Signet Jewelers Limited (SIG) 2025 Q2 Earnings Call Summary

Optimistic Highlights

• Sequential Same-Store Sales Improvement

Signet Jewelers reported a sequential same-store sales improvement of more than 5 points from the first quarter, marking the fifth consecutive quarter of improvement.

• Merchandise Margin and Average Transaction Value (ATV) Growth

The company grew merchandise margin and ATV, driven by new and innovative merchandise.

• Positive Engagement Unit Growth

Engagement units are now growing, with Google and Instagram searches for engagement rings up significantly.

• Services Growth

Services grew 1.4% in the quarter, with extended service agreement attachment rates up 210 basis points.

• On Track for Fiscal 2025 Guidance

The company is on track to deliver its fiscal 2025 guidance, with positive same-store sales in the third quarter to date.

Pessimistic Highlights

• Revenue Decline

Revenue for the quarter was $1.5 billion, down 7.6% year-over-year.

• Same-Store Sales Decline

Same-store sales were down 3.4% compared to the previous year.

• Digital Banners Drag

Digital Banners contributed approximately 150 basis points of drag on same-store sales.

• Non-Cash Impairment Charges

The company took non-cash impairment charges of $166 million, primarily affecting its digital banners.

• Cautious Consumer Behavior

Customers are visiting sites 15% more often before making a purchase, indicating cautious behavior in the current macro environment.

Company Outlook

• Positive Engagement Recovery

The company expects the engagement recovery to continue, supported by strong leading indicators.

• Fashion Sales Growth

New merchandise assortment is expected to drive strong fashion sales.

• Cost Savings Target Increase

The cost savings target for the year has been increased to up to $200 million, with a three-year target now at $450 million.

• Flexible Operating Model

The company’s flexible operating model is expected to help balance the continued promotional environment in the back half of the year.

• Reaffirmed Guidance

The company reaffirmed its guidance range for the year, expecting revenue near the middle of the range or better.

Q & A Highlights

• Q: Gross Margin Trajectory and Holiday Expectations (Ike Boruchow, Wells Fargo)

  A: The company expects to continue driving fashion newness and services to expand margins. For the holiday season, they are prepared with strong assortments and expect the engagement recovery to continue. (Joan Hilson)

• Q: Competitive Promotional Environment (Ike Boruchow, Wells Fargo)

  A: The company has factored in the competitive environment and will continue to balance newness at strong margins with promotional pacing. (Joan Hilson)

• Q: Engagement Units and Average Ticket (Paul Lejuez, Citi)

  A: Engagement recovery is happening, and the company is confident in achieving its guidance even if the current pace of unit growth continues. Lab-created diamonds (LCD) have a higher ATV and attachment rate than natural diamonds. (Gina Drosos)

• Q: Lab-Created Diamond Prices and Customer Perception (Lorraine Hutchinson, Bank of America)

  A: Consumers are becoming more educated about the differences between lab-created and natural diamonds, with lab-created diamonds offering a point-in-time opportunity to trade up. (Gina Drosos)

• Q: Marketing Spending and Future Investments (Jim Sanderson, Northcoast Research)

  A: The company sees marketing as a competitive advantage and will continue to invest in it to drive traffic. Marketing dollars are expected to be up for the year. (Gina Drosos, Joan Hilson)

• Q: Lab-Grown Diamond Mix (Jim Sanderson, Northcoast Research)

  A: The mix of lab-grown diamonds is growing, with total sales up mid-single digits, reaching roughly mid-teens penetration. (Joan Hilson)

• Q: Fourth Quarter Guidance and Margin Expansion (Mauricio Serna, UBS)

  A: The company expects positive comps and margin expansion in the fourth quarter, driven by newness, services, and leveraging fixed costs. (Joan Hilson)

• Q: Digital Banners and Real Estate Performance (Dana Telsey, Telsey Group)

  A: Digital Banners are improving, and the company is adding new vendors and finished products to drive margin expansion. Real estate performance is strong, with store renovations expected to drive top-line growth. (Joan Hilson)