NYSE:SIG Signet Jewelers Q3 2024 Earnings Report $59.00 -0.01 (-0.02%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$58.92 -0.08 (-0.14%) As of 04/25/2025 07:08 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Signet Jewelers EPS ResultsActual EPS$0.24Consensus EPS $0.18Beat/MissBeat by +$0.06One Year Ago EPS$0.74Signet Jewelers Revenue ResultsActual Revenue$1.39 billionExpected Revenue$1.39 billionBeat/MissBeat by +$1.41 millionYoY Revenue Growth-12.10%Signet Jewelers Announcement DetailsQuarterQ3 2024Date12/5/2023TimeBefore Market OpensConference Call DateTuesday, December 5, 2023Conference Call Time8:30AM ETUpcoming EarningsSignet Jewelers' Q1 2026 earnings is scheduled for Thursday, June 12, 2025, with a conference call scheduled at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfilePowered by Signet Jewelers Q3 2024 Earnings Call TranscriptProvided by QuartrDecember 5, 2023 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Good morning, and welcome to the Signet Jewelers Third Quarter Fiscal 20 24 Earnings Call. All participants will be in a listen only mode. Please note this conference is being recorded. Joining us on the call today are Rob Belew, Senior Vice President of Investor Relations Jenna Joseph, Chief Executive Officer and Joan Hilson, Chief Financial Strategy and Services Officer. At this time, I would like to turn this conference over to Mr. Operator00:00:56Rob Belew, Senior Vice President of Investor Relations. Please go ahead, sir. Speaker 100:01:02Good morning. Welcome to Cygni Jewelers Third Quarter Earnings Conference Call. During today's discussion, we will make certain forward looking statements. Any statements that are not historical facts subject to a number of risks and uncertainties. Actual results may differ materially. Speaker 100:01:15We urge you to read the risk factors, cautionary language and other disclosures in our annual report on Form 10 ks, Quarterly reports on Form 10 Q and current reports on Form 8 ks. 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 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. Singetjewelers.com. With that, I'll turn the call over to Gina. Speaker 200:01:49Thank you, Rob, and thanks to all of you for joining us today. Our team delivered this quarter with non GAAP operating income at the high end of our expectations. Recall the jewelry category is experiencing its 2nd COVID as engagements are down 25% due to the disruption of dating 3 to 3.5 years ago. Through this environment, our team has continued to be agile and innovative, resulting in Signet growing our bridal market share again this quarter. I'm confident we'll grow from this trough next year, Just like we rebounded strongly from the closures of the pandemic, our team knows our customers, creates unrivaled experiences to meet their needs and delivers on our commitments. Speaker 200:02:36In this time of year, their expertise really shines. I'm honored to work alongside them. I'd like to leave you with 3 key takeaways today. First, we delivered our financial commitments this quarter and remain on track to deliver the year. Even as we delivered a profitable 3rd quarter, we invested in marketing and merchandise strategies to deliver our 4th quarter commitment and to drive share gains. Speaker 200:03:04Jewelry continues to be an important gifting category, particularly among Gen Z, with Black Friday weekend results in line with our expectations. 2nd, the multi year engagement recovery has begun As we predicted, with engagement ring units beginning to rebound in recent weeks. While we still expect a gradual recovery over the next 3 years of the 45 proprietary relationship milestones that we track, we have seen the expected progression to late stage milestones over the past few months. This progression is highly correlated with engagement ring purchases, which we have also seen increase over the last several weeks. Importantly, engagement rings are the catalyst to lifetime value, which makes them a competitive advantage for establishing sustainable long term growth. Speaker 200:04:033rd, our company is strategically positioned to leverage our scale and competitive advantages to help weather the highs and lows of our category And general macro pressures. For example, we are the largest advertiser in our industry by far With 3 times the annual spend of our nearest competitor, the scale and effectiveness of our marketing spend is reflected in the fact That our top three banners Kay, Zales and Jared have top of mind awareness among jewelry consumers that is twice that of nearly any other U. S. Retailer. Our consumer insights also give us foresight, which, for example, Helped us predict the engagement slowdown and reduce our inventory double digits even while investing in newness for the holidays. Speaker 200:04:57Let's look at each of these points beginning with the quarter. We delivered sales of roughly $1,400,000,000 this quarter and $24,000,000 of non GAAP operating income. Prior to the pandemic, the 3rd quarter was consistently a loss quarter for Signet. It's the 1 quarter of the year without a major gift giving occasion and is when we are investing in marketing and merchandise delivery For our largest gifting occasion, the winter holiday season. As a result of our transformation, we've delivered 4 years in a row of Positive Q3 earnings, all while continuing to invest in both our holiday strategy and our long term growth. Speaker 200:05:41Adding to the obstacles our team navigated this quarter, over inventoried independent jewelers continue to drive heightened levels of promotion That said, our brand equities, services, targeted promotional cadence and sourcing efforts Allowed us to increase gross merchandise margin in the quarter, up 2 50 basis points to last year. Further, inventory was down 14% from a year ago, allowing us to bring in more newness, creating a competitive advantage. This includes value engineered pieces that offer great looks and value at hot price points, along with broad assortments of on gold jewelry such as sculpted gold earrings and necklaces and strong presence in lab created items that also provide excellent value. Compared to last year, sell through of new SKUs increased by 30% in the 3rd quarter. The next point I want to underscore is that we are in the midst of the most popular time of year for engagement ring sales, October through February. Speaker 200:06:52As I highlighted above, we've crossed the trough and the engagement recovery has begun. For example, couples moving in together, a late stage milestone, was up 9 points from early 2022. And Google searches for engagement rings are now 10% higher than last year, the first time they've exceeded the prior year In nearly 2 years, the percentage of couples moving to the engagement phase has improved by 5 points, A statistically significant movement over the last 18 months. Beyond the COVID driven engagement recovery, We are also seeing more positive attitudes among younger, unmarried consumers toward getting engaged and married. In our most recent survey, nearly 80% of non married millennial and Gen Z adults Say they want to eventually get engaged and married, which is a notable improvement to younger adults from a 2018 survey. Speaker 200:07:58That's encouraging, as are the multicultural changes we're seeing in engagements. Moving forward, the majority of engagements in the U. S. Will be multicultural, led by growth in Hispanic Americans. This multicultural trend steering our merchandise and marketing strategies as we lean into higher penetration of products like Yellow Gold and provide bilingual marketing and sales expertise that makes our multicultural customers feel respected and welcome. Speaker 200:08:32It's working. In the Q3, Zayo's performance at High Hispanic Doors is better by 130 basis points Compared to the balance of Zayo's fleet driven by assortment, bilingual consultants and signage as well as increased So our data is clear. Engagements are on their way back and we are positioning ourselves to win. We continue to expect a gradual return to pre pandemic levels of engagements that will play out over the coming 3 years, A 3 year tailwind that we can leverage for business and market share growth given our scale and are positioned as the engagement leader of the industry. The recovery of engagement rates is So our catalyst to lifetime value. Speaker 200:09:25We provide services that cement customer relationships, including nearly 80% attachment rate to extended service agreements on bridal pieces. We are also increasingly using our customer data platform, loyalty program and personalized marketing capabilities To meet our customers' ongoing needs for jewelry, to celebrate birthdays, anniversaries and holidays for years to come. For example, we are now approaching 4,000,000 loyalty members. And this quarter, their average transaction value, or ATV, Was 40% higher than our non loyalty members. It's a clear reflection of loyalty as a long term growth driver and scaled competitive advantage. Speaker 200:10:16This brings me to my 3rd and final point. Signet is well positioned to grow reliably over time, thanks to the mode of competitive advantages and scale We've built that are unique in our category. Signet is able to withstand and even gain share Through cyclical dynamics of