Q3 2025 Earnings Summary
- Engagement units are recovering, with North America engagement units up nearly 4% in Q3, excluding digital banners, representing a 7-point sequential improvement, signaling a positive trend in the Bridal category.
- Strong performance in the Fashion category, with new product driving a meaningful expansion in merchandise margin rate; higher penetration of fashion newness is leading to gross margin expansion.
- Positive same-store sales expected in Q4, with high single-digit same-store sales over the Black Friday weekend, indicating strong holiday performance; the company expects same-store sales growth in the range of flat to up 3% despite a 1-point drag from digital banners.
- Continued challenges with the digital banners, James Allen and Blue Nile, are negatively impacting sales, with an expected 1 point drag on same-store sales in the fourth quarter due to delayed replatforming and search upgrades. Management acknowledges that integration issues have significantly affected performance, and while some improvement is seen, the banners are still impacting overall results.
- Average Transaction Value (ATV) in the Bridal category is down, and engagement units are recovering slower than expected. Although there is some sequential improvement, the decline in ATV and slower recovery may indicate underlying weaknesses in this key product category.
- Increased promotional activity to clear inventory may pressure margins. Management noted that they took clearance pricing actions in the third quarter to make way for new products and anticipate a competitive promotional environment in the fourth quarter. Despite lower comps, they expect margin expansion, which could be challenging under increased promotional pressures.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | –3% | Total revenue declined from $1,391.9 million in Q3 2024 to $1,349.4 million in Q3 2025. This decrease is driven by weaker performance in key segments—especially International (–11% YoY) and Other Regions (a dramatic drop)—which contrasts with stronger figures in the previous period. |
North America Revenue | –2% | North America revenue fell from $1,291.1 million to $1,262.0 million. The moderate decline reflects ongoing competitive pressures and diminished consumer spending, consistent with earlier trends of inflationary impacts and lower same‐store sales seen in previous periods. |
International Revenue | –11% | International revenue dropped from $94.0 million to $83.3 million. This steep decline likely stems from heightened global challenges such as adverse currency effects and possible store closures, echoing similar vulnerabilities seen in prior period analyses. |
Other Regions Revenue | Dramatic decline (from $6.8M to $4.1M) | Other Regions revenue decreased substantially from $6.8 million to $4.1 million. This dramatic drop points to underperformance in non-core areas like diamond sourcing and related operations, where previous periods reported higher figures. |
Operating Income | –31% | Operating income fell from $13.30 million to $9.20 million, reflecting compressed margins. The decline is attributed to lower overall sales combined with increased cost pressures—factors that have continued from prior periods and intensified in Q3 2025. |
Net Income | –40% | Net income decreased from $11.70 million to $7.00 million. The sharper decline compared to operating income is due to additional non-operating charges and margin pressures, further deteriorating profitability relative to Q3 2024. |
Earnings per Common Share (EPS) | Increase from $0.08 to $0.10 | Despite lower net income, EPS saw a slight increase from $0.08 to $0.10. This improvement is primarily driven by share repurchase activity reducing the weighted average share count, even as overall profitability trends declined compared to previous periods. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Same‑Store Sales | Q4 2025 | Expected between down 1% to up 1.5% | Expected in the range of flat to up 3% (includes 1‑point drag from digital banners) | raised |
Adjusted Operating Income | Q4 2025 | Expected between $8 million and $25 million | Expected between $397 million and $427 million | raised |
Gross Margin Rate | Q4 2025 | Expected to expand modestly | Expected to expand | no change |
SG&A | Q4 2025 | Expected to deleverage somewhat due to a shift in marketing spend into Q3 | Expected to be up slightly | raised |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Engagement and Bridal Performance Trends | Consistently discussed across Q4 2024, Q1 and Q2 2025 with steady recovery of engagement units, mixed ATV signals, and expectations of multi‐year recovery ( , , ). | Engagement units continue to recover—with a 2% overall decline but a 7-point sequential improvement in North America—though recovery appears slower and digital banner influences are apparent ( ). | Recurring topic with positive recovery but a slight deceleration; digital banner issues now impacting sentiment. |
Fashion Category Growth and New Product Innovation | Highlighted in Q4 2024, Q1 and Q2 2025 with strong sell-through, significant new merchandise introductions, and margin expansion driven by innovations (e.g., LCD fashion, branded designs) ( , , ). | Maintains robust performance with over 30% growth in LCD-driven fashion sales and a strong margin premium on new products, supporting promotion of the category ( ). | Consistently positive with stable strength and continuous innovation, delivering margin benefits. |
Lab-Grown Diamonds Expansion and Pricing Pressures | Addressed throughout Q4 2024, Q1 and Q2 2025, noting increased LCD penetration, higher ATVs (especially in fashion), and pricing pressures due to declining costs versus retail prices ( , , ). | LCD penetration continues to expand particularly in Fashion, but falling prices and competitive pressures continue to challenge margins and impact certain channels like digital banners ( ). | Recurring with growth offset by pricing and margin challenges; sentiment remains mixed. |
