Signet Jewelers Ltd Q1 FY2026 Earnings Call

Good morning, and welcome to the Signet Jewelers Limited first quarter fiscal 2026 Earnings Call. Please note that this event is being recorded. Joining us today on the call are Rob Ballew, Senior Vice President of Investor Relations and Capital Markets, J.K. Symancyk, Chief Executive Officer, and Joan Hilson, Chief Financial and Operations Officer. At this time, I would like to turn the conference over to Rob. Please go ahead. Good morning. Welcome to Signet Jewelers Limited First Quarter Fiscal 2026 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 further discussion of the non-GAAP financial measures as well as reconciliation 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 the call over to J.K.

Thanks, Rob. And good morning, everyone. I'd like to open my remarks today by thanking our team. Your dedication is delivering results, including both same-store sales and operating income growth above our guidance range. I recently had the chance to spend extended time with our top sales associates in the organization, and your passion and commitment to executing our strategy is inspiring. Thank you for all your hard work. There are three key takeaways I'd like to leave you with today. First, our quick actions delivered results ahead of our first quarter expectations with both same-store sales and adjusted operating income growth. Second, our Grow Brand Love strategy is in the early stages of delivering long-term sustainable growth by better aligning our brands with their unique customer expectations, as well as balancing assortment architecture in both bridal and fashion, all supported by a realigned organization. And third, we're confident in our ability to manage the levers under our control to execute in a dynamic macro landscape. Turning to the quarter, the actions we took in response to holiday, and our early work on Grow Brand Love led to the outperformance I just mentioned, with balanced growth across all categories. Fashion same-store sales sequentially improved roughly four points from the fourth quarter, led by improvement in the key gifting price point range of $250 to $500. We also drove improvement in bridal by filling assortment gaps, particularly within our largest brands. Finally, we're gaining traction on our centralized marketing efforts with more than a 30% increase in impressions at our three largest brands, on a low single-digit increase in ad spend compared to last year. We'll cover our performance in more detail as we discuss our early progress on our Grow Brand Love strategy. You'll recall that strategy addresses three imperatives we believe will drive shareholder value. Those three are shifting to a brand mindset, growing our core, and expanding into adjacent categories, while aligning our organization to support the first two imperatives. With that, let's jump in. First, talking through our shift to a brand mindset, we've developed a go-to-market strategy unique to each of our largest brands: Kay, Zales, and Jared. We're aligning marketing, product assortment, and experience according to the right target audience for each brand. This early stage focus is the most effective way to build value for the company. For example, one point of comp growth in these three brands has the same impact on Signet Jewelers Limited as six points of growth for the remaining brands. Results for those three brands are already delivering a combined 4% comp sales in the first quarter, with continued trends in May. Further, we delivered that sales growth while increasing AUR in both bridal and fashion while expanding merchandise margin. Our actions to build brand equity are fundamental to this work. For example, at Zales, we recently unveiled our Own It campaign, targeting self-expression for every occasion, including the most common occasion; everyday wear. Zales is one of the best-positioned brands to target self-purchase and we're leaning into it with the launch of this campaign. The Own It campaign collections like Stellar Allure and Wemly are targeting affordable price points and relevant designs that accommodate the trend of stacking. Alongside this, the brand is testing store formats that provide reimagined jewelry shopping experiences as well as marketing across new media channels such as mobile gaming and interactive social formats. At Jared, this week, we'll be launching a new fashion campaign that distinguishes itself within our portfolio as the aspirational luxury brand. This campaign will build on the product assortment and experience work that has been completed to date, while highlighting the expansion of successful collections like Unspoken to drive both customer acquisition and retention. Our ability to leverage branded collections