Good morning, and welcome to the Signet Jewelers Third Quarter Fiscal 2025 Earnings Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Please note this event is being recorded. Joining us on the call today are Clayton Ward, Senior Director of Investor Relations and Capital Markets; JK Symancyk, Chief Executive Officer; Joan Hilson, Chief Financial and Operations Officer; and Rob Ballew, Senior Vice President of Investor Relations. At this time, I would like to turn the conference over to Clayton. Please go ahead.

Good morning. Welcome to Signet Jewelers third quarter fiscal '25 earnings conference call. During today's discussion, we will make certain forward-looking statements. Any statements that are not historical facts are subject to a number of risks and uncertainties. Actual results may differ materially. We urge you to read the risk factors, cautionary language and other disclosures in our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Except as required by law, we undertake no obligation to revise or publicly update forward-looking statements in light of new information or future events. During the call, we will discuss certain non-GAAP financial measures. For a further discussion of these non-GAAP financial measures as well as reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures, investors should review the news release we posted on our website at ir.signetjewelers.com. With that, I'll turn it over to JK.

Thank you, Clayton, and good morning, everyone. It's my pleasure to be with you all today, and I'd like to first thank all my Signet colleagues for their incredibly warm welcome. There are many aspects that attracted me to Signet that I'll share in a moment, but let me start by saying that the team is genuinely motivated by our purpose, committed to serving the needs of our customers and invested in the future of Signet. I've immersed myself in our business and culture, spending more time in our stores and offices, meeting with our team members and leadership. In my time at Signet, I've already seen firsthand how our team members recognize and celebrate the emotional connection we have with our customers when they are making a jewelry purchase. I've seen it in cities across our footprint how passionate everyone here is about providing customers with the highest level of jewelry expertise to offer guidance to create lasting memories at milestone and everyday moments in their lives. As a career-long merchant, I share this passion for serving customers. And I'd like to take this moment to recognize our Signet team for their dedication and hard work in the midst of our most important selling season. I'm also encouraged by our vendors and their commitment to strategic partnerships to create on-trend merchandise. After a month at Signet, I'm energized by our opportunity to accelerate growth. Our strong brands, deep consumer focus and talented team provide a powerful foundation to strategically evolve and transform our business. In partnership with the management team, we are actively identifying new opportunities for the future. I recognize we have some challenges. Engagement incidents are somewhat less predictable on a short-term basis and, as you know, lab-created diamonds have disrupted the industry but also create opportunities in the fashion category as well as increase the breadth of assortment within bridal. I'm excited about the opportunities in front of us and I believe Signet's strengths will overcome its challenges to yield growth ahead of us. Over the next few months, myself and our team are first and foremost focused on continuing to execute a successful holiday season. We will look to evolve our strategy to fuel customer and shareholder value and look forward to sharing details on this work and our plans in the coming months. I'll now turn the call over to Joan.

