Signet Jewelers Ltd. Q4 FY2025 earnings call

• Holiday performance: Bridal and services in line with expectations, but key gifting price points underperformed before Christmas, leading to softer fashion performance; lab-grown diamond fashion saw 40% growth but lacked inventory at $200-$500 price point.
• Grow Brand Love strategy: Focuses on accelerating growth through style and product innovation, captivating experiences, and building brand loyalty. Includes moving to a brand mindset, growing core business share, and redesigning the operating model.
• Reorganization: Centralizing leadership and operations of brands into customer families, centralizing functions like media buying and merchandising, reorganizing store operations, and reducing senior leadership team by ~30%.
• Diamond category: Protecting natural stones for engagement and pursuing lab-grown for fashion, collaborating with industry leaders on marketing and traceability.

Revenue for the quarter was down 6% but finished ahead of updated guidance. Same-store sales were down 1.1%. Merchandise AUR grew 7% with bridal AUR up 2% (best quarter in 2 years) and fashion AUR up 8%. Adjusted gross margin was $1 billion or 42.6% of sales, down 70 basis points. Adjusted SG&A expense was down $32 million to $638 million, with SG&A rate at 27.1% of sales. Adjusted operating income was $356 million. Inventory ended the year at $1.9 billion, roughly flat to prior year. Capital expenditures were $153 million, and FY '25 free cash flow was $438 million.

• Q1: Total sales expected $1.5 billion to $1.53 billion, same-store sales flat to up 2%; adjusted operating income $48 million to $60 million.
• Year: Total sales $6.53 billion to $6.8 billion, same-store sales down 2.5% to up 1.5%; adjusted operating income $420 million to $510 million; EPS $7.31 to $9.10; CapEx $145 million to $160 million.
• Guidance excludes significant impact from new tariffs and regulations, and anticipates SG&A as a percentage of sales to be slightly higher year-over-year with $50 million to $60 million in savings from reorganization.

• Consumer environment variability impacting sales.
• Potential impact of new tariffs and regulations.
• Competition affecting market share.
• Inventory management challenges related to assortment gaps and demand fluctuations.
• Risk of lab-grown diamond price declines affecting long-term business.

Q: Given the relative size of opportunities in bridal versus fashion, how do they think the mix will shift?

A: James Symancyk said it's about having the right roles by brand and assortment architecture; lab-grown plays more in fashion due to price points and design, while natural is stronger in engagement for certain brands.

Q: Any headwinds anticipated for comp sales?

A: Joan Hilson said they remain prudent and conservative due to the consumer backdrop, but Q1 performance was positive with bridal recovery occurring.

Q: Customer feedback on lab-grown in engagement?

A: James Symancyk said there's a place for both in consumers' lives, with natural stronger in higher-tier brands and lab-grown in more budget-conscious areas for brands like Kay.

Q: Expectations for engagement category market level and AUR?

A: Joan Hilson said engagement category guidance assumes low single-digit change, AUR down low single-digit to flat; fashion AUR expected to grow due to lab-grown inclusion.

Q: Thoughts on store closures and timing?

A: Joan Hilson said stores will be evaluated based on top-line performance, sales transference potential, and market analysis; repositioning of stores in decline venues over 2-3 years.