allows us to reduce promotional discounting, evidenced by a more than 20% reduction in discounting at Jared compared to Q1 of last year. Kay's brand position as the romantic and milestone gifting destination is one of the strongest in our portfolio. That said, we're introducing new fashion products here as well, for both her and for him. One of the most important areas of focus for brand health at Kay is reducing our reliance on promotion while attracting customers with new product and a refreshed experience, both digital and in-store. In May, we've seen traction on these changes, driving unit and margin improvement, signaling a positive response to our actions. As you can see, we are driving brand distinction through a holistic go-to-market strategy. So while we're in early innings, we're making progress with work still ahead of us. We expect to update you on further progress throughout the year. Moving on to the next imperative of growing our core and expanding into adjacent categories, we're already driving some important proof points here. We've gained traction in our core product now with a healthy bridal offering at key price points and product types. This action delivered unit growth and engagements, modestly increased AUR, and expanded category margins, all while managing the balance within our architecture between lab-grown and natural diamonds. Our leadership position in bridal gives us the right to expand into adjacent categories like fashion, which is important to the long-term and sustainable growth of Signet Jewelers Limited. Fashion's total addressable market is multiple times larger than bridal, and it's an area where we can create and capture demand through assortment strategy and brand equity. We've introduced new collections within fashion leading to positive comp category performance and overall sales growth for Valentine's Day and the quarter. This was led by growth in the key gifting price points below $500. A marked sequential improvement while continuing to lift category AUR. Lab-grown diamond fashion growth of 60% this quarter was supported by the introduction of new products, which led to notable AUR improvement. We continue to see significant runway for lab-grown diamond fashion growth. Our new Wembley offering at Zales, which I referenced a moment ago, targets value and everyday wear with pieces that include metals, gemstones, and lab-grown diamonds. This represents one of the pathways to building customer credibility and, ultimately, brand equity over time. A critical imperative in support of our Grow Brand Love strategy is the alignment of our organization to drive growth. Our reorganization is now substantially complete. We are also actively recruiting for key leadership roles, with a new chief marketing officer expected to be announced later this quarter. In the past couple of months, we've integrated digital and technology into a single centralized function. These changes provide more efficient decision-making alongside clearer accountability. Leaders across our company have carried out this reorganization, balancing the focus on creating value for tomorrow while delivering results for today. So before handing things over to Joan, I'd also like to address tariffs. While the final outcome has yet to be determined on this topic, we've taken action and positioned ourselves for agility. Most of what Signet Jewelers Limited sells are finished goods. Our international sourcing comes from a variety of countries, with India representing about half of our imports and China in only high single digits. The team has taken several actions since April to minimize potential cost impacts and safeguard against supply chain disruption, all while protecting the value proposition we deliver to our customers. We're working with our vendors to optimize production and receipt schedules as well as evaluating sources of origin. We believe we will be able to move most of our Chinese manufacturing to other areas or bring in alternatives from other countries ahead of the important holiday season. We believe that we can navigate tariffs as they stand today within our full-year guidance through a combination of vendor negotiations, value engineering of new and existing styles, as well as promotion and life cycle management. The situation obviously remains fluid, and we will provide updates as appropriate. In summary, my key takeaways today are first, quick actions delivered results ahead of our first quarter expectations. Second, our Grow Brand Love strategy is in the early innings of delivering long-term sustainable growth. And third, we're confident in our ability to manage the levers under our control to execute in a dynamic macro landscape. With that, I'd like to turn it over to Joan.