the jewelry industry and general macro pressures, thanks to those advantages. A good example is how we are managing the price decline of larger loose diamonds this year. The elevated promotional activity of Overstocked Independence is a key contributor to driving down diamond prices to pre pandemic levels in recent months. Speaker 200:11:01In contrast to independent jewelers, our product innovation and assortment, Promotional priorities and scale of buying power have delivered stable ATVs all year, including in recent months, both for natural and lab created diamonds. Within the industry, the natural diamond oversupply situation, Which has been pressuring retail prices is beginning to abate. Independents have been buying less in recent months and their inventory levels have improved by more than 15 points since the Q1. Midstream inventory appears to have peaked In June, and major jewelry manufacturers have dramatically reduced their output. Large diamond miners have recently suspended mining activities and sales for 2 months or longer. Speaker 200:11:54Further, for the first time in more than a decade, De Beers is stimulating category demand with a branded natural diamond marketing campaign over the holiday season. Combined with the upcoming engagement multi year tailwind, We believe the natural diamond market should normalize through next year. But what's most important for us As the world's largest retailer of diamond jewelry is that we are strategic with our partners to drive better pricing, better assortment And better value for our customers by leveraging our inventory discipline and vertical integration. The other growth pillars of our midterm goals are also meaningfully progressing. Our services business, up 5% in the quarter year to date, Have contributed close to one point of our gross merchandise margin expansion. Speaker 200:12:51For example, we continue making great progress With ESA Attachment up to last year again this quarter, improving by 310 basis points. In Accessible Luxury, we've opened 5 Diamonds Direct stores this year, including 3 since the quarter ended, bringing our total to 30 stores. These stores, once reaching full maturity, generate over $15,000,000 a year Our foundry custom jewelry at Jared has grown, including 40% unit growth in Q3 compared to a year ago. This is complemented by our premium assortment doors, which outperformed the balance of the Jared fleet by nearly 900 basis points this quarter. Our digital and marketing capabilities continue to drive efficiencies led by our use of AI in North America And reflecting our ROAS improvement this quarter of 30% to last year in our core banners, We are activating Signet's new CDP for this holiday season more fully than ever before as we target the 35,000,000 people We know have purchased jewelry in the U. Speaker 200:14:11S. In recent years and 14,000,000 people we know are in various stages of dating relationships. To summarize my comments today, the competitive advantages that we've built are working. We are positioned to deliver our commitments this fiscal year and are on track to meet our midterm goals. With that, I'd like to hand it over to Joan. Speaker 200:14:36Thanks, Gina, and good morning, everyone. Our performance this quarter reflects our continued ability to deliver free cash flow improvement On lower comp sales, we generated nearly $1,400,000,000 in sales this quarter, down 12.1% Compared to this time last year, with same store sales down 11.8%. Our performance reflects A 1% improvement in North America's total ATV compared to this time last year or flat on a same store sales basis. Also a one point improvement over first half trends. Traffic was down compared to last year in the mid single digits. Speaker 200:15:22Trends from the Q2 were largely consistent throughout the Q3 across both bridal and fashion as well as across most Price points. As expected, the decline in engagements impacted sales in the quarter, especially in our digital banners, given their more than 80% bridal penetration. Consumer access to credit remains healthy. Overall payment plan penetration was 46% for the quarter similar to last year. Approval rates in store improved compared to last year and the amount financed was in line with the prior year. Speaker 200:16:03Credit Health has continued into the 4th quarter. We delivered $501,000,000 of gross margin this quarter With non GAAP margins increasing 80 basis points to 36% of sales. Within that improvement is a 250 basis point expansion of merchandise margin that reflects the continued strength of our merchandise strategy and the growing penetration of services. Partially offsetting these gains was the deleveraging of the occupancy on lower sales. Turning to SG and A, our non GAAP spend of $477,000,000 or 34.2 percent of revenue Was 280 basis points higher than last Q3. Speaker 200:16:54This year over year change reflects a 50 basis point improvement Compared to the first half of this year, driven by our meaningful cost savings initiatives in our seasonally lowest sales quarter, We achieved $65,000,000 in cost savings this quarter, in line with our expectations, bringing year to date savings to approximately $140,000,000 Key drivers of the cost savings include Non customer impact initiatives such as lower inventory costs related to material recovery, Enhanced credit agreements and overhead efficiencies. De leverage in SG and A was primarily driven by investments in our digital banners and strategic initiatives in our seasonally lowest revenue quarter. For the Q3, non GAAP operating income was $24,000,000 or 1.7 percent of sales. As Gina said, this represents our 4th year in a row of positive earnings in the Q3. This reflects the Flywheel nature of our operating model as we leverage scale and performance to drive consistent cash generation That we then invest to extend our competitive advantages and return cash to shareholders. Speaker 200:18:20Turning to services. Customers continue to see the value of extended service agreements or ESAs Outperforming merchandise by more than 15 points this quarter, consumers continued to be attracted to the great value of our warranty plans, Driving overall attachment 3 10 basis points higher to a year ago with gains in both bridal and fashion categories. Turning to repair, we've made progress ramping up the capacity of our enterprise wide service center in Seattle And now in source appraisal services through Kay in sales. The Tennessee repair facility continues to grow its B2B client base, while also bringing in house all of Kay and Jared's watch repair needs with Veils planned to be integrated next year. Turning to fleet optimization. Speaker 200:19:18Subsequent to the quarter, we sold 15 stores, primarily Luxury Watch Showrooms in the U. K. To the watches of Switzerland Group. The accretive sale multiple generated proceeds of Approximately $53,000,000 This sale represents a gain of approximately $12,000,000 and will be treated as a one time event. The divestiture of this non strategic business allows Signet to accelerate key elements of our U. Speaker 200:19:50K. Transformation plan. Now turning to the balance sheet. We ended the quarter with more than $640,000,000 of cash and equivalents, up more than $315,000,000 compared to a year ago. In terms of free cash flow, we outperformed last year by nearly $100,000,000 in the quarter on lower sales, driven by sustainable working capital improvement. Speaker 200:20:19We repurchased $35,000,000 or nearly 500,000 shares in the quarter. Since the end of the quarter, we've repurchased an additional $11,000,000 or 135,000 shares. This brings our year to date total to more than $128,000,000 And we have approximately $672,000,000 in remaining repurchase authorization as of today. This morning, we also declared a $0.23 dividend to common shareholders. Our return of capital is driven by our consistent free cash flow, led by our flexible operating model and a robust balance sheet, Consistently converting over 70% of non GAAP EBIT to free cash flow in recent years, driven by the structural changes we've implemented. Speaker 200:21:14We ended the quarter with $2,100,000,000 in inventory, which was down $333,000,000 compared to last year or approximately 14% or 12.5 percent excluding the divestiture of inventory held for sale. Our inventory churn of 1.4 times Has improved considerably from a roughly one time turn 5 years ago. We still see opportunity To improve our inventory churns over the midterm as we leverage AI to drive perfect merchandise assortment by store, Leverage flexible fulfillment and continue to optimize our product life cycles. Each 0.1 turn improvement translates to approximately $100,000,000 of additional free cash flow. Our leverage ratios remain below our targets. Speaker 200:22:13With our adjusted gross debt leverage ratio now measuring 2.3 times or 1.8 times on a net basis. Additionally, our net debt The EBITDA ratio is only 0.2 times compared to 2.1 times in FY 2020, Which highlights the improvement to our balance sheet over the last 4 years. Now let's look at guidance. We are reaffirming our FY 'twenty four outlook, excluding the 15 store asset sale in the U. K. Speaker 200:22:49The updated outlook reflects the removal of approximately $25,000,000 of revenue $5,000,000 of 4 wall EBIT for the 15 