Sign in

    Signet Jewelers Ltd (SIG)

    Q4 2024 Earnings Summary

    Reported on Mar 10, 2025 (Before Market Open)
    Pre-Earnings Price$102.46Last close (Mar 19, 2024)
    Post-Earnings Price$90.00Open (Mar 20, 2024)
    Price Change
    $-12.46(-12.16%)

    What went well

    • Gross margins are expected to improve in the back half of fiscal 2025, driven by sourcing savings as inventory turns and new products sell through. The company anticipates that both gross margin and operating margin will improve in the second half of the year. ,
    • Services segment, which carries a 20-point higher margin than merchandise, is expected to outpace merchandise sales in fiscal 2025, supporting gross margin expansion and top-line growth. In Q4, services outperformed merchandise sales by 1,000 basis points. ,
    • Store renovations are delivering mid-single-digit sales lifts, with plans to renovate 300 stores in fiscal 2025, including 200 Kay stores. These renovations are capital efficient and are expected to drive growth, particularly in the second half of the year. ,

    What went wrong

    • Operational issues in the digital banners James Allen and Blue Nile are causing a significant sales drag, with an expected 2% negative impact on same-store sales for the fiscal year. The integration challenges have led to lower fulfillment and conversion rates, and fixes are not expected until later in the year, potentially prolonging the negative impact.
    • Margin improvements are back-half weighted, indicating potential near-term pressure on gross margins. The company acknowledges that gross margin benefits from sourcing savings and new product sell-through will largely occur in the second half of the year, suggesting weaker margins in the first half.
    • Deep discounting by independent jewelers is pressuring average transaction values, and the jewelry industry is expected to decline by mid-single digits. Consumers remain highly value-conscious, and increasing awareness of falling lab-created diamond prices may further impact sales and margins.

    Q&A Summary

    1. Engagement Recovery and Forecast
      Q: Can you update us on engagement trends and forecasts?
      A: Engagements are recovering as expected, with a trough in Q4. We anticipate a 5% to 10% increase in engagements for fiscal year '25, back-weighted due to gradual recovery and seasonality. Couples tend to get engaged between October and February, so we expect strengthening as the year progresses.

    2. Gross Margin Outlook
      Q: How will gross margins perform in Q1 and over the year?
      A: We expect gross margins to improve slightly in Q1 despite negative comps, driven by sourcing efficiencies and increased newness. Sourcing savings and disciplined inventory management will contribute, with more pronounced margin improvements in the back half as new inventory sells through.

    3. Digital Banners Performance
      Q: What's impacting the performance of Blue Nile and James Allen?
      A: Operational issues from integrating Blue Nile and James Allen caused longer fulfillment times and a dip in conversion. Fixes are underway, but fiscal year guidance assumes a 2-point comp drag from digital banners. Core e-commerce remains strong.

    4. Cost Savings Initiatives
      Q: Can you detail the $350 million cost savings plan?
      A: We anticipate $150 to $180 million in cost savings this year, with roughly half from sourcing savings and half from AI and non-customer-facing expense reductions. Sourcing savings are more back-half weighted.

    5. Competitive Landscape and Discounting
      Q: How is competitive discounting affecting you?
      A: Independent jewelers are deeply discounting, especially in lab-created diamonds for Bridal and Fashion, putting pressure on average transaction value. Our value-engineered newness helped maintain stable transaction values, and we expect inventories at independents to normalize, easing pressure.

    6. Services Business Growth
      Q: What are your expectations for the Services business?
      A: Services continue to outperform, growing 1,000 basis points above merchandise sales in Q4. With higher attachment rates in Bridal and new tools like POS prompts, services offer a gross margin 20 points higher than merchandise. We expect continued growth in FY '25.

    7. Store Renovations and ROI
      Q: What's the plan for store renovations and expected benefits?
      A: We're renovating 300 stores, about 10% of our fleet, focusing on capital-light improvements like LED lighting and digital displays. Early results show a mid-single-digit sales lift in Kay stores and over 10% lift in Jared stores with 18% to 22% IRR. Benefits will be more back-half weighted.

    8. Tax Rate Changes
      Q: How will the new tax legislation affect future rates?
      A: The Bermuda tax legislation will impact us starting in FY '26, increasing the tax rate by 3 to 4 points to around 23% to 24%. A deferred tax benefit was recorded, with cash tax benefits occurring over the next 10 years.

    Related Publications