Signet Jewelers just came off a disappointing second quarter with revenues down 7.6%, though it tracked a sequential improvement from the first quarter when revenues dipped 9.4% .
Through Signet’s first half of fiscal 2025 ended August 3, revenues were down 8.5% to $3 billion and adjusted EBITDA dropped to $218 million from $320 million same time last year.
Yet, CEO Gina Drosos is confident the tide is turning across its diverse jewelry retail banners, among them Kay Jewelers, Zales, Jared, Banter by Piercing Pagoda, Diamonds Direct, Blue Nile and James Allen. The company currently operates 2,700 retail stores and each banner has an online e-commerce site.
Green shoots Drosos sees ahead include the long-overdue recovery of the bridal jewelry market, on which roughly half of Signet sales depend, and consumers responding positively to new designs introduced across its fleet.
Sales of new products were up 50% in the second quarter compared with last year and represented roughly 25% of total company sales, Drosos shared with me in a post-earnings call.
“We are a vertically integrated company and given our scale in sourcing, we can bring customers better value at the right price points,” she said. “We turn our inventory twice as fast as the industry average, so our newness is always fresher and in front of the right customers.”
However, underneath the headlines, more significant changes are taking root due to Signet’s long-term investments in its “Connected Commerce Strategies,” which enable the company, the executive team and its sales consultants to get closer to the customer along their purchase journey.
The connected commerce strategies are about more than driving sales online, which, according to the Wall Street Journal, represents 23% of Signet’s business. The online connection sets the stage for the personal customer connection since nearly 80% of in-store buyers interact with the company’s websites before visiting a store.
Every retailer knows that the closer it can get to its customers the greater their success will be. In the overall retail market, Signet is among the few retailers that exemplify best practices in customer connection. And Signet will reap the benefits of its customer-connected philosophy for years to come because retail is first and foremost a people, not a product business.
Jewelry Market Headwinds
“The story of the year in retail is this consumer has been very cautious in shopping all year long. Retail has been choppy because of this cautious customer, but we have strategies that help us in this kind of choppy environment,” Drosos asserted.
Following a U.S. jewelry market decline of 6% in 2023, according to Tenoris, the jewelry market has been choppy indeed this year, only advancing three of the last eight months year-over-year.
In its monthly tracking from data collected across 2,000 jewelry stores, Tenoris reported year-over-year sales grew strongly in July, up nearly 7%, modestly in the 2% range in February (Valentine’s Day) and May (Mother’s Day) and was basically flat in April and August. However, sales were off in January, March and June, down 6%, 3% and 2% respectively.
Tenoris also reported divergence in the market for jewelry set with natural versus lab-grown diamonds. In August, natural diamond jewelry sales dropped 3%, while lab-grown diamond jewelry sales increased 10% and this despite a nearly 20% drop in the average price.
Lab-grown diamonds (LGD) have massively disrupted the legacy diamond jewelry market in both the fashion and bridal jewelry categories. Their significantly lower price relative to the mined alternative makes LGD the first choice for the value-conscious jewelry customer, but increasingly, those who can afford natural are opting for LGD because they can get more bling for the buck.
Signet is well positioned in both categories but has found it is a bit easier to trade-up customers to larger stones in LGD – what the company refers to as lab-created diamonds (LCD) – netting a higher-average transaction value (ATV).
“We have a strategy to trade customers up if they’re interested in LCD. And we have continued to do that. So we actually see a higher ATV on LCD pieces than we do in natural,” Drosos reported, adding that consumers are more informed about the different value propositions between natural and lab-growns and increasingly voting with their wallets for the lab-created alternative.
Bridal Revival
This should position Signet and its many banners well as dating couples move on to their eventual engagement. The company has developed a proprietary database to track up to 45 milestones in couples’ typically three-year dating journey, such as when they move in together or meet the parents.
This gives Signet a predictive guide for the direction of business, plus helps the company guide couples to one of its many banners that fit their needs and tastes.
Drosos revealed the bridal recovery lights have begun flashing, after being delayed through last year and the better part of this year by economic uncertainty and consumer caution.
