Signet Jewelers Q1 2027 Earnings Call |Flat $1.55B Sales Stabilize On Resilient Bridal Segment Gains

Thanks, Rob. And good morning, everyone. I'd like to start the call this morning by thanking our Signet team. Your commitment to grow brand love has delivered a great start to the year. Thank you for your hard work and let's continue building on our momentum. There are three key takeaways I'd like to leave you with today. First, we delivered another quarter of comp sales growth with effective operating performance driving strong earnings growth. Second, we're balancing that performance with progress on our long-term transformation as we fuel this second year of Grow. Third, we're confident in our ability to deliver the year and are raising the midpoint of our guidance for fiscal '27. We delivered top sales growth across every category and most brands this quarter. Within that performance, we've improved on the balance between fashion AUR growth and unit performance with unit comps improving sequentially three points to the fourth quarter. Alongside this trend, we continue to see strength in the higher-end consumer with some of our best performance at higher price points. Collections also continue to be an additional growth driver with Shy continuing to fuel fashion growth and Neil Lane and Monique Lhuillier driving growth for bridal. We delivered positive comps each month of the quarter and the expected savings from last year's reorganization. Adjusted operating income exceeded our guidance range through spending discipline. While still positive, the second half of the quarter slowed somewhat but rebounded for Mother's Day and second quarter to date. With a positive performance in both Valentine's Day and Mother's Day as proof points, we're working to accelerate focus on the go-to-market priorities for our Grow Brand Love strategy. Recall in March I laid out Signet's focus areas in the second year of our strategy would be brand distinction, unlocking portfolio value, and further strengthening of our operating model. The focus on brand distinction is about sharpening our four core engines: Kay, Zales, Jared, and Blue Nile. We are currently in the development and testing phase of the website redesign for Kay, Zales, and Jared to align the search, navigation, and storytelling our sites offer to today's customer expectations. Alongside this, we're actively working through SKU rationalization to improve customer shopping experience while also ultimately reducing inventory levels and improving working capital. The website redesign provides additional opportunity to clearly define brand identities. We're furthest along with the redesign work at Jared and continue to expect all three to be completed in the early part of the third quarter. Websites are our largest storefronts, allowing us to reach the broadest number of both existing and new customers. Therefore, we believe this work to provide a clearer expression of each brand between both online and in-store experience is key to improving conversion ahead of this year's holiday season. In parallel, we are advancing a more modern data-driven marketing approach to strengthen each brand's relevance with its target consumer. This includes shifting towards social-first storytelling and scaled creator partnerships to better connect with younger and more diverse audiences while also improving the efficiency of spend. Recent examples include Zales' partnership with Ashley Graham and Kay's collaboration with Christian McCaffrey, with the latter delivering more than twice our average social engagement rate. As I've said before, this isn't about spending more, but rather spending differently. At Kay this quarter, our spend on social media was up only 1%, whereas we delivered a low double-digit growth in impressions. These early examples of our marketing transformation, similar to our website redesign efforts, represent our aim to deliver progress ahead of this year's holiday season. As we focus on the right audiences, channels, and messages to drive stronger customer engagement and build brand equity, we're also making progress in unlocking portfolio value. On our previous call, we laid out actions we'd take to maximize our existing assets, including the transition of James Allen into Blue Nile and further centralization of back-of-house functions. We've completed those steps and doubled down on our focus in this area through our strategy surrounding natural diamonds. To that end, we've centralized sourcing for diamonds across our North American brands, which we believe will allow us to improve margins and inventory terms. That team has also taken steps to begin refining stone type, size, shape, and quality of offerings by brand. We continue to identify and implement scale benefits through sourcing, planning, and pricing, particularly as we balance our use of promotion against recent commodity highs. Further, with our scale and integrated sourcing, we see clear growth opportunities through a portfolio-level diamond strategy. We're getting clearer about the role each of our brands play across natural and lab-grown offerings. Through brand-level improvements to mix, we can strengthen our position in the more valuable segments of the natural diamond category to support both sales growth and margin without exiting the customer base that's seeking lab-grown product. Lastly, on our Grow Brand Love strategy, we continue to make progress enhancing our operating model. An important factor in those efforts is strengthening our high-performing team, meaning we're organizing, developing, and incentivizing talent to directly support execution. Examples of this work are organizing for better leverage across the company alongside sharper accountability. This includes the centralization and integration of back-of-house teams I just mentioned. Also, developing long-term focus through the build-out of career development plans for high-potential talent as well as an enhanced performance review process. And finally, incentivizing through changes to how we pay, how we train, and how we recruit at the brand level to drive optimal in-store experience. Talent is a big part of how we perform while we transform. As the jewelry customer evolves, our talent model has to evolve with them. Gen Z wants to shop in-store, but they've set the bar higher for what experience looks like. They want a stronger personal connection. In jewelry, the customer is often doing business with two brands: the name above the door and the name on the consultant's name tag. That connection is an increasingly important factor in customer experience. That's why aligning how we recruit, train, and reward talent to that customer mindset is so important. We believe that work is key to winning the future of jewelry shopping. This brings me to my third takeaway. Our performance year-to-date and the progress we've made on our strategic priorities provide us the confidence to raise the midpoint of guidance today. We've now delivered positive comps in 15 of the last 17 months and have seen recently our strongest two-year stacks since pandemic stimulus spending. Top-line performance has been balanced between categories. We continue to see further opportunity to improve fashion units as well as upside for AUR expansion. Said differently, while we've seen early benefits from our new strategy, we still see significant runway. We believe Grow Brand Love is setting the foundation for sustainable long-term growth with the ability to grow even during turbulent macro periods. Before I hand things over to Joan, I'd like to quickly provide an update on tariffs. The muscle we built last year to navigate the ever-changing landscape continues to bolster us this year. Our team is monitoring updates, including potential new tariffs, and we'll be ready to adjust as needed. With regards to refunds, Signet is the importer of record on a small fraction of our purchases. We've already submitted claims for most of those purchases, and to date, a small amount has been approved and received. We are working with our vendors for the remainder of those refunds. At this time, it's too early to quantify the amount or timing of those potential refunds, as well as how any proceeds may be used and when it may impact our P&L. Summarizing my key takeaways today. First, we delivered another quarter of comp sales growth with effective operating performance, driving strong earnings growth. Second, we're balancing that performance with progress on our long-term transformation as we fuel this second year of Grow. Finally, we're confident in our ability to deliver the year and are raising the midpoint of guidance for fiscal '27. With that, I'd like to turn it over to Joan.