Thanks, JK, and good morning, everyone. I'd first like to thank our Signet team. Your agility and commitment continue to be an inspiration, and I appreciate the drive to results in the third quarter and the preparations for the holiday season. I have three takeaways today. First, we continue to drive sales momentum with our sixth consecutive quarter of sequential same-store sales improvement as we navigate a choppy consumer and industry environment this year. Second, we are well prepared this holiday season with a go-to-market strategy, which we believe will drive positive same-store sales in the fourth quarter. Lastly, we're updating guidance to reflect the short-term impacts from both digital banners, James Allen and Blue Nile, leadership transition costs and the permanent accretive impact from the early completion of the preferred shares redemption. Looking closer at the third quarter, same-store sales finished down 0.7%, a nearly 3-point sequential improvement to the second quarter. In fact, when excluding the impact of our digital banners and hurricanes, we delivered same-store sales growth of 1 point. Fashion sales were positive as we continue to see strong sell-through of new merchandise, partially offsetting the decline in engagement performance in our digital banners. Focusing more on newness, our strategy to drive higher penetration continues to resonate with customers, up nearly 8 points to last year in our core banners. The higher penetration of new merchandise is key to Signet's strategy around average transaction value or ATV and merchandise margin. For example, North America fashion ATV was up mid-single digits in the third quarter, driven by a more than 30% growth in lab-created diamond fashion sales. Importantly, new products carried more than a 5-point margin premium to our core average, which is a greater premium than last year. Turning to bridal, we finished the quarter with total North America engagement units down 2% due to performance in our digital banners. Excluding the digital banners, units were up nearly 4 points in the third quarter, a 7 point sequential improvement to last quarter. Turning to ATV, overall North America bridal ATV was down mid-single digits in the quarter due to competitive price pressure in loose stones. We continue to believe engagement units will recover over the next few years. Services revenue was up nearly 2% in the quarter as it continues to outpace merchandise sales. Extended service agreements, or ESAs, attachment rates grew 170 basis points to last year, driven by continued traction in post-repair ESA and fashion merchandise. As a reminder, services carry a 20-point margin premium to merchandise. Turning to my second takeaway, we believe we'll deliver a positive holiday performance this year driven by our comprehensive go-to-market strategy. We have positioned merchandise and marketing to lean into both fashion and bridal, building on the momentum we've seen in the last few quarters. We've increased inventory penetration of newness to over 30% in core banners, up more than 10 points to drive holiday selling. The consumer continues to be value-oriented and the increase in new fashion merchandise allows us to provide customers a greater value at an attractive margin and ATV through product engineering. This work extends to bridal as well. December typically has twice the number of engagements as any other month, and we believe December engagement units will be positive. We delivered high single-digit same-store sales over the Black Friday to Cyber Monday weekend. However, keep in mind that this includes a moderate lift resulting from the closer proximity to Christmas and is reflected within our fourth-quarter guidance expectations. As a reminder, our holiday sales are weighted to the two weeks before Christmas. Before I hand the call over to Rob, I'd like to discuss the changes in our expectations for the full year. As part of my expanded responsibilities, my initial assessment of challenges at our digital banners goes beyond the API integration issues we've previously shared. The delayed completion of re-platforming work and aided search upgrades that began earlier in the year significantly impacted traffic and search placement upon the completion of that work in the back half of the quarter. While our fourth-quarter expectations are lower for the digital banners than a few months ago due to these additional challenges, we've already seen some improvement in the fourth quarter compared to October's performance. And importantly, I am pleased to welcome our new digital banner President, Corinne Bentzen, who joined just a month ago. She has deep consumer and digital experience, including Tiffany's and most recently led Home Depot Online. I believe our talented digital team will benefit from her leadership, setting the stage to drive improvement and return to our long-term growth path over the coming quarters. Alongside the update to our expectations of digital banners, we will incur leadership transition costs of approximately $7 million that were not initially contemplated in our full-year guidance. We are also reflecting the accretive impact from the early completion of preferred share redemption. I'll now hand the call over to Rob to discuss the financial results in more detail.

Thanks, Joan, and good morning, everyone. Revenue for the quarter was $1.35 billion, down 3%. As Joan mentioned, same-store sales were down 0.7%. Same-store sales reflect the continued drag from our digital banners of approximately 120 basis points. Digital banners did improve sequentially by approximately 500 points that worsened in the second half of the quarter. We delivered adjusted gross margin of $486 million or 36% of sales this quarter, flat to last year. Merchandise margin was also flat in the third quarter as we cycled a 250 basis point growth in the prior year. Turning to SG&A, adjusted expense was down $8 million to $469 million for the quarter. SG&A deleveraged by 50 basis points to 35% of sales due primarily to somewhat higher marketing expense that we referenced last quarter to pull some marketing spend ahead of the election as well as approximately $2 million of leadership transition costs. Adjusted operating income was $16.2 million for the quarter or 1.2% of sales. Adjusted EPS for the quarter was $0.24 and in line with last year. Turning to inventory, we ended the quarter at $2.1 billion, up 2% to last year as we bolstered the penetration of new product as we enter the holiday season. We have completed the redemption of all remaining preferred shares this quarter for approximately $270 million and $810 million in aggregate this year. Common share repurchases year-to-date totaled $118 million or 1.3 million shares at an average share price of approximately $91. These actions translate to an end-of-year share count reduction of more than 17% to fiscal '24 year-end to roughly 43.5 million diluted shares. We continue to see capital returns to shareholders as an important part of our capital allocation strategy moving forward. Turning to liquidity, we ended the quarter with $158 million of cash and equivalents and $253 million temporarily drawn on the revolver. The draw on the revolver was the result of timing around the redemption of the preferred shares and holiday inventory purchases, and we have already repaid a significant portion so far in the fourth quarter. With that, I'll hand the call back to Joan to discuss our guidance for the fourth quarter and the fiscal year.

