Why Signet’s Tailwinds Are Stronger Than The Jewelry Market’s Headwinds

The jewelry market had an impressive run over the past three years. According to the Bureau of Economic Analysis, personal consumption of jewelry rose 50% from 2019, up from $61 billion to $91.4 billion in 2022.

But as 2022 progressed, things turned south. First quarter was strong, up 19% year-over-year, then in each successive quarter, personal consumption slowed, ending with a 5% decline in the fourth quarter.

During the quarter when the jewelry market should deliver its highest sales, it clocked its lowest quarterly level in the year. And the declines continued in January when consumption dropped 2% year-over-year.

Not surprisingly, Signet Jewelers
SIG
, the nation’s market share leader, followed much the same trajectory as the overall market, though its fiscal quarters don’t precisely match the calendar quarters. For example, in its fiscal 2023 fourth quarter ending January 28 this year, sales were off 5.2%.

“Despite headwinds and volatility throughout the year, we are confident in the sustainable competitive advantages we’ve built and our ability to leverage our enhanced infrastructure and scale to grow ahead of the jewelry industry,” CEO Virginia Drosos said in a statement.

With the economy hanging in the balance and jewelry demand expected to slow in 2023, Signet’s performance this year will hinge on its competitive advantages to take market share from other industry players. And it has tailwinds to give it confidence it will achieve its goal of 10% market share after growing share from 9.3% in 2021 to 9.7% at the close of the fiscal year.

Drosos and Jamie Singleton, group president and chief consumer officer, shared the advantages that will get the company through an anticipated mid-single digit slowdown in the jewelry market this year.

However, Drosos was pleased to report, “We had one of the strongest Januarys in Signet history,” and the last three days before Christmas were the company’s biggest days of the year.

Covering All Bases

It starts with the company having virtually every nook and cranny in the jewelry market covered by its 11 major brands or banners plus ten regional brands, including Kay Jewelers, Zales, Jared, Banter by Piercing Pagoda, JamesAllen.com, Peoples, H. Samuel, Earnest Jones and recently acquired Blue Nile, Diamonds Direct and Rocksbox jewelry subscription service.

Its offerings span across price points from value-priced, fashion-focused Banter to luxury-leaning Jared, James Allen, Diamonds Direct, Blue Nile and everything in between.

Since joining the company in 2017, Drosos implemented a Brilliance transformation plan which was super-charged three years ago. One of the plan’s objectives was clearly differentiating its banners through distinct messaging, precise targeting and tailored merchandising.

That was a critical priority since, at the time, the company operated over 3,600 stores, many sitting side-by-side in malls. Since then, it’s right-sized its retail footprint by closing some 1,000 stores and continues refining its store formats.

For example, Banter is moving out of the mall’s center aisle in a kiosk format to in-line locations for more privacy to extend piecings beyond earlobes. And the in-line stores are further enhanced through a modular concept that gives them more flexibility to showcase the hottest merchandise and serve customers better with reduced inventory.

Its higher-end, accessible-luxury banner Jareds will grow this year, adding or remodeling some ten stores. And recently acquired Diamonds Direct, which operated 22 mega-stores in the Southeast region at the time of the acquisition, will open five new stores – locations yet to be announced – but Drosos revealed the expansion will extend the banner’s footprint into a more national model.

With the company generating about 20% of its $7.8 billion in sales online during fiscal 2023, direct-to-consumer Blue Nile was an especially choice acquisition announced in August 2022. It joined James Allen in its digital pure-play banner segment, which accounted for 7% of revenues, up from 5% the previous year.

Blue Nile has proven a good fit as it integrates the operations backend into JamesAllen.com’s and refines its product mix to balance lab-grown diamonds, fine jewelry, fashion and bridal.

“As has been the case with Diamonds Direct and James Allen before, we love the entrepreneurial spirit of these businesses. So we try to bring the breath of entrepreneurship into our business and learn from each other. But at the same time, the core values and the fundamentals of our cultures need to be the same for any acquisition,” she continued.

Powered By Technology

Technology is the cornerstone of Signet’s “connected commerce” strategy, which includes virtual try-on, virtual appointments, chat and digital storefronts, as well as inventory distribution and flexible fulfillment modernized by artificial intelligence and machine learning.

But the Signet team believes the breadth and depth of its customer data is its ace in the hole.

“We are flexing the muscle we’ve built into our customer data and marketing analytics,” group president Singleton shared. “We have more insight and knowledge of the customers probably greater than anyone in jewelry. We are entrenched in data and analytics to stay close to our customers.”

And it is adding even more customer data through the newly launched loyalty program that now extends across Jared (17% of revenue), Kay (36%) and Zales (18%) with a total of about two million members.

The insights gathered will be instrumental in extending the lifetime value of the various banner’s customers, who tend to be loyal to their banner point of entry, which typically starts with that all-important engagement ring.

“The emotional and financial point of market entry in the jewelry category is the diamond engagement ring, typically the most expensive first purchase a couple makes together,” Drosos said.

“We work hard to build a trusting relationship during that time as a lot of learning is involved in buying a diamond. Then Jamie and her team follow them through their lifetime, extending to wedding rings, bridesmaid jewelry, first anniversaries, birth of a child and presents. They all add up to lifetime value,” she added.

While the company enjoyed a bump during the pandemic from an uptick in weddings and engagement, it forecasts the number of engagements to be down double-digits this year. Still, the company expects this to be a temporary blip that will recover in 2024.

Plus, its new loyalty program will help tide it over as it is gaining traction through higher purchase frequency and increased average transaction value compared to non-loyalty customers.

Company Culture

“We’ve built a culture of innovation and agility that’s resilient,” Drosos asserted, as she pointed to the company being named three consecutive years as a Great Place To Work Certified honoree. “We’ve built a culture of growth, learning, career and leadership development so that 85% of our employees are proud of what we are doing at Signet.”

Proving the point, the company recently made significant leadership changes, including expanding Singleton’s role to managing the various banners’ leadership teams.

Assuming new, increasingly-responsible positions are:

• Bill Brace who took the position of president at Kay, moving over from Jared’s after four+ years as its president.
• Kecia Caffie, promoted to president Zales after serving five years leading Banter at Piercing Pagoda.
• Stacee Johnson Williams to managing director of Peoples and svp merchandise planning and inventory at Kay, after honing her skills in the company’s inventory management leadership.

And new hires include retail veteran Amy Robinson as president of Banter by Piercing Pagoda, and Claudia Cividino as president of Jared, after serving as CEO of the North America region of Loro Piana.

“At Signet, we have five core values: people first being one and customers being another, having a culture of straight talk, leading bravely and having an ownership mentality,” Drosos said. And these are the qualities demanded and instilled throughout the culture.

“Our team is resilient. We’ve built a strong portfolio of banners and a team capable of pivoting where needed. That’s how we will overcome the headwinds,” she reiterated.

Proof Positive

Drosos concluded by dropping some impressive numbers. Liquidity has grown nearly three times since the company began its transformation, up from about $900 million to $2.6 billion. During that time, it’s returned $1.4 billion to shareholders through share repurchases and dividends.

In addition, the company paid down half-billion dollars in debt to leverage its ratio from an “unhealthy” four-times EBITDAR to a “very healthy” two-times EBITDAR, she related. And the company made two strategic acquisitions, paying $900 million in cash.

“That financial health will allow us to continue to expand even in a down market. This year is one of continued focus on our strategies and investments to create a catapult effect as the economy gets back to where we all hope it will,” she concluded.