Sure, Jeff. Yeah, thanks for the question and the comment. From a unit perspective, we feel good about the progress. I think what we talked about on the call was balance in terms of certainly driving performance but seeing unit trend improvement across all categories, both fashion and engagement. I would say we see more opportunity on the high end, and for us the high end is a little bit less of a driver of overall unit volume but is more important as it relates to revenue. If you look at price points above $2,000 in our business, they're call it mid-single digits in terms of unit penetration, but 40-ish percent as it relates to revenue. So seeing unit growth on the high end, I think is an important driver of our business. We've seen better performance in what I would call the mid-price point buckets of units and not surprisingly when you look at those lower-end price points sub-$150, that's where we're a little more challenged in terms of unit growth and are doing I think great work to balance our sourcing plans, our supply chain capabilities, and some assortment reconfiguration to make sure that we can still serve customers there. That's the business that's most exposed to gold and tends to also have a little bit more exposure when you look at a brand like Banter or online. So it's important for us. I think a little less important as you look at a quarter like first quarter, but certainly as you can see from the guide, we see the improvement, but we also have good plans in place we feel like can maximize that opportunity as we get into the holiday.

Yeah, I'd say so. So, I mean, I think that look, the important distinction I'd make as well is our higher-end price point is still catering to a customer in the middle tier, right? So, when I talk about numbers like I just shared, we're disproportionately talking about Zales, Jared just because they're the lion's share driver. You heard Joan's comments on the strategy of Blue Nile. I assume we'll probably have some questions there and so I won't go into detail but we see an opportunity to get a bigger share as it relates to the upper middle and in the case of Blue Nile we see an opportunity on the higher end where maybe we're not taking our fair share today to be completely honest, which I think is both an upside as it relates to our growth opportunities moving forward. I also think it's reflective of the benefit of not just better assortment work, Jeff, and pricing architecture but also a clearer strategy in terms of our diamond strategy overall and the balance that we see in terms of the continued growth opportunity on the lower-end price point in fashion with lab-grown diamond but also the affinity for customers with natural diamond and the opportunity at higher price points for growth. That's certainly definitely paying off when you look at this quarter and we think we've got runway ahead of us.

