Signet Jewelers Continues To Grab Market Share With Year-To-Date Sales Up 65% And An Acquisition
Astounding is the only word that can describe the recovery of the jewelry industry from the pandemic. By jewelry-industry expert Edahan Golan’s estimate, U.S. overall jewelry sales are up more than 50% through October compared with 2019 pre-pandemic levels and 56% over same period last year.
Astounding too describes Signet Jewelers
In its most recent quarter (fiscal third quarter 2022), Signet continues its strong performance across its 2,833 stores under the Kay, Zales, Jared and Banter by Piercing Pagoda, James Allen banners, among others. In addition, the company just announced it acquired the 22-store Diamonds Direct chain.
Total third-quarter sales reached $1.5 billion – and this was accomplished with 423 fewer stores than two years ago. In the quarter, comparable store sales were up 19% over last year (fiscal 2021) and 37% over 2019 (fiscal 2020). The company’s third quarter results are even more remarkable because there is no national gifting holiday in the period.
“Our team delivered the strongest, most profitable third quarter in Signet’s history that has often been challenging because there’s no broad scale gift-giving holiday occasion,” CEO Gina Drosos said in the latest earnings call.
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“We’ve taken steps to mitigate our dependence on big holiday cycles and move to a more always-on approach. This is evidenced by our investments in consistent marketing and customer engagement throughout the year, our year-round bridal-cycle and our efforts to increasingly support early holiday shopping in October. This approach is paying off,” she continued.
Third quarter highlights
Over the past year, Signet has been following a transformation plan called “Inspiring Brilliance,” which is the follow-up phase of its earlier “Path to Brilliance” plan. It has three pillars:
- Be Consumer Inspired to attract new customers with refined brand value propositions, enhanced shopping experiences and personalized products and communication.
- Enable Connected Commerce to win with customers wherever, whenever and however they want to engage, including digital acceleration, flexible and fast fulfillment and virtual selling.
- Build a Culture of Innovation and Agility to unleash the potential within its diverse, purpose-driven organization to innovate and lead through employee development, improved productivity and more agility.
In the earnings call, Drosos outlined accomplishments toward each of these three pillars with the ultimate long-term goal of reaching $9 billion in annual sales.
That goal is getting closer as the company’s high-end guidance reflects revenues of almost $7.5 billion this year and the acquisition of Diamonds Direct should add another $500+ million to revenues next year.
Diamonds Direct joins the fold
Perhaps the biggest news this quarter is the addition of Diamonds Direct to its portfolio acquired for $490 million in cash. Founded in 1995 with 22 stores across the mid-west and southern states, the Charlotte, NC chain specializes in all-things diamonds, though it sells some colored gemstones too.
Its name derived from its early days as a direct diamond importer, which allows it to offer lower prices by eliminating middleman markups. It currently operates an office inside the world diamond exchange in Tel Aviv, Israel.
While Diamonds Direct does offer online purchasing, it is primarily a destination retail chain devoted to diamond jewelry in mega-stores averaging $18.5 million in annual sales.
Current-president Itay Berger has been with the company since its founding and was promoted to president in 2009. He and his staff will remain on-board, Drosos shared with me in a call following earnings.
“We are going to learn a lot from each other,” she said. “Diamonds Direct has a really interesting model that is unique in jewelry retail.”
Despite Signet being the world’s largest retailer of diamond jewelry, Drosos figures Diamonds Direct can teach it a thing or two about the diamond business and Signet will impart its e-commerce expertise to grow Diamonds Direct online business.
“People will drive over an hour to come to a store and spend hours there to find the perfect engagement ring. We’ll be partnering together to drive synergies and not impose new ways of working in a business model that is quite successful,” she said.
Banner differentiation means more precise targeting and higher closures
“The strategy here is the clearer our banner value propositions become the faster we grow, as we are better directing customers to the banner that is best able to serve them,” Drosos said, as she pointed to Jared’s 35% average transaction value increase and James Allen’s 50% growth in customer transactions this quarter over same period two years ago.
Often co-located in the same malls, Kay and Zales are increasingly distinguishing themselves with Zales targeting more self-purchases and Kay appealing to milestone or gifting purchases.