Thanks, J.K., and good morning, everyone. The activation of our Grow Brand Love strategy is intentionally focused on driving sustainable growth with disciplined execution and accountability across the company. We have aligned our organization to our strategy and are beginning to maximize our scale advantages through centers of excellence that drive enterprise-wide impact. Concentrating on our three largest brands creates the most meaningful impact on growth, most immediately through assortment architecture, promotion management, and maximizing the investments in our e-commerce channel. In parallel, we are fully engaged in longer-term initiatives including delivering on our real estate plan, expanding services offerings, and building brand equity, particularly in fashion. Turning to the quarter, revenue was $1.5 billion with same-store sales growth of 2.5%. With growth across every major category, including services. Further, Kay, Zales, and Jared delivered double-digit e-commerce sales growth while expanding their sales per square foot by nearly 5% compared to the prior year. The leading factor in this growth is the strength of our new product offering across all categories, which delivered a sales penetration increase of new products by eight points while roughly maintaining inventory levels. These results reflected growth across all channels, including mall, off-mall, and e-commerce. While Blue Nile was in line with the company's comp sales growth, James Allen created 140 basis points of pressure on comps. I'll touch more on that topic shortly. From a product perspective, merchandise AUR grew approximately 8% with fashion up 10% and bridal AUR slightly up. The fashion AUR improvement was primarily driven by a 60% increase in lab-grown diamond fashion sales, which carries a more than two times AUR premium to category AUR and higher gold prices. As J.K. mentioned, we saw also significant improvement in fashion price points between $250 to $500. In bridal, we continue to maintain a slight increase in AUR while managing assortment to meet consumer demand through our brand portfolio. Moving on to gross margin, we delivered a rate expansion of 100 basis points compared to last year. This reflects our refined promotional strategy, inventory management, and leverage on fixed costs such as occupancy. Our SG&A rate was flat compared to last year for the quarter and was better than our expectations driven by earlier than anticipated cost out actions from our reorganization and continued spend discipline. Adjusted operating income exceeded expectations at $70 million for the quarter, up more than 20% compared to last year. Adjusted EPS was $1.18, above last year on higher income and a lower share count, partially offset by a higher effective tax rate and items related to non-operating investments, some of which we expect to recapture over the year. Turning to the balance sheet, Inventory ended the quarter at $2 billion, up approximately 1%, lower than the 2% growth in revenue. The health of our inventory provides flexibility within merchandise margin, including pre-tariff product, the ability to further improve life cycle management, and strategic promotion management. Cash ended the quarter at $264 million with total liquidity of $1.4 billion. Our liquidity position enabled us to take advantage of the pullback in share price this year by more aggressively repurchasing shares, with approximately 2.3 million shares repurchased year to date or over 5% of shares outstanding. We have approximately $600 million of authorization remaining. As a reminder, our top priority for cash remains organic growth, followed by returning capital to shareholders and maintaining a conservative leverage ratio. In fact, Fitch recently upgraded our credit rating to investment grade. In the quarter, we've made progress on our real estate plan designed to create an experience aligned with each brand's identity. As a reminder, we have a four-pronged strategy: first, to close 150 underperforming doors over the next two years; second, we'll optimize sales transference following closures by shifting sales to remaining doors and to our e-commerce channel; third, reposition nearly 200 healthy doors in declining venues; and lastly, continue to refresh our existing fleet. Progress this quarter includes renovating approximately 40 stores, with an additional 160 locations planned for the balance of the year. We closed 14 stores in the quarter and expect to close just under 100 stores within the fiscal year. As a reminder, these closures are concentrated in underperforming mall locations with lease terms expiring towards the end of the year. We continue to identify opportunities to reposition high-value stores in declining venues, with approximately 10 plans for this year and up to 200 in the next three years. The reposition strategy and closures reflect our continued shift away from traditional mall locations as we align our footprint to support unique brand strategies. Over the last year, we've reduced our North America mall revenue penetration to approximately 35%, and we continue to expect progress towards reducing this penetration to 30% in the next few years. We do not expect a material increase in our normal level of investment to drive this strategy forward. Now returning to our digital brands, the technical challenges are behind us, and we have since seen a consistent positive comp performance in Blue Nile. That said, James Allen continues to underperform, reflecting lower brand awareness and its current positioning in the value space for custom engagement rings. We are taking aggressive action to improve performance, including a refined marketing strategy and significantly higher levels of finished product to better meet the timing requirements of customers while we continue to take a deeper look at the brand. Turning to guidance, we expect total sales for the second quarter in the range of $1.47 billion to $1.51 billion with same-store sales in the range of down 1.5% to up 1%. Our sales expectations for the second quarter include quarter-to-date performance near or above the high end of the range, reflecting continued improvement in our two-year stack. This includes a positive low single-digit Mother's Day performance, a trend which has continued since. We expect gross margin rate to be flat to up modestly in the second quarter, continued merchandise margin expansion, and modest deleverage in SG&A. We expect adjusted operating income to be between $53 to $73 million in the quarter. For the year, we are increasing the low end while maintaining the high end of our fiscal 2026 operating guidance. We now expect total sales in the range of $6.57 billion to $6.8 billion with same-store sales in the range of down 2% to up 1.5%. The lower half of our guide continues to provide flexibility in the back half of the year for a measured consumer environment and reflects at the low end a two-year stack consistent with the second quarter. We continue to expect gross merchandise margin expansion for the year as our product and promotional strategies should more than offset current tariffs. We continue to expect SG&A as a percentage of sales to be slightly higher year over year at our high guide. Recall that our outlook also includes an incentive compensation reset within SG&A that is largely offset by cost savings related to this year's reorganization along with normal levels of inflation. One-time costs related to the reorganization of $3.045 billion are expected largely in the first half of the year, and nearly all will be excluded from adjusted results. Reflective of our updated operating guidance and share repurchase to date, we are increasing our expected adjusted EPS by approximately 4% at the midpoint to a range of $7.70 to $9.38 per diluted share. We continue to expect capital expenditures of $145 million to $160 million. Before we turn to Q&A, I'd like to personally thank our Signet Jewelers Limited team for their commitment to our Grow Brand Love strategy and delivering early wins, all in the spirit of our purpose, inspiring love. Operator, let's now go to questions.