All right. Appreciate it, bud. Thanks for the question.

Sure. I mean let me start with the last part of your question first, Randy. I think we go into this that we're intentional about balancing AUR and unit performance. As I mentioned earlier, I think the greatest driver of unit volume is lower ticket, call it sub-$150, and I think we have good plans in place in terms of what we do to maximize that. That's important for us because I think it is the opportunity for people, even in the luxury tier, that opening price point ability for people to experience the brand and the opportunity that creates to develop a relationship with the customer and grow your business is important for us. And so, there's a lot of moving parts. And when you look at a short quarter where we've got a pretty tight window in terms of what we can do with pricing changes, etc., because of Valentine's Day falling in February and then Mother's Day coming on the heels of it where we've taken a little longer view and are balancing pricing decisions and movements around assortment where there's a lot of transition that happens over the summer months to position us for the Q4 holiday but we expect that trend to continue. We really believe that there's an opportunity to move unit volume positively. We're certainly seeing it in the high end and feel really good about the progress we made in the mid-tier and are really focused on what do we do to serve that customer who is shopping at a budget whether it's a brand like Banter or online where you got a little bit more exposure from a lower price point unit perspective but definitely that's how we're building our plans. Pleased with the progress in Q1 and would expect that to continue, frankly are making progress against it despite some of the other volatility that's coming with tariffs and commodities. In terms of AUR, this is an emotional category and I would tell you we see, I get asked a lot how much of this AUR growth is being driven because of whatever may be happening in terms of commodity. The truth is where we're really seeing the biggest AUR expansion is at higher price points and it's because we're underdeveloped there. I think the more we drive distinction with our brands, particularly seizing the opportunity on the higher side with brands like Blue Nile, Jared, and Diamonds Direct, we certainly see headroom to move up there but to be honest we see it in Kay's, Zales as well. As an entry point, consumers are aspirational in nature and even in a category like engagement, our first ring is not always our last ring. That opportunity to trade up and develop a longer-term relationship with customers is something that we see headroom even in those brands and by really sharpening our focus not only on brand strategy but as well our diamond strategy, we know there's market share gain opportunities that we can drive on both sides of the ledger.

Sure. Let me start and I'm sure Joan might want to add a little bit of color here too because this is something our teams are really, really working hard on. I'm proud of what our team and our partners are doing. When I look back at this last year to manage the volatility on the commodity side as well as all of the volatility with tariffs and still deliver at the high side as well as deliver in line with where we said we were going to be in Q1, you're still dealing with the same set of variables. It's a short quarter. We don't really take any pricing or change the architecture before Valentine's Day. You've got a very short window before Mother's Day. And then the lion's share of transition really happens over the summer months to position us for the Q4 holiday. So we're working through all of those things. I think the team has done a great job of managing the commodity volatility. We've got a great team in place that's focused on sourcing and supply chain. We're working through our assortment and our pricing architecture to make sure that we're optimizing for the customer and for the business. And we feel good about the progress we've made and the plans we have in place to continue to drive margin expansion over time.

Happens over Q2 and Q3, so our guide reflects that. We knew where we were going to be in Q1 and have shown up consistent with that guide. In terms of how we manage margin, I think we feel really good about what's happening on the upper end and are better positioned there. We're much more focused on how we protect the lower price point goods in our assortment to drive volume. That's going to be really critical, and we know we've got the right plan in place to drive it for the holiday. In terms of gold specifically, we've talked about this a little bit before, but we've reintroduced hedging that helps us balance our inventory, be in better control of inventory, and actually take advantage of some of the opportunities to melt product and have a healthier balance of inventory. That positions us well as we go through the last part of the year and this quarter. We did not slow down Clarence. Clarence contributed at a higher level because we believe having the right assortment is going to be critical for performance, and we knew we had the expense base to be able to continue to stay clean and didn't slow that down. So the team's pulling the right levers. With gold, you're going to continue to see design that takes advantage of lower weight. In brands like Banter, we've introduced a plated assortment that helps protect at lower price points. That's testing very well with customers, and we believe positions us to serve that base well from a design perspective. Look for alternative metals to come back into play. We're also taking advantage of a little bit of softness on the diamond cost side to really balance supply chain and input costs so that we can mix from a design perspective to deliver stronger margins within the business. When you add all that up, both being more efficient on supply chain and sourcing strategies and then also getting the right assortment architecture in place, we feel good about margin not only for the year but also about the expansion opportunities, particularly as we pull it through to the bottom line.