Thanks, Rob. For the fourth quarter, we expect same-store sales in the range of flat to up 3%. This includes an approximate 1 point drag from our digital banners. We expect engagement units to be up low to mid-single digits and fashion sales to be up modestly. We expect adjusted operating income to be between $397 million to $427 million and a higher operating margin rate than last year. Gross margin rate is expected to expand in the quarter with SG&A rate up slightly. We believe our guidance provides for flexibility in a competitive environment. This results in an update to our full-year guidance range with same-store sales down in the range of 2% to 3%. We expect adjusted operating income between $540 million and $570 million and adjusted EPS between $9.62 and $10.08. So, in closing, before we go to questions, I'd like to remind you of the three takeaways I'm leaving you with today. One, we delivered the quarter within our expectations. Two, we're on track for positive holiday sales. And finally, our updated guidance reflects short-term impacts from both digital banners and leadership transition costs and the permanent accretive impact from the early completion of preferred shares redemption. Operator, let's now go to questions.

And your first question comes from the line of Ike Boruchow with Wells Fargo. Please go ahead.

Hey, good morning, everyone. Good to talk to you, JK. I guess two questions for me on the new guide. Just making sure I understand. So the new comp guide flat to 3%, but there's 100 basis points of the digital. Did the core business, meaning ex digital, did your expectation on that business also come down? It looks like it did, but it also kind of sounds like you're more calling out the digital banners as the driver of it. So just trying to understand core versus the digital component. And then just a follow-up question on the guide. It looks like you're still guiding some nice margin expansion despite the lower comp. And I guess I'm trying to understand where that margin expansion has come from. Is that gross margin? Is that some expense initiatives you're flexing? So just kind of curious the puts and takes.

Thanks for the questions, Ike. We are pleased with the core banner performance in the third quarter. Overall, we are slightly adjusting our guidance for core banners in the fourth quarter to reflect a minor drop. However, we are satisfied with how the core banners are doing. The digital banners are significantly impacting our business. In the third quarter, digital had a 120 basis points effect on the comp. There was a slight decline due to the hurricanes, but we anticipate that some of this will improve, although we still expect a 1-point drop related to digital. The merchandise margin is mainly driving the gross margin expansion, which has improved alongside the comp performance. We are very happy with our fashion performance and have seen considerable growth in the merchandise margin rate due to our new product offerings. This increased mix from our new product assortment is what is contributing to the gross margin expansion in the fourth quarter.

Can you quantify what you expect gross margin to be for 4Q? And then just kind of comment on the promo environment, and then I'll pass it along.

Yeah. Not specifically, but we do expect it to expand based on the higher penetration of fashion newness. I would also add that in the third quarter, there was a slight impact related to promoting some of the clearance product to make way for newness as we head into the fourth quarter. We believe that we are competitively positioned from a pricing perspective and have really assessed our fourth quarter and believe we've provided for flexibility within our current view of gross margin.

Thanks so much.

Your next question comes from the line of Lorraine Hutchinson with Bank of America. Please go ahead.

Hi, this is Melanie on for Lorraine. Thanks for taking our question. I just wanted to ask about the digital integration issues. If you can just expand upon those a bit more, it seems like you identified a few more things going on in that side of the business. So if you can just explain why these are still going on, what else needs to be done. Thank you.

Thanks for the question. With respect to the digital banners, we have been working through the API integration and believe that those opportunities or challenges are behind us. We saw that working nicely over the Black Friday weekend for us. So, as we assessed what was happening in the latter part of the quarter, but the re-platforming work going in later than anticipated and aided search going in as well with closer proximity to the fourth quarter. It's really impacted the overall performance of the digital banners. Now we're working through. And as I mentioned on my prepared remarks that we're seeing some improvement relative to the later third quarter performance, we're seeing improvement in the month of November, but we still do expect a 1 point impact related to the digital banners in the fourth quarter.

