Signet's Earnings Calls Reveal Contradictions in Tariff Mitigation, Fashion Strategy, and Consumer Confidence Amid Q3 and Q2 Updates

Date of Call: None provided

Financials Results

• Revenue: $1.4B, comp sales +3% YOY
• Gross Margin: Up 130 basis points YOY (merchandise +80bps, occupancy +30bps, distribution +20bps)

Guidance:

• Raised full-year same-store sales low to -0.2% and maintained high at +1.75%.
• Q4 same-store sales range: +0.5% to -5%.
• Full-year adjusted operating income: $465M to $515M; Q4 adjusted operating income: $277M to $327M.
• Full-year adjusted EPS range: $8.43 to $9.59 per diluted share (includes repurchases to date).
• Q4 gross merchandise margin expected roughly flat to slightly up; capex $145M–$160M; remaining repurchase authorization ~$545M.

Business Commentary:

* Positive Sales Growth and Margin Expansion: - Signet Jewelers reported 3% same-store sales growth for Q3, marking their third consecutive quarter of positive sales growth. - The company expanded adjusted operating income double Q3 of last year and grew merchandise margins by 50 basis points year-to-date. - The growth was driven by expanding merchandise margin strategies and favorable market conditions, offsetting pressures from tariffs and commodity pricing.

• **Brand Equity and Marketing Success:

• Signet's largest brands (Kay, Zales, and Jared) delivered a combined same-store sales performance of 6%, reflecting strategic brand equity work and a refined approach to pricing and promotion.

• The company's approach included modernizing marketing with a robust full funnel media strategy and leveraging brand ambassadors like Antonia Gentry and Chloe Fineman.

• This focus on brand equity and innovative marketing led to double-digit growth in impressions and improved conversion metrics.

• **Lab-Grown Diamonds and Fashion Jewelry:

• LGD fashion expanded its penetration to 15% of fashion sales, nearly doubling last year's rate.

• Jared's premium fashion sub-brands achieved 10% comp sales growth, driven by diamond, gold, and men's jewelry collections.

• The focus on LGD and premium fashion categories contributed to overall growth, particularly in the sub-$1,000 price points.

• **Inventory and Consumer Spending Adjustments:

• For the upcoming holiday season, Signet focused on strategic inventory positioning in key gifting items at targeted price points, such as LGD fashion and men's fashion.
• The company noted concerns about lower to middle-income consumer value expectations, leading to cautious guidance and flexibility in promotional strategies.
• Adjustments were made to meet pronounced value expectations and drive conversion in brick-and-mortar stores.

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted a third consecutive quarter of positive comps (+3% same-store sales), adjusted operating income up >2.5x vs. prior-year Q3, and gross margin expansion of 130 bps YOY. They raised the low end of full-year guidance and detailed inventory and promo positioning for the holiday while noting cautiousness on near-term consumer traffic.

Q&A:

• Question from Paul Lejuez (Citi): Curious if you could talk about what you've seen quarter-to-date and specifically over the Thanksgiving weekend, how that might have informed your comp guidance for 4Q? And maybe you could just dig in a little bit more about the external disruptions since late October that you referenced, just wanted to understand what you were referring to. If that was the traffic comments that you just made? Or if it was something else?
  Response: Q4 guide remains cautious because of softer traffic in the past five weeks—especially in lower/mid‑income–exposed brands; Black Friday weekend is not determinative for Signet (December's final 10 days drive results); company is positioned with inventory and a value-focused promo cadence.

• Question from Lorraine Maikis (Bank of America): So last quarter, you spoke to the low end of guidance if the India tariffs remained. What were the key mitigating factors that had the biggest impact to allow you to raise that low end today?
  Response: Mitigation came from rapid supply‑chain moves and supplier flexibility—shifting country of origin (including some U.S. production), design and sourcing changes, and operational efficiencies that muted the tariff impact.

• Question from Lorraine Maikis (Bank of America): And then can we just talk a little bit more about pricing. With gold prices and tariffs, it sounds like you are pulling the pricing lever a little bit. How do you tread carefully enough, given that you're seeing that pressure at the low-income consumer, I guess, how do you balance the need to offset some of these cost pressures with the consumer struggles that you're seeing?
  Response: For commodity‑driven gold pieces they pass through price where consumers expect commodity moves; for tariff/design impacts they use engineering, design and sourcing levers to hit critical price points (notably sub‑$500 and sub‑$1,000) to preserve value for lower‑income customers.