Yeah. Thank you.

Sure. Thanks, Paul. It is baked into the guidance that we've given for the second quarter. We see in the second quarter it's roughly 70 basis points. So if you think of where we're moving from Q1 to Q2, that will with the high end of the guide at 2.5% comp growth, and then we would see that begin to move down a bit in Q3 and Q4. Think of it as 60 basis points, 50 basis points in the fourth quarter, bringing the year in that guidance range that we gave of 50 to 70 basis points down. So really reflected in the high end of our guide, and we also saw as we noted that we raised the low end of our guide, and as a result the midpoint came up. So we've reflected that within the guide itself across the year.

Yeah, sure. If you look at last year, we were up low single digits. This year up low single digits. So you're talking about mid-single digit two-year stacks, which is stronger than where we've been in terms of overall performance. We had a good Mother's Day. We've seen that momentum hold, similar performance where we're seeing strength across all brands, categories, and have seen that momentum continue to build. So no other real color there from a consumer perspective. The only thing I would say, we commented on a little bit of that momentum return. It also coincides with getting through the round of pricing architecture work that happens in between Valentine's Day and Mother's Day. As we do that work, as a reminder, then we've got to turn off promotion, rely a little more on clearance during that time period, and the baseline run rate of the business are less, spend a little bit less in marketing as we work that transition. We saw the business pull back a bit during that time period, remain positive. And then as we put our signs back up and communicate with customers and really turn marketing on, then we saw the business return. And I know Joan mentioned it earlier, that's all happening against the backdrop of continued discipline around promo effectiveness. We're consistent with the run rate we were running this last year. So there's not more promo in the business. We're just seeing better health across the base.

Yeah. Thank you very much. Appreciate the question.

Short answer is no. We can't really call out a notable change in behavior tied to either of those things, frankly. From a higher tax refund point of view as well as from a higher gas price, the truth is we're in not only an emotional purchase but a considered purchase. My wife and I were joking about this the other day when I was getting ready to ask her, I don't know that she would have taken a pause because of the price per gallon of gas. We tend to sit in a category where there's a little more thought that's gone into it. We're much more tied to milestone, whether that's engagement, gift, holiday, etc. Also tied to a big chunk of our business to a purchase that relies on credit or some form of financing for our customer. So bottom line is those kind of short-term moves don't have as big of an impact in our business. I would say we're more resilient in that regard. And we tend to focus on those things that are a little more longer term structural as it relates to the consumer to make sure that we're positioning our business well. But can't really call out either a headwind or a tailwind necessarily in this quarter that would be noteworthy. And I do think we look at that and pay attention to it a little bit more. So in a business like Banter where we're a little more exposed to both a lower income customer, it's just not as big of a driver of revenue for our business. So it's not over.

Yeah, thanks for the question, Juliana. No real change in trend. I would say we continue to see growth and trade up on both sides of that. I think one of the things we called out in the script is we believe there's even more opportunity on the natural side as we look at higher price point and as we clarify our strategy by brand. So we see that both as an AUR and sales opportunity, ultimately one that's tied to some opportunity to gain share as well. So no new news there other than continued progress against that trend, and we're doing our part to take advantage of it.

Yeah, thanks for the question.