“We plan our assortments with these journeys as our compass,” she explained, allowing the brands to introduce more distinctive products suited to each brands’ customer need.
As a result, bridal sales grew 14% and fashion over 30% in the quarter. For Kay, its new Monique Lhuillier bridal line has been a big hit, yielding over $2 million more in sales than planned. And Kay is increasingly moving out of malls, with nearly half of its stores now in off-mall formats.
By leaning into digital consumer data by trade area, local Signet stores are able to customize assortments and generate more sales with less inventory which resulted in a 50% inventory turn improvement, Drosos reported.
It is also paying off in how Signet manages its lab-grown or lab-created diamond (LCD) assortments so as not to compete with sales of natural stores.
“Our database approach is ensuring that LCD is additive,” Drosos explained. “It is increasing selection, appealing to different customers and driving incremental sales.” So, for example, Zales offers LCD in its Vera Wang line and Kay features them in its Leo line.
Connected commerce let’s customers choose
Describing its digital capabilities as an accelerator, Drosos said its connected commerce approach is a big win for the company. Connected commerce includes not just e-commerce and product visualization, but virtual consulting, asynchronous chat, ship from store, curbside delivery, same-day delivery, flexible credit options and services. It gives consumers the choice of how they want to engage and buy.
During the quarter, Drosos announced it had fully outsourced its consumer credit options to third-parties thus eliminating credit risk from the company’s balance sheet. Through its financial partners, Signet can now provide broader payment options to customers.
“By leveraging third-party expertise and focusing on what we do best, our financial services transformation is increasingly an enabler of customer acquisition and satisfaction. We’ve also eliminated costs the customer doesn’t see or care about,” she said.
Providing more high-margin services to customers, not just pre- but post-purchase, is another priority. Seeing services as a $1 billion opportunity, Drosos describes services as the “glue that builds lifetime relationships across every banner while also supporting our margin goals.”
It includes extended service agreements, a new loyalty program now testing in selected Jarad stores, unlimited jewelry cleanings and jewelry rental through its Rocksbox banner.
Corporate culture strengthened
Ultimately the success of any retail business comes down to the individual contributions of every employee serving the customers’ needs. The human element is even higher for a company like Signet with such an emotionally-charged mission to “enable all people to Celebrate Life and Express Love.”
On the employment front, which is challenging so many retailers today, the 22,000 employee-strong company reported a 60% decrease in new employee turnover during their first two months.
Because of its high level of employee retention, Signet achieves a 75% overall improvement in sales per labor hour. Drosos also notes employees who’ve been with the company for a year have 60% more sales than a new team member.
To attract new hires and retain staff, the company increased hourly wage this year, expanded employee benefits, and invested more in training, development, and career growth.
“We have become so much more productive so people are making more money because we have higher hourly wages and they get commission on top of that. They’re benefiting and we are benefiting,” she said.
Momentum going into holiday
Going into the critical November-December holiday season, which accounted for one-third of jewelry retailers’ annual sales last year, Drosos was cautious about predicting her company’s results given the uncertainties surrounding the new Covid variant.
Further, the company has seen more early holiday spending this year with company data finding about 25% of customers have completed their holiday shopping before Black Friday, compared to 17% in previous years.
At the same time, Thanksgiving weekend results were positive and she expects many customers, men in particular, will still wait till the final countdown to shop. Plus, thanks to the company’s new data analytics capability, it can tailor marketing messages week-by-week to provide inspiration for last-minute shoppers.
In closing, I asked Drosos about Edahn Golan’s prediction that holiday jewelry sales could rise 40% over last year in November and December. “From his mouth to God’s ears,” she quipped.
Reading the tea leaves from various industry sources, Drosos expects the jewelry category to grow ~30% this year. And she credits that growth to the “Covid-love phenomenon. People are really grabbing onto those they care about, holding them closer,” she said, adding that jewelry is an important way for people to express that love and connection.
No matter what happens, Drosos feels her company has the momentum, talent and agility to power on regardless of headwinds that may unexpectedly blow.
“We are stocked and staffed,” she concluded. “The high end of our guidance today implies more than 43% growth in total sales, and that reflects our belief that we will outpace the industry and gain market share. The momentum we’ve been building is intentional and disciplined and reinforces our conviction that Signet is a healthy and agile company.”