Thank you. And ladies and gentlemen, we will now begin the question and answer session. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star followed by the number two. With that, our first question comes from the line of Paul Lejuez with Citigroup. Please go ahead.

Hey. Thanks, guys. I'm curious if you could quantify your unmitigated tariff pressures and then maybe if you could size the pieces in terms of the actions that you're taking to mitigate those pressures? And then second, curious if you could talk about pricing in both lab and natural. I'm curious how each of them are trending within the bridal and fashion categories and how you're thinking about that for the rest of the year? Thanks.

Yeah, Paul. I know, as far as tariffs are concerned, there are really a couple of levers that we're leaning into to take advantage of that. It's not so much about cost impact as it is thinking about what we need to do to continue to hit the right price points and maintain margin structure within the business. So that becomes as much of an exercise in design and assortment architecture to make sure that we can still hit those key price points. If you think about the landscape today, there's an incremental 10% tariff on India primarily. Obviously, that ball is moving around a little bit, and that's why agility is really important for us as we think through it. We do have a little bit of an advantage in the sense that our business is a longer lead time business, so we need to stay out in front of it. It also means we've got a great inventory position going into it where we have the flexibility to adjust our assortments as we hit these key holiday periods. I would also point out that commodity prices are affecting it, and, of course, part of that is gold, which can impact our overall pricing strategies. So, all of this goes into the mix as we think about our sourcing strategy and assortment architecture. As we shared on the call, it's baked into our guidance so we feel confident about how we've accounted for it based on what we know today. But those three biggest levers are really how we think about assortment architecture to deliver; sourcing opportunities from country of origin; and timing of receipts to safeguard the fourth quarter. From a cost standpoint, we've seen a consistent set of actions going on, particularly as it relates to lab versus natural. Natural has stabilized of late, but there is some continued deflation within lab. However, in our numbers, lab growth continues to be a source of expansion for AUR for us, partly because of how consumers have traded up in some categories, and the expansion of lab in fashion really—its lower cost enables the growth of lab as an entry into a category where it would have been underpenetrated before. So that lab growth in fashion is actually an accretive opportunity in expanding the utilization of diamonds in that space.

The only thing I'd add on to that, Paul, is that from a lab diamond perspective, it's decreasing but at a slower pace than we've seen in the past. And then, with respect to quantifying, what we've said is that our guidance includes our view of the impact of tariffs on our business as we know it today, and it includes anything unknown or new that may come forward. We believe that at the low end of our guidance, we provided for some flexibility related to that. We're pleased with the work that the team has done around promotional planning, and, you know, J.K. cited in his prepared remarks that Jared has reduced discounting by 20%, and we've seen that reflected in the 10-Q. As we noted, our three major brands were up positively in comps, which is very important to our overall business. So we're pleased with the execution of our promotional planning and refinement of that strategy to help us navigate through these other factors.

Got it. Thank you, guys. Good luck.

Hi. Good morning. This is Juliana Duque for Ike. For J.K., maybe a couple of questions. If you could compare the performance of fashion and the ongoing recovery of bridal and give more on both there, specifically on any progress on Sage's market share position within each of these two. And additionally, you mentioned last quarter that lab presented a new customer opportunity. Have you seen a ramp-up in that new customer segment in Q1? And then I think that's it. Thank you.