Digital Banners Integration and Operational Challenges | Consistently raised in Q4 2024, Q1 and Q2 2025, focusing on integration delays, API issues, and negative same‐store sales impacts affecting James Allen and Blue Nile ( , , ). | Persistent issues remain with integration causing a 120 basis point drag on same-store sales, despite some sequential improvements; full-year guidance still excludes improvement ( ). | Recurring negative sentiment; minor sequential improvements are noted but challenges persist. |
Margin Management Amidst Promotional and Cost Pressures | Emphasized across Q4 2024, Q1 and Q2 2025 where new product introductions and services growth helped offset higher marketing expenses and promotional discounting pressures, leading to modest improvements in gross margins ( , , ). | New product initiatives continue to support margin expansion, yet increased promotional activities and cost pressures (including higher SG&A and marketing spend) dampen the benefit ( ). | Recurring with cautious optimism; strategic pricing and new products help, but expense pressures remain. |
Promotional Activity and Competitive Discounting | Consistently mentioned from Q4 2024 through Q1 and Q2 2025 regarding deep discounting by competitors, inventory clearance measures, and resultant pressures on ATVs and margins ( , ). | Continued competitive discounting is evident, with clearance pricing now expected to hit 9–10 points higher than prior periods, indicating persistent margin pressure ( ). | Recurring and possibly intensifying; discounting remains a key challenge affecting margins. |
Loyalty Program Expansion and Inventory Optimization | Q1 2025 discussed significant loyalty program growth (e.g., 25% increase in new users, 50% uplift in active members) combined with focused inventory optimization strategies; Q2 2025 reiterated efficient inventory management though with less emphasis on loyalty ( , ); Q4 2024 focused mainly on inventory. | There is no new specific mention of loyalty program expansion in Q3 2025, and inventory optimization is also less highlighted relative to earlier periods. | Previously emerging with strong performance, but less emphasized in Q3 2025, suggesting a possible integration into broader strategies or deprioritization in current reporting. |
Strategic Partnerships and Store Renovations | Q1 and Q2 2025 emphasized active initiatives including a De Beers partnership for training and new natural diamond collections, as well as plans for extensive store renovations to boost sales; Q4 2024 focused on renovating around 300 stores to drive sales uplift ( , ). | Not mentioned in the Q3 2025 call. | Previously noted as future catalysts, but absent in Q3 2025 reporting—indicating a potential delay or lower current focus despite their long-term impact. |
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Gross Margin Expansion
Q: What's driving your gross margin expansion?
A: Merchandise margin is driving gross margin expansion, thanks to a higher penetration of fashion newness and a mix shift toward new product assortment. This is expected to continue into the fourth quarter, with expansion based on the higher penetration of new fashion products. -
Digital Banners Impact
Q: How are digital banners affecting comps?
A: Digital banners had a 120 basis point negative impact on comp sales in Q3 due to replatforming delays and integration issues. While improvement is seen in November, a 1 point negative impact is expected in Q4 from digital banners. -
Costs and Pricing of Diamonds
Q: How are diamond costs affecting pricing?
A: Costs for lab-grown diamonds are decreasing faster than retail prices. To manage this, we are introducing new branded products in Bridal and Fashion categories, which carry 2x higher average transaction values, balancing the assortment within key price points. -
Engagement Units and ATV Trends
Q: What's happening with engagement units and transaction values?
A: Engagement units are recovering, down 2% in Q3 but showing a 4-point sequential improvement. Excluding digital banners, North America engagement units were up nearly 4%, a 7-point sequential improvement. Average transaction value was down in Q3 but stabilized due to our Fashion assortment. -
Same-Store Sales and Guidance
Q: How are quarter-to-date sales and outlook?
A: We had a high single-digit same-store sales increase over the Black Friday weekend. The quarter-to-date performance is within our Q4 guidance range. The two weeks prior to Christmas are crucial, and we are confident in delivering a positive comp for the quarter. -
Profitability of Digital Banners
Q: Are digital banners profitable, and what's the plan?
A: While we don't comment on operating margins, the top-line growth and introduction of finished jewelry in Blue Nile and James Allen are essential for margin expansion. We expect these banners to get back on track with our long-term growth plans, focusing on assortment mix and expense management to improve profitability. -
Promotional Environment
Q: How is the promotional environment affecting margins?
A: In Q3, we promoted clearance products to make way for newness, slightly impacting margins. For Q4, we've provided flexibility within our gross margin to remain competitive, and our guidance includes allowances for promotional activities. -
Share Count and EPS Impact
Q: How is share count affecting EPS calculations?
A: Due to preferred share repurchases and settlement amendments, diluted share count was about 48 million in the first half and 44 million in the second half, leading to a full-year diluted share count of 46.2 million. We expect to exit the year at 43.5 million shares, providing additional EPS accretion going forward. -
Black Friday Sales Comparison
Q: How did Black Friday sales compare to last year?
A: We didn't provide last year's numbers, but this year we reported a high single-digit comp over Black Friday weekend, which is included in our positive Q4 guidance.
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