Yeah, let me maybe talk at the macro level and then I'd love Joan to lean in a little more on specifically what we see with Blue Nile. I would say at a high level it really is about leaning into the opportunity to differentiate and drive distinction by brand. We see Blue Nile at the highest end of that. That really is what the legacy positioning of that brand is, and in some ways, not to deprioritize this at all, but it is about returning to a spot that I think is really the equity and rightful spot for that brand to be. It also, I think, every healthy portfolio has a north star, if you will, that really is the anchor point of aspiration, and that really allows you to build a life cycle approach to customer and really does allow you to play across the full landscape. We've talked about it before, but Jared and Diamonds Direct, I think, we describe it as accessible luxury or affordable luxury. That opportunity in the upper middle and lower high end, where you're really playing on the shoulders of that smart value of high quality at the right price, that really does appeal to an upper middle income customer as well as to a more affluent customer, is a wide open space right now. As a lot of brands have looked to move up and chase luxury, we really feel like that space has opened up and it represents an opportunity for growth for us. Kay is smack in the middle, serving the largest cross-section of customers as the largest brand in not only our portfolio but really in the jewelry space. And we love that. It really does allow us to play across the full spectrum of customers, and even there we do see an opportunity that maybe it's not about premiumization of the brand, but it's about recognition of how customers in that segment routinely trade up and trade down. So there's a wider cross-section of opportunity there. Zales is similarly placed but also probably a little bit more of an entry point into the category, driving fashion and jewelry basics as an opportunity, which will mean you've got a little bit more affordable price points, although similar cross-section when you think about AUR across the business. But I do think paramount to this is our strategy to really drive premium at Blue Nile. Not only because of the opportunity it represents for the company, but also because it's a point of destination for people that are researching across the category and is such a shaper of perspective and trend for so many consumers that really do shop all of our brands. So maybe Joan, if you want to kind of dive into some of the high points of where we see this opportunity for Blue Nile.

Appreciate the question.

Sure. Sure, Dana. Thanks for the question. We've not given a target AUR number, but certainly we see an opportunity to expand, particularly as we look at natural diamond above $2,500 or so. As we pointed out on the call, we're seeing trend improvement across all categories. We don't talk about it a lot, timepieces actually even is maybe among the strongest of the group. So that very much is a testament to the work that we're doing with fashion. Self-purchase, early days, we talked about the inclusion of Roxbox as a driver with Kay. We're seeing the customer really respond well there. As we introduce plated and vermeil options in Banter, we're seeing the self-purchase customer respond, seeing continued growth in sales as well. So across the board, right momentum in place, and we're looking to continue to build on that.

Yeah, we've seen improvement across the business. We talked about positive comps across most brands. Really there were only two in the quarter that were not positive. Diamonds Direct was one, but was improved sequentially from where it had been performing and was closed. And then James Allen obviously is the other. But across the rest of the brands we saw health and actually saw an improvement in Diamonds Direct from a sequential standpoint.

Yes.

Yeah, we expect to see continued pressure on gross margin for the full year. We said flat to slightly down. So really down in the first half of the year and flat to slightly up in the back half of the year, which is what leads you to that full-year guide. So at the anniversary of the fall season, we see a better opportunity there in merchandise margin.

You know, we're growing in line. I think what we do is, what we recognize is we've seen strength and independence at higher price points. Nowhere near the unit performance that we have, but certainly taking advantage of trade up and higher-end customers. We tend to be leading mass and big box and are kind of on the pulse of where the industry is, which is good. But we recognize within our base there's a share opportunity on the higher end, and that's where, and I know Joan and I have both talked about it, our balance in terms of diamond strategy and really leaning into the growth proposition on both ends is really important for us.

Yeah, thank you.

No, go ahead. Well, I was just going to say on the margin front, look, promotionally there's nothing extra there. We're very consistent with where we have been running last year. So this is not an effect promo, and really the exposure is primarily commodity related. We've talked about it. I think it's important for us to balance AUR and unit performance. And while we still believe strongly that there's margin expansion opportunity for the business, we're also being thoughtful around how we approach this commodity environment, in particular how we think about exposure on lower-end price points, which is really where this pressure gets managed and why it's important as we think about balancing AUR and units overall. So expect that to continue and to improve. Q2, we'd see it moderate, and then we see opportunity in the back half of the year for improvement. So you'll see that line continue to build. I think we're in line with where we thought we'd be. Q1, are thoughtful around how we're managing against a volatile environment, and actually really happy with performance because of the balance we see across the business. I think it points to the health of the portfolio. Maybe let Joan jump in and talk about comp impact, but overall, no, we're not hiding the ball there. I think we see strength on the balance of the business.

All right. As we end the call, I want to thank everybody for the time and also really like to thank our team and partners. We've got a great start to the year. We're staying focused on performing while we transform our business, and look forward to sharing more updates on our Grow Brand Love progress in September. Thanks for joining. Goodbye for now.