Thank you.

Your next question comes from the line of Paul Lejuez with Citigroup. Please go ahead.

Hey, couple of questions. Can you talk about what you're seeing on the cost side for both natural and lab and how retail prices change relative to what you're seeing on the cost side? And then second, when we get through this year, what's the profitability going to look like from those digital banners? Are they even making any money this year and what's the plan to improve profitability of those businesses for next year? Thanks.

Thanks, Paul. So first question related to cost. We see costs within, particularly within lab-grown diamonds, coming down faster than the retail is coming down. So the way that we've bridged that in our strategy, as you know, is we are providing design, branded product within bridal and with the introduction of more fashion with ATV. We see that carrying two times higher ATV than products without lab-grown diamonds in it. So we're managing the retail with the infusion of new product within our assortment. And we're very pleased with how that's performing. We're seeing within our bridal engagement, we see some decline in overall ATV, as we mentioned on the call, but we're again balancing our assortments within our sweet spot of price points. So, feeling very good about how engagement recovery is continuing to happen, albeit slower. And we are continuing to stay on our strategy of new product offering and continuing to bring branded product within engagement. Now with respect to gold, we see little price resistance within our business on gold. The consumer understands the value and how gold is priced in the market. So as we see prices or costs in gold rise, we are able to adjust our pricing and/or value engineer product to keep pricing within the consumer sweet spot. So feel that we've been able to navigate that. Now with respect to your digital banner question, we don't really comment per se on operating margins, but what I will say to you, Paul, is that the top-line growth of the digital banners, the infusion of finished jewelry within Blue Nile and James Allen is very important to the merchandise margin expansion for those banners and when we are seeing that come in for this fourth quarter and in some magnitude for the first time. So as we look forward, we clearly expect Blue Nile and James Allen to get back on track to our long-term growth plans and see assortment mix as well as expense management as part of the growing profitability of those banners.

Okay. Thanks. Good luck.

And your next question comes from the line of Mauricio Serna with UBS. Please go ahead.

Hi, good morning. Thanks for taking my question. Maybe could you talk about your quarter-to-date same-store sales, just given your commentary about Black Friday sales performance. And then also, maybe could you give us a sense on the puts and takes that you're seeing into 2025 margins, rising pricing in commodity costs like gold, any incentive comp rebuild just like getting a better sense in that? And then I have a quick follow-up on share count. Thank you.

Okay, so as I mentioned, Mauricio, we had a high single-digit same-store sales performance over the Black Friday weekend through Cyber Monday. Just as a reminder, there's a modest impact there for proximity to Christmas. The overall performance of the quarters to date is reflected within our Q4 guidance. So it is considered within our guidance range. So, and I also mentioned within my prepared remarks that the two weeks prior to Christmas are very important to our business and are obviously our highest selling period. So we have a good portion of the quarter to go. And so all of that is reflected within our guidance. Then with respect to ‘25, we'll be back to you on the fourth-quarter earnings call with our view of fiscal ‘26, I think you're asking about. But we'll be back to you on that. Clearly we are evaluating our operating plan, working with JK as he's come on board and with the management team and we have a lot of work ahead of us to, as JK mentioned, we're actively identifying opportunities for our future and we'll be happy to share those at that time.

Got it. And just, I guess, just to make sure, does that mean that your quarter-to-date is within flat to up 3%? And then the follow-up I had on the share count, just trying to understand, like, how are you getting to the, I think, like the 46.2 share count for the entire year, just like doing the numbers and what you already did and even like not assuming any more buybacks, I'm getting to like a 45.5, which just trying to understand like anything there to consider on the calculations for the diluted share account for the full year.