Okay. Yeah. Thanks, Juliana. I think I got it, but if I missed something, please let me know. So on fashion versus bridal, obviously, we talked a lot about the bridal trend. I think I’ve been pretty clear that while I don’t necessarily know that there’s a level of precision that we’ve articulated in the past, the directional movement, up and to the right, has continued, and we see that playing out in this quarter. On the fashion side, this is where I'll come back to what I pointed out in the first part: long lead time business also means it takes time to adjust assortment. We’ve taken very clear actions around where we felt like there were holes in our assortment or where we lacked depth at key price points. I think we’ve been a little more deliberate around where there’s opportunities for newness, which led to same-store sales sequential improvement of four points and moved fashion to positive, which I think is an important first step for us. But I think there's more to go, and it does take time to reset an assortment. It also takes time to build that credibility with customers. I believe that we're doing the necessary work to put ourselves in a favorable position. I think we’ll deliver, but I’m pleased with the progress in the first quarter. The standout has been our work around that sub-$500 price point to shore up gaps in the assortment. That’s critical for us both for everyday sales and for key gifting periods. There are real highlights in a brand like Zales, where Stellar Allure and Wemly are better positioned, relating to trends like stacking in our sales business, as well as sales essentials, focusing on traditional and foundational pieces that are timeless. I think those are important drivers for a brand like Zales. Jared, we’ve talked about Unspoken a lot, which shows there's a growth opportunity related to natural diamonds in fashion pieces. The Shy Collection is another that is driving growth. There are many proof points around our businesses that I think are important as we build customer loyalty overall, both in acquisition and retention. Those are longer measures, so I don’t want to claim victory for just one quarter. However, I believe we are gaining traction in both bridal and fashion, and health will improve over time. On market share, we only get our best views of market share annually due to the cyclical nature of this business. So we only discuss it then, as our data improves. I feel better about our business health, and as we drive comp sales improvement, we believe if we do these things, we will shift to growing bridal market share. Considering the size of where we are in fashion, getting an annual read will be much more valuable for us. We are moving in the right direction in that regard and are happy to see both levers working within the business.

Great. Thank you.

Hi. Nice to see the progress. As you think about the health of the consumer, what are you seeing in the different brands? Is it differing? And are you seeing in terms of price point ranges? Given the AUR went up to 8%, I believe, from 7% last quarter. That trend, where do you see it coming from and progressing? And lastly, as you think about the upcoming holiday season, marketing, new product launches, how are you thinking about that in the midst of this environment of tariffs and potentially more pressured consumer? Thank you.

Dana, can you repeat the first part of that question for us, if you don't mind? I think you were asking about the health of the consumer, but I don't want to guess at it. You cut out for just a second.

No problem. It was about AUR growth increasing from 7% to 8%. Where is that AUR increase coming from? How do you see that developing going forward?

Yeah. The AUR growth has been across the business. The fact of the matter is there are two different dynamics at play. In bridal, I think it’s consistent with what we’ve talked about. The stability of cost and price and really to the degree that customers are making decisions relative to natural versus lab, they're continuing to trade up in size and LGD, and that hasn’t really changed. I think we’ve noted a little more predictability and stability on that front. On the fashion side, even though we are talking about the $250 to $500 price point being a key driver of that business, LGD is expanding the use case of diamonds into fashion and does create trade-up opportunities. While that choice can be discretionary, it’s really opening new merchandise avenues and is helping drive AUR for us. It’s part of where we believe we can see growth. As for the consumer, there’s resiliency there, and what we’re seeing in the AUR increase is more about making sure we are aligning to the right trends and matching design with the needs and wants of consumers. If we do that, consumers are showing the resiliency to spend on things they really want, and if we fall short of that, then some of the pressures around AUR or promotions start to creep in. We continue to focus on the right assortment at the right time with the right value proposition for customers, and I think we’ll continue to see these trends. But one thing I’d call out: while we expect AUR to be up, the growth of fashion at a lower price point in aggregate will moderate AUR in total for us. Our job is to really clarify that within our business to avoid giving a misleading picture of overall health. Regarding marketing, generally for us, our costs are up slightly with a 30% increase in impressions, which is crucial for expanding our customer base. I think this is critical as we move forward, allowing us to target our spend and audience carefully. The interesting thing is we continue to find opportunities to cut back on promotions. I think that’s going to be important to minimize noise for the holiday and ensure we focus on key drivers, which means hitting key price points and leveraging demand windows while striking a balance between traditional and enhanced digital marketing.

