Akron, Ohio-Signet Jewelers Ltd. reported a decline in second-quarter sales as issues such as inflation and rising interest rates weighed on consumers and the number of engagements fell.
The jewellery giant, which is the parent company of several major jewellery store chains including Zales, Jared and Kay Jewelers, noted a “challenging” macroeconomic environment but is not changing its sales forecast for the year.
“We exceeded our sales and earnings commitments in the second quarter and remain confident in our full-year guidance,” said Virginia C. Drosos, CEO of Signet Jewelers, on the company’s earnings call Thursday morning.
From a bridal recovery to holiday promotions, here are five things to know about the company’s latest earnings report.
Same-store sales fell sharply in the second quarter.
For the quarter ended July 29, Signet’s revenue totalled $1.61 billion, down 8 percent year-over-year, but ahead of its previous guidance of $1.53 billion to $1.58 billion.
Same-store sales were down 12 per cent.For the first half of the year, sales totalled $3.28 billion, down 9 percent versus the prior year.First half comparable sales declined 13 percent.
“We delivered these results in a challenging macro environment that disproportionately impacts our mid-market customers,” said Drosos.In North America, Signet’s banners include Zales and Kay Jewelers, as well as Peoples in Canada.
Signet’s second quarter sales in the region totalled $1.5 billion, down 7 percent versus the prior year.Same-store sales were down 12 per cent.
The company noted that its average transaction value (ATV) increased 4 percent in the quarter, driven by Blue Nile, although there were fewer transactions.
Signet’s international banners include Ernest Jones and H. Samuels.
International sales totalled $102 million, down 9 percent versus the prior year. Same-store sales declined 8 percent in the quarter.The international banners also saw an increase in ATV of 3 percent and a lower number of transactions.
A bridal recovery is on the horizon, Signet said.Bridal sales have been declining in recent quarters, but this could be about to change, Signet said.
The COVID-19 pandemic has disrupted the dating world. Signet’s data shows that engagements typically occur within three years of a couple dating, so the recovery is expected to begin later in fiscal 2024, with a more robust rebound expected in fiscal 2025.
Signet estimates that before the pandemic there were around 2.8 million engagements per year, which will bottom out this year at 2.1 to 2.2 million, around 25 per cent lower.”As engagements begin their recovery later this year, we’re positioning ourselves for a multi-year tailwind,” said Drosos.
She noted that bridal purchases are typically a customer’s first major jewellery purchase, marking their entry into the world of fine jewellery, which typically leads to future purchases.
Drosos estimates that Signet has a $600 million sales growth opportunity in the bridal market.In fashion jewellery, shoppers are going back to basics.
Drosos noted that while overall fashion (non-bridal) jewellery sales improved “modestly”, it saw a “robust” performance in the category for pieces priced under $1,000.
At Kay, its basics range, which includes hoops and other classic gold and diamond styles, performed well as shoppers opted for versatile, everyday pieces.
Kay, Zales and Jared saw comparable sales growth at the highest price points in their fashion ranges. “Our independent jeweller data shows declines in this segment, reflecting our share gains in the quarter,” she said.
As Signet prepares for the holiday season, Drosos revealed what its banners will be stocking.
Kay is beefing up its yellow gold offerings. Yellow gold jewellery “continues to trend well and is multi-culturally appealing,” Drosos said.
The banner will also add gift box ranges priced under $500.
For bridal, Kay will introduce rings with larger centre stones and new collections from Neil Lane and Monique Lhuillier.
At Zales, new styles will be added to the Vera Wang Love bridal collection, as well as new fine jewellery options such as hoops and diamond fashion jewellery.
At Jared, 30 per cent of its bridal jewellery is now yellow gold, Drosos said. The banner will also carry “gender-inclusive” commitment rings.
In addition, the banner will introduce a personalised charm collection with an entry-level price point.
Drosos also touched on Signet’s lab-grown diamond business, noting that the man-made stones make up less than 20 percent of its diamond inventory.
Its lab-grown diamond jewellery offerings have both a higher margin and a higher ATV than natural diamonds, she said.
Its services segment continues to grow.
Signet has focused on growing its services revenues in recent quarters.
The segment again outperformed merchandise this quarter, Drosos said, with revenue up 4 percent.
Growth drivers included its extended service agreements, customisations, repairs and piercings.
Drosos said the company is increasing the number of locations offering piercing and permanent jewellery services.
In July, Signet Jewelers announced that it had acquired the assets of Service Jewelry Repair National Repair Center (SJR), allowing it to bring more repairs in-house.
The jeweller has plans to convert the recently closed Blue Nile fulfilment centre in Seattle into a central repair centre that will service all Signet banners.
“The capabilities that SJR and the Blue Nile centre bring will complement the capabilities of our existing team of 1,800 jewellers and further position Signet as the premier service provider in the industry today,” said Joan Hilson, chief financial, strategy and services officer, in an interview with National Jeweler last month.
Signet’s services include Rocksbox, the jewellery subscription business it acquired in 2021, as well as appraisals at select Kay Jewelers stores, a new insurance program at Jared, Kay and Zales, and the continued rollout of its Vault Rewards loyalty program.Signet remains committed to its guidance.
For the fiscal year 2024, Signet reaffirmed its sales guidance of $7.1 billion to $7.3 billion.
For the third quarter, the company expects sales of $1.36 billion to $1.41 billion.
“We continue to expect a cautious consumer, driven by macroeconomic pressures that are reflected in traffic declines. We will continue to use strategic promotional levels to drive traffic and conversion,” Hilson said.
Signet said total sales for the US fine jewellery industry as a whole are expected to decline more than its previous forecast of a mid-single-digit decline.
The decline is likely to be “driven by the impact of macroeconomic factors on consumer spending and the continued shift in consumer discretionary spending,” the company said.
As part of its cost-cutting efforts, the retailer, which operates more than 2,700 stores, announced last quarter that it would close 150 stores over the next 12 months, focusing on those that have not met productivity targets.
It will open 30 to 35 stores, Hilson said, mainly in Kay, Jared and Diamonds Direct locations, which operate larger stores with higher ATVs, representing roughly the same amount of retail space for the company as a whole.