store sale in the U. K. In the Q4. For the full year, we anticipated these 15 locations to generate approximately $60,000,000 of revenue $8,000,000 of 4 wall EBIT this year. Our top line outlook for the Q4 reflects expectations of a continued elevated promotional activity over the holiday season. Speaker 200:23:24We expect engagements to be down mid to high single digits compared to the previous year versus down mid teens year to date. In the last 3 weeks, we've seen a more than 300 basis point improvement to engagement trends from our Q3 exit rate, and we anticipate further improvement as the quarter progresses. This outlook also reflects Black Friday weekend results in line with our previous guidance expectations for the quarter. Additionally, we have a 53rd week in the 4th quarter, which is worth between $80,000,000 to $100,000,000 in revenue. We're also lapping U. Speaker 200:24:08K. Strikes last year, which is worth a point in comp sales. We continue to expect cost savings in the range of $85,000,000 to $110,000,000 for the 4th quarter. And finally, we expect somewhat less deleveraging on fixed cost in occupancy and labor on higher revenue. Before we move on to Q and A, I want to thank our team for their commitment to our customers as we head into the peak holiday selling season and wish them all a happy and safe holiday. Speaker 200:24:41With that, we'll open the line for Q and A. Thank you. Operator00:24:48Ladies and gentlemen, we will now begin the question and answer session. You will hear a 3 tone prompt acknowledging your request. If you are using a speakerphone, please lift your handset before pressing any keys. Our first question comes from the line of Ike Boruchow from Wells Fargo. Please go ahead. Speaker 300:25:26Hey, thanks for taking the question. Question for Jen and then I have a follow-up for Joan. I guess Jen, just at a high level, I think you've done a good job kind of Over the past couple of quarters, giving us kind of your state of the union on the consumer as you see it. You've gotten through Black Friday, probably a pretty high volume Just how are you feeling about the consumer today, the state of the consumer? Is that much different than what you had seen or thought 3 months ago? Speaker 300:25:50I Speaker 200:25:58would say we haven't Seeing a lot of change in how the consumer is approaching the holiday season. We have, for a while now, expected it to be a late holiday. Consumers are very deal conscious, really waiting to make sure they're getting the best deal they possibly can. Our Black Friday weekend results were in line with our guidance range. That tends to be a lower priced Part of the jewelry category sales, that's not the area that we compete in as much, but we had strong results Across all of our banners on price points under $1,000, Banner performed particularly well that plays More in that lower price fashion. Speaker 200:26:45I think the good news is that we're seeing the recovery in engagements the way we thought we would. The milestones are tracking. Google searches are above a year ago for the first time in a couple of years, And we're definitely seeing engagement ring sales begin to increase. Now we still have a plan down for the quarter. It's a gradual recovery over 3 years, But I think that is definitely a good sign for us. Speaker 300:27:12Got it. And then maybe Joan, so it Looks like the implied comps for the quarter are somewhere like down mid to high, so a little bit better than 3Q. In the slide deck you guys have given, you guys are Forecasting engagement trends to be up double digits next year. Just any help with the shape of next year? Just trying to understand because the comps have obviously They've been negative double digits in 3Q, now still negative. Speaker 300:27:38Like, how do you see the cadence playing out? Anything at a high level might be helpful for us just as we think about how you guys might be planning the business next year. Speaker 200:27:47Sure. As Speaker 400:27:49we said in our prepared remarks, When we look at engagement for the Q4, our expectation is to be down mid- to high single digits With respect to engagements, now that's an improvement, to Jen's point, a gradual improvement coming off of year to date numbers, which were down Mid teen now moving towards low double towards the end of the third quarter. So we can see the progression happening. So we would expect That progression to continue to improve as we move into next year and do expect For the engagement overall for the industry to be towards that 2,400,000 Incidents of engagement next year, and we have roughly a 28% to 30% share In the market, so we would expect that we could continue to hold on to that share as well as gain share with The many competitive advantages that we put in place, notably personalization, targeting customers at the right point in time in their journey, So we can be most helpful to them as they navigate the engagement journey next year. Speaker 300:29:07Any chance you're comfortable saying when that would equate to the comp trend stabilizing or inflecting the positive? Speaker 400:29:14Not at this time. I thought we appreciate the question. And as we move into the Q4 conference call, we'll be really pleased to Operator00:29:31Our next question comes from the line of Mauricio Serna from UBS. Please go ahead. Speaker 500:29:38Great. Good morning and thanks for taking my Just wanted to ask on the operating margin. I think the implied guidance at the midpoint for the 4Q It's roughly 150 basis points expansion year over year and that's an improvement of what we've seen over the last couple of quarters. Maybe if you could walk us through like the puts and takes at the gross margin level and also In the SG and A, just thinking about how each of these are going to move versus the previous quarters? Thank you. Speaker 400:30:11Sure, Mauricio. Thanks for the question. We spoke about in our prepared remarks The 3rd quarter gross margin and we expect that trend to continue into the 4th quarter. But what we're also expecting is The benefit of inventory related costs continuing to improve in the 4th quarter as well as the sourcing Opportunities, the assortment strategy that we put in place to optimize margins. And as we see Bridal recovery begin to occur, we'll see a little bit of dilution there. Speaker 400:30:50But what's really important, I think, in the 4th quarter To note is that the digital banners are expected to recover, as we said, from our synergies. We're expected to gain roughly 50 basis points related just to the digital banners alone. So sourcing, inventory related costs, markdown management, services as well as the digital banner recovery is what we see in gross margin. Cost savings, again, which do affect gross margin as well, Are related to the same things, inventory related costs, but the very disciplined inventory management that our teams widely I'll provide, as well as the clearance Related to that, we take leaner marks on our clearance because of our strong position, and we're able to leverage it as strategic promotion. That provides us margin expansion as well. Speaker 400:31:53I would note there's some offset for fixed cost leverage, but given the size of the quarter, it's less. And so there's less deleverage for occupancy costs, if you will. And then the cost savings are just continuing. We have Marketing opportunities, we have indirect procurement costs and general overhead costs that are cost out for us. There are structural changes in our business that we have put in place and implemented over the last In 5 years, we will have close to $835,000,000 of savings just over the course of our transformation. Speaker 400:32:33So we'll continue to drive on costs that customers don't care about. Speaker 500:32:38Got it. And then maybe if you could just elaborate a little bit more on what you're seeing on the LabCorp and Diamonds dynamics. I know there's been concerns About incremental capacity and maybe some pressure on the prices. Maybe just update us on that and Where does that penetration is in your oral jewelry business? Thank you. Speaker 200:33:03Sure. Hi, Mauricio. So a couple of things on lab grown diamonds. Number 1, the costs have come down considerably this year. We think that growers are now pretty much at the bottom of the cost curve. Speaker 200:33:20The costs that we're seeing are really not much more than the cost of the ingredients, the power to make them and a small margin on that. So We don't see much movement in the future on cost. What we've been able to do really effectively is to keep our ATVs up. We've done that both on natural diamonds and on lab created. In part, that's because of the average price, of a typical diamond sale for us. Speaker 200:33:49We're able to trade customers up into a lab created at a higher ATV, and we've branded lab created. We've brought Innovation, our team has done a really nice job strategically managing that so that it's become a margin help, but not Our revenue headwind, I think, as we go forward, you asked a little bit about penetration. It's low teens as a percentage of our total diamond business, so still not high, but we have seen it Level out a bit. It was growing much more quickly earlier in the year. And over the last couple of months, we've seen Lab Creative level out Quite