• Question from Randal Konik (Jefferies): I guess, Joan, maybe what would be helpful is to kind of hindsight fourth quarter last year. Maybe give us a little bit more color on, if not quantitatively, more qualitatively how the quarter played out and kind of how you think about that as it pertains to fourth quarter this year ... And then as a follow-up to that, commentary. Maybe JP can give us some perspective of what you're kind of constructing teams to do to execute the holiday season to make it a success.
  Response: They closed last year's assortment gaps (notably LGD penetration), see consistent conversion and stronger in‑store traffic, and are focused on inventory depth, simplified value messaging and tight execution to drive conversion in December's critical last 10 days.

• Question from Randal Konik (Jefferies): When you think about the bridal category versus the fashion category, just as an industry, how do you think -- how do you feel about those 2 different sectors? And then when you think about architecting the business over the next -- and changes to it over the next 12 to 24 months, are you thinking about changing the balance between bridal and fashion at all any changes you're contemplating thoughts on the portfolio? You keep talking to a distortion of capital towards the mega brands of Kay, Zales and Jared, just kind of curious on how you're thinking about the next 12 to 24 months moving things around the chessboard?
  Response: They will maintain bridal dominance but lean into fashion for outsized growth; mix may shift over time as fashion grows, with capital allocation decisions to be outlined after the holidays.

• Question from Irwin Boruchow (Wells Fargo): To the first question is really just about promo. Maybe JK or Joan, could you talk about the Black Friday week, what your strategies were. Did you deviate from those at all? And then kind of how does promo play into comment -- the cautious commentary. So understanding that the comp guide, just kind of curious how your markdown strategy is planned for the holiday today?
  Response: They stayed on plan over Cyber 5, reduced discounting in targeted areas to protect margin, and retain flexibility in holiday promotions enabled by assortment architecture to serve different income segments.

• Question from Irwin Boruchow (Wells Fargo): Got it. And then within that, Joan, could you maybe for 4Q specifically, the gross margin plan? And could you kind of intertwine your promo plan along with whatever the tariff headwind is? Like basically, you stack the puts and takes for 4Q gross margin that's embedded in the EBIT guide?
  Response: Q4 gross merchandise margin outlook is roughly flat to slightly up, reflecting pricing/assortment actions plus distribution efficiencies; they retain pricing flexibility to respond to promo and tariff variability.

• Question from Irwin Boruchow (Wells Fargo): Just so I'm clear. So the merchant margin flat to up, but the comp is negative, would gross margin be down due to deleverage on fixed costs within [ cards ]?
  Response: Yes—merchant margin flat or slightly up can still result in gross margin pressure if comps are negative due to deleverage on fixed costs.

• Question from Dana Telsey (Telsey Group): I think you had mentioned about some of the smaller banners like James Allen or Banter for the second half of the year, a guide towards the 60 to 90 basis point margin drag. Is that still in place? Or has anything changed there? And 2 other things, given the upcoming holiday season and the opportunity for this year, what is the percentage of newness that you're thinking about in the assortment, whether for bridal or fashion for this fourth quarter? And Joan, any updates on the real estate optimization plans?
  Response: James Allen impact assumed to be ~-120bps to comps; newness target ~30% (focus on depth/content); store refreshes are delivering mid‑single‑digit lifts with ~2‑year payback; plan to close ~100 stores this year and ~150 over two years, with Banter relocations considered.

• Question from Jeffrey Lick (Stephens): I was wondering if you could maybe unpack a little bit more ... If I use last year's EBITDA of 394 and then the high end of your EBITDA this year at 374, it kind of implies that almost no matter what the consumer element is a bigger factor than the improvements that you're making. Could you maybe just unpack? Are we -- is that how it should be read? Or is it possible that things could come in much better because from the get-go, it seems like the consumer element seems to be a much bigger factor than the -- what was thought to be pretty sizable improvements potential for Q4 this year? ... Is there any chance you can give us a sense of the dollar amount if, let's say, tariffs were to go back to, say, 25%, 20%?
  Response: They remain guarded to retain flexibility amid consumer and tariff uncertainty and note incentive‑comp reset impacts EBIT; a reduction in Indian tariffs would be positive for 2027+, but quantifying a dollar amount is difficult given sourcing/design changes already made.

• Question from Mauricio Serna Vega (UBS): Just a point of clarification on the Q4 guidance. When you said that you are within -- well within the range, does that mean you're at the top end, midpoint? I'm just trying to understand that part of the guidance. And then also in Q4, thinking about the promotional environment, can you talk about what you've seen so far in terms of like at an industry level, what you've seen in promotions? And do you expect that to maybe year-over-year be more intense, be in line? Just any thoughts on what you're thinking about that the promotional environment would be great.
  Response: They said they're well within the top‑line range (no specific position disclosed) and are 'cautiously optimistic' for December; promotional intensity may rise with consumer uncertainty, so they plan to remain flexible and responsive.