Hey, Mauricio. Thank you for the question. This is Rob. Yeah, in terms of quarter-to-date, as Joan said, we're not providing exactly the number, but there is the holiday shift a little bit closer to Christmas and we feel very confident in our ability to deliver a positive comp for the quarter, which is provided in our quarterly guidance and certainly reflected a strong Black Friday weekend. In terms of the diluted share count, I think everyone knows it's a fairly complicated calculation with the preferred shares this year, but due to the fact that we had some of the year calculated before we repurchased some of the preferred shares in April and then amended the settlement agreement. And so the share count was about 48 million in the first half of the year on a diluted basis, on an adjusted EPS basis. And obviously you can get to roughly 44 million in the back half of the year to get to the 46.2 million shares. And as we put in our earnings release, we do expect to exit the year at 43.5 million shares, which should provide some additional EPS accretion going forward.

Got it. Thank you so much, and good luck.

And your next question comes from the line of Jim Sanderson with Northcoast Research. Please go ahead.

Hey, thanks for the question. I wanted to go back to the commentary on the bridal category. I think you reported the average transaction value is down. Can you put that into perspective for us, whether that's getting worse or better and what the key drivers of that decline are?

Sure, I'll take that one, Jim. So, engagement units are recovering, and although slower than we expected, they were down overall 2% in the third quarter, but it did represent a 4-point sequential improvement. If you look at the business, excluding the digital banners in the third quarter, our North America engagement units were up nearly 4% in Q3. So that is a 7-point sequential improvement in our North America banner. So, also a positive signal towards the engagement recovery. And so as we look forward, as I mentioned, we expect that bridal, our engagement units in the fourth quarter will continue to be positive, albeit with the digital banners impact, it will have some impact on that number, but we've reflected that as we've mentioned earlier in our guidance. So overall engagement recovery underway. We believe that we'll continue to see that recovery, although it may be a bit extended from our earlier view on that.

Okay, and how do we get the actual transaction value? I apologize. I just wanted to make sure I understood the question.

Thank you. So the average transaction value was down in the third quarter. It also had a significant impact related to the digital banners because there's such a high penetration of engagement within the digital banners. So going forward, we were pleased with the overall flat average transaction value, Jim, because our fashion assortment is providing us the ability to manage our way through what may be a bit of a choppy environment related to bridal ATV. So feel that it's stable and we're able to manage with the mix of our business.

All right. And just one last follow-up question. I think you reported numbers for Black Friday this year and Cyber Monday. Could you remind us what that trend was reported last year for comparison?

We didn't provide that last year, Jim, but just to remind you, we reported a high single-digit comp over that weekend, which is included in our guidance for positive comps in the fourth quarter.

Understood, thank you.

Thank you.

And we have a follow-up question coming from Mauricio Serna with UBS. Please go ahead.

Thank you. I have a quick follow-up. Can you explain the impact of the digital banners on the total price? Is it due to engagement or are there more promotions? How are you viewing the promotional environment in Q3 compared to previous quarters and what are your thoughts for Q4? Thank you.

The digital banners had a 120 basis point impact on comparable sales in the third quarter. The timing of re-platforming completion later in the third quarter, along with the search upgrades we implemented, negatively affected performance. However, we are seeing some improvement in the fourth quarter and expect a 1-point negative impact to comparable sales in the fourth quarter from James Allen and Blue Nile, which have a high engagement in bridal segments, thus affecting our overall engagement performance. Our North America banners showed positive engagement in the third quarter when excluding the impact of the digital banners. Regarding pricing and promotion in the third quarter, we did implement some clearance pricing to move through inventory and make room for new products as we enter the fourth quarter, which has a significantly higher penetration than last year, about 9 to 10 points. This was important for us, and we believe we have positioned ourselves well entering the quarter. Our guidance reflects what we believe is a good level of flexibility in our promotional strategy for the fourth quarter, allowing us to remain competitive within our forecasts.

Understood. Thank you so much.

Thank you. And that is all the time we have for questions. I would like to turn it back to our CEO, JK Symancyk, for closing remarks.

Thank you. In closing, I'd like to again thank our Signet team for their dedication to our purpose and for welcoming me to the team. I believe the opportunities ahead of us to evolve Signet will deliver further value to both shareholders and customers. I thank you for your time today. We look forward to speaking to you again in March. Goodbye.

Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.