a bit. Speaker 200:34:32And in the prepared remarks, I talked about the work going on in the diamond industry on natural diamonds. They're special, right? There is finite supply, etcetera. And so we're really seeing a lot of good work going on that is Causing, I think, some of the pressure on natural diamonds to abate, we would expect that to kind of level out to a more normalized place next year. Speaker 500:34:59Got it. Thank you so much. Operator00:35:04Our next question comes from the line of Paul Leishway from Citi. Please go ahead. Speaker 600:35:11Hey, thanks guys. I just want to be clear on your 4th quarter guidance. Are you saying that you expect Your engagement sales in 4th quarter to be down mid to high single digits. And then if that's right, how does that break down in units versus ticket? And also curious if you could talk about, your like for like changes in pricing of lab grown and natural? Speaker 400:35:36So I'll take that, Paul. So engagements, you're correct. We said that engagements, we expect to be down mid- to high single digits in 4Q compared to mid to high teens for the year to date kind of performance. So as we continue to, as I said earlier, move into the first half of next year, we would continue we would expect to continue to See that decline abate and we would move towards that 2,400,000 Speaker 500:36:132,400,000 Speaker 400:36:16incidents of engagements next year. From a pricing perspective, we are You can see through our results and as you look at the 3Q, we have been able to manage our ATV Relatively flat. It's up a point when you consider Blue Nile. And what the team has been able to do is really balance pricing Very nicely through branding of LCD product, special shapes. We believe that LCD in fashion, As an example, is a nice way for us to expand our fashion business. Speaker 400:36:54So we are Feeling that the teams have appropriately addressed the market position of pricing within diamonds balancing natural and LCD. And we really haven't shared units versus dollars in terms of that performance. But we believe that we're on we're seeing the uptick we expected in bridal and encouraged by what we're seeing in fashion. Speaker 600:37:24Got it. What kind of cost changes have you seen on lab grown and natural, like if you look at it on a like for like basis? Speaker 400:37:35So on lab grown, we've seen what everyone's seen in the market is that lab grown costs have come down. We believe that they're likely at their lowest point given there's a cost of Making the lab grown, there's labor, there's energy, there's other those basic costs that go in. So we've seen those costs come down Within lab and our pricing, we've been able to manage, as I said earlier, with The special cuts and the branding. Natural Diamonds, we are able to balance the assortment. We, as you know, sell loose Diamonds as well as finished product. Speaker 400:38:21And between the combination of that and our custom design business, We are able to manage what we're seeing happening in the market. And we, as you know, have a diamond marketplace, which gives us real time pricing of diamonds across the globe. And we are able to really have a keen Sensitivity on pricing in a dynamic sense. So we're leveraging those tools to drive our competitive advantages. Speaker 500:38:54Thank you. Good luck. Operator00:38:58Our next question comes from the line of Jim Sanderson from Northcoast Research. Please go ahead. Speaker 700:39:06Hey, thanks for the question. I was wondering, could you provide us what you expect on North American and international same store sales to get to the Higher end of your 4th quarter guide. Speaker 400:39:21So on a Total company basis is the way that I would express that for you, Jim. And It would be 7% to 8% for the high guide, negative 7% to 8% on the high end. Now remember, in the Q4, just to give you a little color on that, our revenue position, Not in the comp, but we have that extra week, which we have stated as $80,000,000 to $100,000,000 In the U. K, as you mentioned, international, the U. K. Speaker 400:39:58Is cycling The strikes from last year, so that's reflected as they have a better comp than North America relative To that as well as recall the U. K. Sale of the locations for the Watch Showrooms and so that is removed from the base as well. Speaker 700:40:24Understood. So a lot of moving parts there. Yes. Just a quick follow-up question, just following along on the recovery of the engagement cycle. How do you foresee the recovery of the engagement average transaction value and unit profitability as this Recovery and engagements takes place and that's given the changes in demographics that you called out, maybe changes in consumer preferences that are different today Speaker 200:40:58Jim, I think the biggest change will be in units. So we've seen couples progressing through the milestones that we've identified. We see a statistically significant Growth in people getting to that lab stage, which is when they choose to get engaged. So units is where we would expect to see an increase. ATVs have been pretty stable for us across lab created and natural all year. Speaker 200:41:25We're bringing innovation that we think appeals 2 multicultural customers. Yellow Gold is a great example of that. They tend to have a preference. Brands names Is another example. We haven't seen anything that would indicate that a shift toward more multicultural engagements would Cause a significant difference in ATV. Speaker 200:41:48We'd expect it to be very similar to what it is today. The one thing I would say is that we do know among Hispanic customers is that they tend to have a preference for natural diamonds over lab created. And so that will be an interesting trend for us to look at going forward. Speaker 700:42:06All right. Thank you very much. Operator00:42:11Our next question comes from the line of Lorraine Hutchinson from Bank of America. Please go ahead. Speaker 800:42:19This is Melanie on for Lorraine. I just had a question about the promotional landscape, specifically for Black Anything else you can provide on traffic and price points for Black Friday, Cyber Monday? And then still on promotions, what are you embedding in 4Q Speaker 200:42:48Sure. So it's been a different holiday season. Over the last couple of years, we've seen Consumer shop early in part due to supply chain challenges. They came into the market to make sure they could get the holiday gifts they wanted before they sold out. This year has been quite different. Speaker 200:43:06We've been predicting for a while the holiday would come quite late. Usually, the earliest Shoppers for jewelry for holiday are women buying at lower price points for gifts and for themselves. We saw that as the primary customer during Black Friday weekend. Promotionality was very high on those lower price point goods. We were competitive in that context, both through the way we're able to do targeted promotions, Given our CDP and our personalization capabilities, but also we offer a great value through our Sourcing and our vendor relationships. Speaker 200:43:49So as we move through December, we would expect to continue to see A high level approach promotionality, I think that will come up into higher price points as independent jewelers Are still trying to clear some of the inventory they had from last year. We have very healthy inventory, so our level of newness is Excellent. One of the encouraging things that we've seen is that year to date, our newness is selling 30% faster Than it did a year ago. So that's what consumers tend to look for in this kind of an environment. They look for a great value, Which we can provide because of our sourcing capability and they look for innovation. Speaker 200:44:34And we think that's an area where we will really stand out. So All of that to say it was very promotional on Black Friday at lower price points. We think it will be promotional for the rest of the season, and we're ready for that. Operator00:44:55Thank you. There are no further questions at this time. I'd now like to turn the call back over to Ms. Joseph for final closing comments. Speaker 200:45:04Sure. Well, thank you, everybody, for being on the call with us today. In closing, as a company whose purpose is to inspire love, We are committed this holiday season to doing our part to enable people to express love to each other in these difficult times. I'm proud of and very appreciative of our team who brings our purpose to life every day. Thank you. Operator00:45:32Thank you. Ladies and gentlemen, this concludes your conference call for today.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallSignet Jewelers Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Signet Jewelers Earnings HeadlinesID theft ring carried out in Bay Area counties busted: State A.G. BontaApril 26 at 7:39 AM | msn.comSignet Jewelers (SIG) Receives a Hold from Wells FargoApril 15, 2025 | markets.businessinsider.comThe Trump Dump is starting; Get out of stocks now?The first 365 days of the Trump presidency… Will be the best time to get rich in American history.April 27, 2025 | Paradigm Press (Ad)Signet Jewelers Reaches Record $10M Fundraising Benefiting St. Jude Children’s Research HospitalApril 10, 2025 | uk.finance.yahoo.comSignet Jewelers downgraded to Equal Weight from Overweight at Wells FargoApril 9, 2025 | markets.businessinsider.comJim Cramer Once Praised Signet (SIG) as a Turnaround – Now It’s Down Nearly 50%April 8, 2025 | msn.comSee More Signet Jewelers Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Signet Jewelers? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Signet Jewelers and other key companies, straight to your email. Email Address About Signet JewelersSignet Jewelers (NYSE:SIG) operates as a diamond jewelry retailer. It operates through three segments: North America, International, and Other. The North America segment operates jewelry stores in jewelry stores in malls, mall-based kiosks, and off-mall locations in the United States and Canada primarily under the Kay Jewelers, Kay Jewelers Outlet, Jared The Galleria Of Jewelry, Jared Vault, Zales Outlet, Zales Jewelers, Diamonds Direct, James Allen, Banter by Piercing Pagoda, and Peoples Jewellers names, as well as operates online through its digital banners, James Allen and Blue Nile. This segment also engages in jewelry subscription business. The International segment operates stores in shopping malls and off-mall locations primarily under the H.Samuel and Ernest Jones brands in the United Kingdom, Republic of Ireland, and Channel Islands. The Other segment is involved in the purchase and conversion of rough diamonds to polished stones, as well as the provision of diamond polishing services. Signet Jewelers Limited is based in Hamilton, Bermuda.View Signet Jewelers ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of Earnings Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 9 speakers on the call. Operator00:00:00Good morning, and welcome to the Signet Jewelers Third Quarter Fiscal 20 24 Earnings Call. All participants will be in a listen only mode. Please note this conference is being recorded. Joining us on the call today are Rob Belew, Senior Vice President of Investor Relations Jenna Joseph, Chief Executive Officer and Joan Hilson, Chief Financial Strategy and Services Officer. At this time, I would like to turn this conference over to Mr. Operator00:00:56Rob Belew, Senior Vice President of Investor Relations. Please go ahead, sir. Speaker 100:01:02Good morning. Welcome to Cygni Jewelers Third Quarter Earnings Conference Call. During today's discussion, we will make certain forward looking statements. Any statements that are not historical facts subject to a number of risks and uncertainties. Actual results may differ materially. Speaker 100:01:15We urge you to read the risk factors, cautionary language and other disclosures in our annual report on Form 10 ks, Quarterly reports on Form 10 Q and current reports on Form 8 ks. 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 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. Singetjewelers.com. With that, I'll turn the call over to Gina. Speaker 200:01:49Thank you, Rob, and thanks to all of you for joining us today. Our team delivered this quarter with non GAAP operating income at the high end of our expectations. Recall the jewelry category is experiencing its 2nd COVID as engagements are down 25% due to the disruption of dating 3 to 3.5 years ago. Through this environment, our team has continued to be agile and innovative, resulting in Signet growing our bridal market share again this quarter. I'm confident we'll grow from this trough next year, Just like we rebounded strongly from the closures of the pandemic, our team knows our customers, creates unrivaled experiences to meet their needs and delivers on our commitments. Speaker 200:02:36In this time of year, their expertise really shines. I'm honored to work alongside them. I'd like to leave you with 3 key takeaways today. First, we delivered our financial commitments this quarter and remain on track to deliver the year. Even as we delivered a profitable 3rd quarter, we invested in marketing and merchandise strategies to deliver our 4th quarter commitment and to drive share gains. Speaker 200:03:04Jewelry continues to be an important gifting category, particularly among Gen Z, with Black Friday weekend results in line with our expectations. 2nd, the multi year engagement recovery has begun As we predicted, with engagement ring units beginning to rebound in recent weeks. While we still expect a gradual recovery over the next 3 years of the 45 proprietary relationship milestones that we track, we have seen the expected progression to late stage milestones over the past few months. This progression is highly correlated with engagement ring purchases, which we have also seen increase over the last several weeks. Importantly, engagement rings are the catalyst to lifetime value, which makes them a competitive advantage for establishing sustainable long term growth. Speaker 200:04:033rd, our company is strategically positioned to leverage our scale and competitive advantages to help weather the highs and lows of our category And general macro pressures. For example, we are the largest advertiser in our industry by far With 3 times the annual spend of our nearest competitor, the scale and effectiveness of our marketing spend is reflected in the fact That our top three banners Kay, Zales and Jared have top of mind awareness among jewelry consumers that is twice that of nearly any other U. S. Retailer. Our consumer insights also give us foresight, which, for example, Helped us predict the engagement slowdown and reduce our inventory double digits even while investing in newness for the holidays. Speaker 200:04:57Let's look at each of these points beginning with the quarter. We delivered sales of roughly $1,400,000,000 this quarter and $24,000,000 of non GAAP operating income. Prior to the pandemic, the 3rd quarter was consistently a loss quarter for Signet. It's the 1 quarter of the year without a major gift giving occasion and is when we are investing in marketing and merchandise delivery For our largest gifting occasion, the winter holiday season. As a result of our transformation, we've delivered 4 years in a row of Positive Q3 earnings, all while continuing to invest in both our holiday strategy and our long term growth. Speaker 200:05:41Adding to the obstacles our team navigated this quarter, over inventoried independent jewelers continue to drive heightened levels of promotion That said, our brand equities, services, targeted promotional cadence and sourcing efforts Allowed us to increase gross merchandise margin in the quarter, up 2 50 basis points to last year. Further, inventory was down 14% from a year ago, allowing us to bring in more newness, creating a competitive advantage. This includes value engineered pieces that offer great looks and value at hot price points, along with broad assortments of on gold jewelry such as sculpted gold earrings and necklaces and strong presence in lab created items that also provide excellent value. Compared to last year, sell through of new SKUs increased by 30% in the 3rd quarter. The next point I want to underscore is that we are in the midst of the most popular time of year for engagement ring sales, October through February. Speaker 200:06:52As I highlighted above, we've crossed the trough and the engagement recovery has begun. For example, couples moving in together, a late stage milestone, was up 9 points from early 2022. And Google searches for engagement rings are now 10% higher than last year, the first time they've exceeded the prior year In nearly 2 years, the percentage of couples moving to the engagement phase has improved by 5 points, A statistically significant movement over the last 18 months. Beyond the COVID driven engagement recovery, We are also seeing more positive attitudes among younger, unmarried consumers toward getting engaged and married. In our most recent survey, nearly 80% of non married millennial and Gen Z adults Say they want to eventually get engaged and married, which is a notable improvement to younger adults from a 2018 survey. Speaker 200:07:58That's encouraging, as are the multicultural changes we're seeing in engagements. Moving forward, the majority of engagements in the U. S. Will be multicultural, led by growth in Hispanic Americans. This multicultural trend steering our merchandise and marketing strategies as we lean into higher penetration of products like Yellow Gold and provide bilingual marketing and sales expertise that makes our multicultural customers feel respected and welcome. Speaker 200:08:32It's working. In the Q3, Zayo's performance at High Hispanic Doors is better by 130 basis points Compared to the balance of Zayo's fleet driven by assortment, bilingual consultants and signage as well as increased So our data is clear. Engagements are on their way back and we are positioning ourselves to win. We continue to expect a gradual return to pre pandemic levels of engagements that will play out over the coming 3 years, A 3 year tailwind that we can leverage for business and market share growth given our scale and are positioned as the engagement leader of the industry. The recovery of engagement rates is So our catalyst to lifetime value. Speaker 200:09:25We provide services that cement customer relationships, including nearly 80% attachment rate to extended service agreements on bridal pieces. We are also increasingly using our customer data platform, loyalty program and personalized