“Customers are approaching engagement in a more cautious way in this macro environment, slowing the recovery,” she said, noting that one sign of their caution is that customers are visiting company websites 15% more often than a year ago before making a purchase.
But things are beginning to ease up as early in the third quarter engagement unit sales are up. Further Google and Instagram searches for engagement rings are trending now and couples have achieved at least 26 of the company’s proprietary engagement milestones.
“We have confidence that we’re well positioned for the upcoming peak engagement season over the holidays and the multiyear engagement recovery back to pre-pandemic levels,” she said.
Services Create A Loyalty Bond With Customers
Providing more services to jewelry customers is another linchpin in the company’s strategies to get closer to the customer and build a loyalty bond that will pay off down the road.
It launched a “Vault Rewards” loyalty program online and across its Jared, Kay and Zales banners in 2023. At the end of fiscal 2024, it had engaged 5.2 million members. Loyalty members have a proven track record of higher purchase frequency and average transaction value.
Services also extend to jewelry cleaning and repair through Extended Service Plans and a variety of financial services offerings, including installment loans, lease purchase and split-payment options across different credit cards.
Signet sees a $1 billion potential in its services offerings that yield a higher margin than products. While it doesn’t break out services as a separate reporting category, Drosos revealed that services have grown every quarter over the past two years.
“Services continues to be a source of strength for Signet, growing 1.4% in the quarter, with extended service agreement or ESA attachment rates up, led by strong attachment on engagement,” Drosos shared in the earnings call. “Importantly, the attachment rate on LCD jewelry is well above other merchandise in both Bridal and Fashion categories.”
With cautious consumers keen on protecting their investment in fine jewelry, services are an important way Signet provides customers confidence in their past and future purchases with the company.
Empowering Sales Consultants With New Tools For Customer Engagement
Through the connected commerce strategy, Signet has invested heavily in digital technology to enhance customer and company staff interactions. It just launched an AI search tool on its websites to help shoppers find exactly what they are looking for and it learns from past searches by other customers to better curate and refine selections for the current customer.
It also has introduced personalized digital storefronts hosted by the company’s sales consultants. These allow sales consultants to share curated selections with their social media connections and styleboards for individual customers as part of appointment prep or to follow up on a store visit.
“The digital storefronts help our jewelry consultants combine their personal relationships with customers in the store with ongoing engagement with clients, for example, sending them their top five picks of new items that just came in. Digital storefronts have become a new sales channel for us,” Drosos explained, adding that its more than 5,000 personalized digital storefronts have attracted 36% new customers.
“Over the course of our multi-year transformation, we have saved roughly $900 million in operating expenses by streamlining our operations and driving out inefficiencies that are costs to customers they don’t see or care about. Instead we are investing in those that are visible to them and they do care about. That’s the fabric of the flexible operation model we run our business on,” she said.
On Track To Reach $9 Billion In Sales
Drosos shared with the Wall Street Journal in mid-September that the company is still on track to reach $9 billion in sales within the next three-to-five years.
With revenues at the end of last fiscal year at $7.2 billion and current guidance in the $6.66 billion to $7.02 billion range for fiscal 2025, the company has an uphill climb.
But by continuing to get closer to the customer, better understand their needs and wants and meet them wherever they are, Signet should continue to take market share from competitors even in the face of a flat market.
And if the jewelry market rebounds, especially if engagements grow from the current 2.1 million per year rate to pre-pandemic levels of 2.8 million, Signet will rise with the tide and take share faster.
Already Signet’s connected commerce strategies are gaining recognition across the retail industry. Incisiv just named Kay Jewelers, the only Signet banner evaluated in its 2024 Retail Customer Experience Index, as one of the nine retail leaders in overall customer experience across 131 retailers in multiple industry segments evaluated.
Kay got top marks in customer engagement methods, personalized experiences and resolution mechanisms when things go wrong.
“I’m not surprised Kay, our biggest brand by far, would pop to the top, but that’s indicative of the investments we’ve made in customer experience in our stores and online,” Drosos said. And those investments will continue to provide the tailwinds Signet needs to reach its $9 billion milestone.
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