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Dive Brief:
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Signet on Thursday said that Q2 total sales fell 1.9% year over year to $1.8 billion, as store comps fell 8.2%, according to a company press release.
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Gross margin contracted 220 basis points to $664.7 million, reflecting in part occupancy cost deleverage on lower sales and the strength of lower-margin Diamonds Direct's bridal business. Net income fell 35.4% to $145.4 million.
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The company closed its $360 million acquisition of online jeweler Blue Nile, which was announced last month, executives said in a conference call with analysts.
Dive Insight:
Unlike many retailers in recent weeks, Signet maintained its outlook for the year, and executives on Thursday were upbeat about the company’s prospects despite the challenging consumer spending environment.
“Our strategy is working. We are winning, and our biggest businesses, with our diversified portfolio of banners, expanding accessible luxury, accelerating services, and leading in digital,” CEO Virginia Drosos said on the call. “We're able to be strategically flexible, leaning further into the areas of our business with the most growth opportunities, driving both customer and shareholder value.”
While the jewelry conglomerate continues to chase market share, the current macroeconomic environment made for mixed results in Q2. Consumers are shopping at lower price points, with those at lower incomes impacted most by the financial pressures, Drosos said. As a result, sales of items priced below $500 “are seeing steep decline,” and those below $1,000 are also down, while sales of higher-priced items are stronger, she said.
UBS analysts found that during Q2 the company’s U.S. banners all experienced lower online search trends, and traffic to its U.S. stores slowed down in the period, remaining below the pre-pandemic baseline. According to the company’s press release, total North America sales fell 1.8% to $1.6 billion, as store comps fell 8.7%, while international sales fell 14.6% to $111.6 million, as those store comps fell 1.5%.
Bridal sales were a bright spot in the quarter as weddings have resumed since the height of the pandemic. Executives said they estimate the company enjoys about 30% market share in that segment, and see the potential for more sales in wedding-day gifting for mothers of the bride and bridal parties — which they estimate is a $1.9 billion market in the U.S. — as well as wedding-day opportunity for brides via the rental service Rocksbox, acquired last year.
Signet Jewelers operates about 2,800 locations worldwide, under the banners Kay Jewelers, Zales, Jared, Banter by Piercing Pagoda, Diamonds Direct, Blue Nile, JamesAllen.com, Rocksbox, Peoples Jewellers, H.Samuel and Ernest Jones.
Executives said they don’t expect newly acquired Blue Nile to cannibalize its James Allen online banner because Blue Nile “has a distinctive cohort — younger, more diverse, more affluent — than the rest of our portfolio.”
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Daphne Howland, Khareem Sudlow