marketing capabilities To meet our customers' ongoing needs for jewelry, to celebrate birthdays, anniversaries and holidays for years to come. For example, we are now approaching 4,000,000 loyalty members. And this quarter, their average transaction value, or ATV, Was 40% higher than our non loyalty members. It's a clear reflection of loyalty as a long term growth driver and scaled competitive advantage. Speaker 200:10:16This brings me to my 3rd and final point. Signet is well positioned to grow reliably over time, thanks to the mode of competitive advantages and scale We've built that are unique in our category. Signet is able to withstand and even gain share Through cyclical dynamics of the jewelry industry and general macro pressures, thanks to those advantages. A good example is how we are managing the price decline of larger loose diamonds this year. The elevated promotional activity of Overstocked Independence is a key contributor to driving down diamond prices to pre pandemic levels in recent months. Speaker 200:11:01In contrast to independent jewelers, our product innovation and assortment, Promotional priorities and scale of buying power have delivered stable ATVs all year, including in recent months, both for natural and lab created diamonds. Within the industry, the natural diamond oversupply situation, Which has been pressuring retail prices is beginning to abate. Independents have been buying less in recent months and their inventory levels have improved by more than 15 points since the Q1. Midstream inventory appears to have peaked In June, and major jewelry manufacturers have dramatically reduced their output. Large diamond miners have recently suspended mining activities and sales for 2 months or longer. Speaker 200:11:54Further, for the first time in more than a decade, De Beers is stimulating category demand with a branded natural diamond marketing campaign over the holiday season. Combined with the upcoming engagement multi year tailwind, We believe the natural diamond market should normalize through next year. But what's most important for us As the world's largest retailer of diamond jewelry is that we are strategic with our partners to drive better pricing, better assortment And better value for our customers by leveraging our inventory discipline and vertical integration. The other growth pillars of our midterm goals are also meaningfully progressing. Our services business, up 5% in the quarter year to date, Have contributed close to one point of our gross merchandise margin expansion. Speaker 200:12:51For example, we continue making great progress With ESA Attachment up to last year again this quarter, improving by 310 basis points. In Accessible Luxury, we've opened 5 Diamonds Direct stores this year, including 3 since the quarter ended, bringing our total to 30 stores. These stores, once reaching full maturity, generate over $15,000,000 a year Our foundry custom jewelry at Jared has grown, including 40% unit growth in Q3 compared to a year ago. This is complemented by our premium assortment doors, which outperformed the balance of the Jared fleet by nearly 900 basis points this quarter. Our digital and marketing capabilities continue to drive efficiencies led by our use of AI in North America And reflecting our ROAS improvement this quarter of 30% to last year in our core banners, We are activating Signet's new CDP for this holiday season more fully than ever before as we target the 35,000,000 people We know have purchased jewelry in the U. Speaker 200:14:11S. In recent years and 14,000,000 people we know are in various stages of dating relationships. To summarize my comments today, the competitive advantages that we've built are working. We are positioned to deliver our commitments this fiscal year and are on track to meet our midterm goals. With that, I'd like to hand it over to Joan. Speaker 200:14:36Thanks, Gina, and good morning, everyone. Our performance this quarter reflects our continued ability to deliver free cash flow improvement On lower comp sales, we generated nearly $1,400,000,000 in sales this quarter, down 12.1% Compared to this time last year, with same store sales down 11.8%. Our performance reflects A 1% improvement in North America's total ATV compared to this time last year or flat on a same store sales basis. Also a one point improvement over first half trends. Traffic was down compared to last year in the mid single digits. Speaker 200:15:22Trends from the Q2 were largely consistent throughout the Q3 across both bridal and fashion as well as across most Price points. As expected, the decline in engagements impacted sales in the quarter, especially in our digital banners, given their more than 80% bridal penetration. Consumer access to credit remains healthy. Overall payment plan penetration was 46% for the quarter similar to last year. Approval rates in store improved compared to last year and the amount financed was in line with the prior year. Speaker 200:16:03Credit Health has continued into the 4th quarter. We delivered $501,000,000 of gross margin this quarter With non GAAP margins increasing 80 basis points to 36% of sales. Within that improvement is a 250 basis point expansion of merchandise margin that reflects the continued strength of our merchandise strategy and the growing penetration of services. Partially offsetting these gains was the deleveraging of the occupancy on lower sales. Turning to SG and A, our non GAAP spend of $477,000,000 or 34.2 percent of revenue Was 280 basis points higher than last Q3. Speaker 200:16:54This year over year change reflects a 50 basis point improvement Compared to the first half of this year, driven by our meaningful cost savings initiatives in our seasonally lowest sales quarter, We achieved $65,000,000 in cost savings this quarter, in line with our expectations, bringing year to date savings to approximately $140,000,000 Key drivers of the cost savings include Non customer impact initiatives such as lower inventory costs related to material recovery, Enhanced credit agreements and overhead efficiencies. De leverage in SG and A was primarily driven by investments in our digital banners and strategic initiatives in our seasonally lowest revenue quarter. For the Q3, non GAAP operating income was $24,000,000 or 1.7 percent of sales. As Gina said, this represents our 4th year in a row of positive earnings in the Q3. This reflects the Flywheel nature of our operating model as we leverage scale and performance to drive consistent cash generation That we then invest to extend our competitive advantages and return cash to shareholders. Speaker 200:18:20Turning to services. Customers continue to see the value of extended service agreements or ESAs Outperforming merchandise by more than 15 points this quarter, consumers continued to be attracted to the great value of our warranty plans, Driving overall attachment 3 10 basis points higher to a year ago with gains in both bridal and fashion categories. Turning to repair, we've made progress ramping up the capacity of our enterprise wide service center in Seattle And now in source appraisal services through Kay in sales. The Tennessee repair facility continues to grow its B2B client base, while also bringing in house all of Kay and Jared's watch repair needs with Veils planned to be integrated next year. Turning to fleet optimization. Speaker 200:19:18Subsequent to the quarter, we sold 15 stores, primarily Luxury Watch Showrooms in the U. K. To the watches of Switzerland Group. The accretive sale multiple generated proceeds of Approximately $53,000,000 This sale represents a gain of approximately $12,000,000 and will be treated as a one time event. The divestiture of this non strategic business allows Signet to accelerate key elements of our U. Speaker 200:19:50K. Transformation plan. Now turning to the balance sheet. We ended the quarter with more than $640,000,000 of cash and equivalents, up more than $315,000,000 compared to a year ago. In terms of free cash flow, we outperformed last year by nearly $100,000,000 in the quarter on lower sales, driven by sustainable working capital improvement. Speaker 200:20:19We repurchased $35,000,000 or nearly 500,000 shares in the quarter. Since the end of the quarter, we've repurchased an additional $11,000,000 or 135,000 shares. This brings our year to date total to more than $128,000,000 And we have approximately $672,000,000 in remaining repurchase authorization as of today. This morning, we also declared a $0.23 dividend to common shareholders. Our return of capital is driven by our consistent free cash flow, led by our flexible operating model and a robust balance sheet, Consistently converting over 70% of non GAAP EBIT to free cash flow in recent years, driven by the structural changes we've implemented. Speaker 200:21:14We ended the quarter with $2,100,000,000 in inventory, which was down $333,000,000 compared to last year or approximately 14% or 12.5 percent excluding the divestiture of inventory held for sale. Our inventory churn of 1.4 times Has improved considerably from a roughly one time turn 5 years ago. We still see opportunity To improve our inventory churns over the midterm as we leverage AI to drive perfect merchandise assortment by store, Leverage flexible fulfillment and continue to optimize our product