• Question from James Sanderson (Northcoast Research): I wanted to dig in a little bit more to the fourth quarter guidance, the lower range, the negative 5%. Given the strength you've had in average unit revenues to date, what would it take with respect to average unit volume declines to get to that negative 5% in fourth quarter, both in bridal and in fashion? Just trying to get a sense of where the greatest risk or weakness can emerge for the fourth quarter.
  Response: To hit the low end (-5% comp) they'd expect bridal units down roughly mid‑single digits and fashion units down similarly; at the high end bridal could be down low single digits—units are the primary risk.

Contradiction Point 1

Tariff Impact and Mitigation Strategies

It involves the company's response to tariff impacts and mitigation strategies, which are crucial for managing financial risks and operational challenges.

Last quarter, you projected the lower end of guidance if India tariffs remained. What key factors enabled you to raise that guidance today? - [Lorraine Maikis](Bank of America)

20251202-2026 Q3: Our team has done a great job mitigating impacts by moving production to the U.S. and other countries, finding efficiencies in the supply chain, and partnering upstream. Despite a significant tariff increase, our team has grown the business and removed downside risk. - [James Symancyk](CEO)

What are the potential impacts of Indian tariffs on your business? - [Paul Lejuez](CitiBank)

2026Q2: We are working through tariff impacts with our suppliers. There's flexibility in design and sourcing to mitigate these impacts. The focus is on maintaining price points and leveraging partnerships, despite dynamic tariff environments. - [James Symancyk](CEO)

Contradiction Point 2

Fashion Category Performance and Strategy

It highlights differences in the company's approach to the fashion category, which is a significant part of their business strategy.

What are your thoughts on the bridal versus fashion categories? Are you considering any changes to the balance between bridal and fashion in the portfolio? - [Randal Konik](Jefferies)

20251202-2026 Q3: We maintain dominance in bridal but see outsized growth opportunity in fashion. We're not pivoting from bridal but focusing more into fashion through strategic positioning. - [James Symancyk](CEO)

What is the breakdown of AUR growth in bridal and fashion between product mix and pricing actions? Will this change in H2? - [Paul Lejuez](CitiBank)

2026Q2: Fashion AUR is driven by the introduction of lab-grown diamonds into the mix, expanding the category. Fashion AUR remains strong due to lab-grown diamonds, which carry a premium, and a stabilization in natural and lab diamond markets. - [James Symancyk](CEO)

Contradiction Point 3

Consumer Confidence and Economic Uncertainty

It reflects the company's perspective on consumer behavior and economic conditions, which are critical for sales projections and strategic planning.

Could you share how QTD and Thanksgiving weekend performance have influenced your 4Q comp guidance? What external disruptions since late October are you referring to? - [Paul Lejuez](Citi)

20251202-2026 Q3: We've been cautious as it relates to Q4 all year long. - [James Symancyk](CEO)

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2026Q2: We're pleased with customer response. - [Joan Hilson](CFO)

Contradiction Point 4

Tariff Mitigation and Impact on Business

It highlights differing approaches and levels of impact attributed to tariffs on the company's operations and financial performance.

What key mitigating factors allowed you to raise the lower end of guidance today? - [Lorraine Maikis](Bank of America)

20251202-2026 Q3: Our team has done a great job mitigating impacts by moving production to the U.S. and other countries, finding efficiencies in the supply chain, and partnering upstream. Despite a significant tariff increase, our team has grown the business and removed downside risk. - [James Symancyk](CEO)

How will Signet maintain guidance with potential increased tariffs from India on lab-grown diamonds? - [James Jon Sanderson](Northcoast Research)

2026Q1: Tariffs remain a fluid issue. We leverage our scale to coordinate actions. Control over lab input costs allows flexibility. Tariffs are less of a pressure point in the lab space due to our control over those costs. - [James Kevin Symancyk](CEO)

Contradiction Point 5

Inventory Levels and Production Strategy

It highlights differing statements on inventory levels and production strategies, which directly impact operational efficiency and financial performance.

Given last year's underperformance in the 10 days before Christmas, do you expect sales to accelerate during that period this year? - [Paul Lejuez](Citi)

20251202-2026 Q3: We've seen consistent trends in those brands with more exposure to high-income customers. We have five to eight times the inventory in sub-$500 price points, particularly in fashion, compared to last year. - [James Symancyk](CEO)

What drove the sequential improvement in engagement? - [Virginia Drosos](Virginia Drosos)

2025Q4: Despite some margin pressures, inventory levels are managed tightly. We are improving supply chain effectiveness through better forecasting and data-driven demand planning. - [Virginia Drosos](CEO)