Thank you.

Great. Good morning, and thanks for taking my question. I wanted to ask just on the lab-grown diamond business. Could you remind us how much of your business is Lab-grown diamond now? And what's implied for it by the end of the year in terms of penetration? And then, just some commentary, confirming earlier remarks: quarter-to-date, comp sales up low single digits. Could you explain that two-year stack you spoke of? Is that on comps or total sales? Just to clarify. And lastly, on gross margin. Does that include any impact from leverage or deleverage? And what's the leverage point at this level?

Thanks, Mauricio. From a lab-grown diamond penetration perspective, overall penetration is roughly 20%. This is up about five points from last year, aligning with our positioning of our assortment. We believe this increase reflects our efforts to drive LGD in fashion, particularly since it carries a two times higher AUR than other fashion pieces. This is very important for us. Regarding gross margin expansion for us, with the 50 basis points expansion in the first quarter, we did see leverage on the positive 2.5% comp. On a go-forward basis, we believe we can leverage gross margin slightly on positive comps and will continue to see expansion throughout the year at a similar level; that’s reflected in our guidance.

Understood. Thank you so much, and congratulations.

Hey. Thanks for the question, and congratulations on a great quarter. I wanted to lean in a little more to the lab-grown diamond feedback you provided. What is your outlook on your ability to achieve the higher end of guidance if there are increased tariffs coming out of India? I'm trying to understand your exposure to that product line and the risk of higher tariffs.

I appreciate the question. The biggest takeaway as we think about tariffs is that it is a fluid issue. As it stands today, we have a task force that meets weekly, sometimes daily, based on what new cycles may arise, to ensure we're coordinating our actions. I think I should have mentioned this in the first round of questions about tariffs. As the largest player in the space, our ability to leverage our scale thoughtfully as partners is a real advantage. We’re also making sure we're coordinating these efforts across our portfolio, considering the health of our business, the consumer, and our partners. For lab-grown diamonds specifically, I think it's less of a pressure point. We have more control over input costs and can adjust designs and fabrication to meet changing costs. This gives us flexibility in making sure we engineer the right product at the right price point to meet demand. Based on the facts we know now, I don’t see this being one of the critical risks relative to our guidance.

Alright. Thank you for that. Just a quick follow-up on the bridal category. Were your unit growths in the quarter comparable to industry or did you exceed industry trends- with respect to engagement rings?

We believe that, based on external indicators, we are gaining traction in the bridal space. Google searches related to engagements and related topics are up. So we are pleased with what we’re seeing in the bridal category of our business.

Alright. And just one last follow-up: could you indicate what share of your bridal sales were lab-grown in the quarter?

Basically, in the mid-30s range for us. This is up from last year, as you might expect from our core banner sales, particularly at Kay, where we had lower penetration at some of the lower price points in lab. We've improved the assortment architecture related to that. While doing so, we were still able to see an increase in bridal AUR, reflecting the balance between natural and lab-grown.

Thank you very much.

And we have no further questions at this time. I would like to turn it back to J.K. Symancyk for closing remarks.

Okay. Well, in closing today, I’d really like to thank our team again, as well as our other key stakeholders, including our vendors, banking partners, and the investment community. I'm so proud of our team for striking the right balance between solid foundational strategy work and remaining focused on execution to deliver results in a dynamic environment, allowing us to meet both short and long-term goals. I’m encouraged by the extensive time I've spent with our strategic vendors who are committed to the Grow Brand Love strategy. I'm excited about the commitment of all of our stakeholders as we continue to build momentum on our Grow Brand Love strategy. Thank you all for your time today. We look forward to providing additional updates and further progress throughout the year.

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