life cycles. Each 0.1 turn improvement translates to approximately $100,000,000 of additional free cash flow. Our leverage ratios remain below our targets. Speaker 200:22:13With our adjusted gross debt leverage ratio now measuring 2.3 times or 1.8 times on a net basis. Additionally, our net debt The EBITDA ratio is only 0.2 times compared to 2.1 times in FY 2020, Which highlights the improvement to our balance sheet over the last 4 years. Now let's look at guidance. We are reaffirming our FY 'twenty four outlook, excluding the 15 store asset sale in the U. K. Speaker 200:22:49The updated outlook reflects the removal of approximately $25,000,000 of revenue $5,000,000 of 4 wall EBIT for the 15 store sale in the U. K. In the Q4. For the full year, we anticipated these 15 locations to generate approximately $60,000,000 of revenue $8,000,000 of 4 wall EBIT this year. Our top line outlook for the Q4 reflects expectations of a continued elevated promotional activity over the holiday season. Speaker 200:23:24We expect engagements to be down mid to high single digits compared to the previous year versus down mid teens year to date. In the last 3 weeks, we've seen a more than 300 basis point improvement to engagement trends from our Q3 exit rate, and we anticipate further improvement as the quarter progresses. This outlook also reflects Black Friday weekend results in line with our previous guidance expectations for the quarter. Additionally, we have a 53rd week in the 4th quarter, which is worth between $80,000,000 to $100,000,000 in revenue. We're also lapping U. Speaker 200:24:08K. Strikes last year, which is worth a point in comp sales. We continue to expect cost savings in the range of $85,000,000 to $110,000,000 for the 4th quarter. And finally, we expect somewhat less deleveraging on fixed cost in occupancy and labor on higher revenue. Before we move on to Q and A, I want to thank our team for their commitment to our customers as we head into the peak holiday selling season and wish them all a happy and safe holiday. Speaker 200:24:41With that, we'll open the line for Q and A. Thank you. Operator00:24:48Ladies and gentlemen, we will now begin the question and answer session. You will hear a 3 tone prompt acknowledging your request. If you are using a speakerphone, please lift your handset before pressing any keys. Our first question comes from the line of Ike Boruchow from Wells Fargo. Please go ahead. Speaker 300:25:26Hey, thanks for taking the question. Question for Jen and then I have a follow-up for Joan. I guess Jen, just at a high level, I think you've done a good job kind of Over the past couple of quarters, giving us kind of your state of the union on the consumer as you see it. You've gotten through Black Friday, probably a pretty high volume Just how are you feeling about the consumer today, the state of the consumer? Is that much different than what you had seen or thought 3 months ago? Speaker 300:25:50I Speaker 200:25:58would say we haven't Seeing a lot of change in how the consumer is approaching the holiday season. We have, for a while now, expected it to be a late holiday. Consumers are very deal conscious, really waiting to make sure they're getting the best deal they possibly can. Our Black Friday weekend results were in line with our guidance range. That tends to be a lower priced Part of the jewelry category sales, that's not the area that we compete in as much, but we had strong results Across all of our banners on price points under $1,000, Banner performed particularly well that plays More in that lower price fashion. Speaker 200:26:45I think the good news is that we're seeing the recovery in engagements the way we thought we would. The milestones are tracking. Google searches are above a year ago for the first time in a couple of years, And we're definitely seeing engagement ring sales begin to increase. Now we still have a plan down for the quarter. It's a gradual recovery over 3 years, But I think that is definitely a good sign for us. Speaker 300:27:12Got it. And then maybe Joan, so it Looks like the implied comps for the quarter are somewhere like down mid to high, so a little bit better than 3Q. In the slide deck you guys have given, you guys are Forecasting engagement trends to be up double digits next year. Just any help with the shape of next year? Just trying to understand because the comps have obviously They've been negative double digits in 3Q, now still negative. Speaker 300:27:38Like, how do you see the cadence playing out? Anything at a high level might be helpful for us just as we think about how you guys might be planning the business next year. Speaker 200:27:47Sure. As Speaker 400:27:49we said in our prepared remarks, When we look at engagement for the Q4, our expectation is to be down mid- to high single digits With respect to engagements, now that's an improvement, to Jen's point, a gradual improvement coming off of year to date numbers, which were down Mid teen now moving towards low double towards the end of the third quarter. So we can see the progression happening. So we would expect That progression to continue to improve as we move into next year and do expect For the engagement overall for the industry to be towards that 2,400,000 Incidents of engagement next year, and we have roughly a 28% to 30% share In the market, so we would expect that we could continue to hold on to that share as well as gain share with The many competitive advantages that we put in place, notably personalization, targeting customers at the right point in time in their journey, So we can be most helpful to them as they navigate the engagement journey next year. Speaker 300:29:07Any chance you're comfortable saying when that would equate to the comp trend stabilizing or inflecting the positive? Speaker 400:29:14Not at this time. I thought we appreciate the question. And as we move into the Q4 conference call, we'll be really pleased to Operator00:29:31Our next question comes from the line of Mauricio Serna from UBS. Please go ahead. Speaker 500:29:38Great. Good morning and thanks for taking my Just wanted to ask on the operating margin. I think the implied guidance at the midpoint for the 4Q It's roughly 150 basis points expansion year over year and that's an improvement of what we've seen over the last couple of quarters. Maybe if you could walk us through like the puts and takes at the gross margin level and also In the SG and A, just thinking about how each of these are going to move versus the previous quarters? Thank you. Speaker 400:30:11Sure, Mauricio. Thanks for the question. We spoke about in our prepared remarks The 3rd quarter gross margin and we expect that trend to continue into the 4th quarter. But what we're also expecting is The benefit of inventory related costs continuing to improve in the 4th quarter as well as the sourcing Opportunities, the assortment strategy that we put in place to optimize margins. And as we see Bridal recovery begin to occur, we'll see a little bit of dilution there. Speaker 400:30:50But what's really important, I think, in the 4th quarter To note is that the digital banners are expected to recover, as we said, from our synergies. We're expected to gain roughly 50 basis points related just to the digital banners alone. So sourcing, inventory related costs, markdown management, services as well as the digital banner recovery is what we see in gross margin. Cost savings, again, which do affect gross margin as well, Are related to the same things, inventory related costs, but the very disciplined inventory management that our teams widely I'll provide, as well as the clearance Related to that, we take leaner marks on our clearance because of our strong position, and we're able to leverage it as strategic promotion. That provides us margin expansion as well. Speaker 400:31:53I would note there's some offset for fixed cost leverage, but given the size of the quarter, it's less. And so there's less deleverage for occupancy costs, if you will. And then the cost savings are just continuing. We have Marketing opportunities, we have indirect procurement costs and general overhead costs that are cost out for us. There are structural changes in our business that we have put in place and implemented over the last In 5 years, we will have close to $835,000,000 of savings just over the course of our transformation. Speaker 400:32:33So we'll continue to drive on costs that customers don't care about. Speaker 500:32:38Got it. And then maybe if you could just elaborate a little bit more on what you're seeing on the LabCorp and Diamonds dynamics. I know there's been concerns About incremental capacity and maybe some pressure on the prices. Maybe just update us on that and Where does that penetration is in your oral jewelry business? Thank you. Speaker 200:33:03Sure. Hi, Mauricio. So a couple of things on lab grown diamonds. Number 1, the costs have come down considerably this year. We think that growers are now pretty much at the bottom of the cost curve. Speaker 200:33:20The costs that we're seeing are really not much more than the cost of the ingredients, the power to make them and a small margin on that. So We don't see much movement in the future on cost. What we've been able to do really effectively is to keep our ATVs up. We've done that both on natural