline by 2 to 6 percent. The company reaffirmed its guidance for fiscal 2025, anticipating total sales between $6.66 billion and $7 billion, with same-store sales ranging from a 5% decrease to a 1% increase. The updated earnings per share outlook has been raised to a range of $9.90 to $11.52 per diluted share.
While Signet Jewelers faces significant market challenges, it is adapting through strategic adjustments, focusing on service and product innovation, and leveraging partnerships to drive future growth.