diamonds and on lab created. In part, that's because of the average price, of a typical diamond sale for us. Speaker 200:33:49We're able to trade customers up into a lab created at a higher ATV, and we've branded lab created. We've brought Innovation, our team has done a really nice job strategically managing that so that it's become a margin help, but not Our revenue headwind, I think, as we go forward, you asked a little bit about penetration. It's low teens as a percentage of our total diamond business, so still not high, but we have seen it Level out a bit. It was growing much more quickly earlier in the year. And over the last couple of months, we've seen Lab Creative level out Quite a bit. Speaker 200:34:32And in the prepared remarks, I talked about the work going on in the diamond industry on natural diamonds. They're special, right? There is finite supply, etcetera. And so we're really seeing a lot of good work going on that is Causing, I think, some of the pressure on natural diamonds to abate, we would expect that to kind of level out to a more normalized place next year. Speaker 500:34:59Got it. Thank you so much. Operator00:35:04Our next question comes from the line of Paul Leishway from Citi. Please go ahead. Speaker 600:35:11Hey, thanks guys. I just want to be clear on your 4th quarter guidance. Are you saying that you expect Your engagement sales in 4th quarter to be down mid to high single digits. And then if that's right, how does that break down in units versus ticket? And also curious if you could talk about, your like for like changes in pricing of lab grown and natural? Speaker 400:35:36So I'll take that, Paul. So engagements, you're correct. We said that engagements, we expect to be down mid- to high single digits in 4Q compared to mid to high teens for the year to date kind of performance. So as we continue to, as I said earlier, move into the first half of next year, we would continue we would expect to continue to See that decline abate and we would move towards that 2,400,000 Speaker 500:36:132,400,000 Speaker 400:36:16incidents of engagements next year. From a pricing perspective, we are You can see through our results and as you look at the 3Q, we have been able to manage our ATV Relatively flat. It's up a point when you consider Blue Nile. And what the team has been able to do is really balance pricing Very nicely through branding of LCD product, special shapes. We believe that LCD in fashion, As an example, is a nice way for us to expand our fashion business. Speaker 400:36:54So we are Feeling that the teams have appropriately addressed the market position of pricing within diamonds balancing natural and LCD. And we really haven't shared units versus dollars in terms of that performance. But we believe that we're on we're seeing the uptick we expected in bridal and encouraged by what we're seeing in fashion. Speaker 600:37:24Got it. What kind of cost changes have you seen on lab grown and natural, like if you look at it on a like for like basis? Speaker 400:37:35So on lab grown, we've seen what everyone's seen in the market is that lab grown costs have come down. We believe that they're likely at their lowest point given there's a cost of Making the lab grown, there's labor, there's energy, there's other those basic costs that go in. So we've seen those costs come down Within lab and our pricing, we've been able to manage, as I said earlier, with The special cuts and the branding. Natural Diamonds, we are able to balance the assortment. We, as you know, sell loose Diamonds as well as finished product. Speaker 400:38:21And between the combination of that and our custom design business, We are able to manage what we're seeing happening in the market. And we, as you know, have a diamond marketplace, which gives us real time pricing of diamonds across the globe. And we are able to really have a keen Sensitivity on pricing in a dynamic sense. So we're leveraging those tools to drive our competitive advantages. Speaker 500:38:54Thank you. Good luck. Operator00:38:58Our next question comes from the line of Jim Sanderson from Northcoast Research. Please go ahead. Speaker 700:39:06Hey, thanks for the question. I was wondering, could you provide us what you expect on North American and international same store sales to get to the Higher end of your 4th quarter guide. Speaker 400:39:21So on a Total company basis is the way that I would express that for you, Jim. And It would be 7% to 8% for the high guide, negative 7% to 8% on the high end. Now remember, in the Q4, just to give you a little color on that, our revenue position, Not in the comp, but we have that extra week, which we have stated as $80,000,000 to $100,000,000 In the U. K, as you mentioned, international, the U. K. Speaker 400:39:58Is cycling The strikes from last year, so that's reflected as they have a better comp than North America relative To that as well as recall the U. K. Sale of the locations for the Watch Showrooms and so that is removed from the base as well. Speaker 700:40:24Understood. So a lot of moving parts there. Yes. Just a quick follow-up question, just following along on the recovery of the engagement cycle. How do you foresee the recovery of the engagement average transaction value and unit profitability as this Recovery and engagements takes place and that's given the changes in demographics that you called out, maybe changes in consumer preferences that are different today Speaker 200:40:58Jim, I think the biggest change will be in units. So we've seen couples progressing through the milestones that we've identified. We see a statistically significant Growth in people getting to that lab stage, which is when they choose to get engaged. So units is where we would expect to see an increase. ATVs have been pretty stable for us across lab created and natural all year. Speaker 200:41:25We're bringing innovation that we think appeals 2 multicultural customers. Yellow Gold is a great example of that. They tend to have a preference. Brands names Is another example. We haven't seen anything that would indicate that a shift toward more multicultural engagements would Cause a significant difference in ATV. Speaker 200:41:48We'd expect it to be very similar to what it is today. The one thing I would say is that we do know among Hispanic customers is that they tend to have a preference for natural diamonds over lab created. And so that will be an interesting trend for us to look at going forward. Speaker 700:42:06All right. Thank you very much. Operator00:42:11Our next question comes from the line of Lorraine Hutchinson from Bank of America. Please go ahead. Speaker 800:42:19This is Melanie on for Lorraine. I just had a question about the promotional landscape, specifically for Black Anything else you can provide on traffic and price points for Black Friday, Cyber Monday? And then still on promotions, what are you embedding in 4Q Speaker 200:42:48Sure. So it's been a different holiday season. Over the last couple of years, we've seen Consumer shop early in part due to supply chain challenges. They came into the market to make sure they could get the holiday gifts they wanted before they sold out. This year has been quite different. Speaker 200:43:06We've been predicting for a while the holiday would come quite late. Usually, the earliest Shoppers for jewelry for holiday are women buying at lower price points for gifts and for themselves. We saw that as the primary customer during Black Friday weekend. Promotionality was very high on those lower price point goods. We were competitive in that context, both through the way we're able to do targeted promotions, Given our CDP and our personalization capabilities, but also we offer a great value through our Sourcing and our vendor relationships. Speaker 200:43:49So as we move through December, we would expect to continue to see A high level approach promotionality, I think that will come up into higher price points as independent jewelers Are still trying to clear some of the inventory they had from last year. We have very healthy inventory, so our level of newness is Excellent. One of the encouraging things that we've seen is that year to date, our newness is selling 30% faster Than it did a year ago. So that's what consumers tend to look for in this kind of an environment. They look for a great value, Which we can provide because of our sourcing capability and they look for innovation. Speaker 200:44:34And we think that's an area where we will really stand out. So All of that to say it was very promotional on Black Friday at lower price points. We think it will be promotional for the rest of the season, and we're ready for that. Operator00:44:55Thank you. There are no further questions at this time. I'd now like to turn the call back over to Ms. Joseph for final closing comments. Speaker 200:45:04Sure. Well, thank you, everybody, for being on the call with us today. In closing, as a company whose purpose is to inspire love, We are committed this holiday season to doing our part to enable people to express love to each other in these difficult times. I'm proud of and very appreciative of our team who brings our purpose to life every day. Thank you. Operator00:45:32Thank you. Ladies and gentlemen, this concludes your conference call for today.Read morePowered by