Signet Jewelers' Q2 2026: Contradictions Emerge on Lab-Grown Diamond Penetration, Digital Banner Impact, Bridal Business Growth, and Tariff Challenges

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $1.5B+, same-store sales up 2% YOY
• EPS: $1.61 adjusted EPS, up 29% YOY
• Gross Margin: Gross margin rate up 60 bps YOY (incl. +30 bps merchandise margin, +20 bps services; -70 bps wholesale/write-down; +30 bps fixed-cost leverage)

Guidance:

• Q3 sales: $1.34B–$1.38B; comps: -1.25% to +1.25%.
• Q3 gross margin rate up modestly; SG&A deleverage (incentive reset, reorg change mgmt, earlier marketing shift).
• Q3 adjusted operating income: $3M–$17M.
• FY sales: $6.67B–$6.82B; comps: -0.75% to +1.75%.
• FY adjusted operating income: $445M–$515M; adjusted EPS: $8.04–$9.57.
• Expect gross merchandise margin expansion for the year.
• Tariffs: If India 50% rate persists (incl. Russian penalty), EBIT skews mid–low end; if penalty removed (to ~25% reciprocal), upper half.

Business Commentary:

* Strong Same Store Sales and Earnings: - Signet Jewelers delivered positive same store sales for eight consecutive months, with Q2 sales growth of 2%. - This performance was driven by a focus on their three largest brands, Kay, Jared, and Zales, which saw combined same store sales growth of approximately 5% in back-to-back quarters.

• Fashion and Merchandising Strategy:
• The company's fashion category saw a 2% comp growth, driven by a 14% penetration of lab grown diamond (LGD) fashion sales.

• This trend is attributed to an expansion of the fashion category through the introduction of LGD products and strategic merchandising efforts across key price points.

• Marketing and Branding Initiatives:

• Signet Jewelers achieved a more than 40% increase in impressions across Kay, Jared, and Zales brands with a mid single-digit increase in media spend.

• The increase in impressions is due to a shift in marketing strategy, focusing on social media and digital channels, and the use of influencers and targeted campaigns like the Love Highway campaign for Jared.

• Tariff and Supply Chain Management:

• Signet Jewelers reacted to a 50% tariff increase on Indian imports by leveraging existing inventories and adjusting production to mitigate tariffs.
• The company is actively working with suppliers to optimize domestic production and shift production to other countries, aiming to minimize tariff impacts on customers and shareholders.

Sentiment Analysis:

• Management delivered comps and earnings ahead of expectations and raised full-year guidance. Quotes: “delivered same store sales of 2%, ahead of our expectations,” “eight consecutive months of positive same store sales,” “We are raising our adjusted EPS guide… to $8.04 to $9.57,” and “Adjusted EPS was $1.61… 29% above last year.” They also said they are “fully prepared and well positioned for holiday.”

Q&A:

• Question from Paul Legas (Citibank): Can you break down AUR drivers in bridal and fashion (mix vs pricing), and how that may change in 2H?
  Response: AUR gains are primarily mix-driven—LGD expands fashion price points and higher-carat/natural mix supports bridal; pricing has stabilized rather than broad increases.

• Question from Paul Legas (Citibank): How do India tariffs impact this year vs. next year; can you mitigate if 50% persists?
  Response: No FY26 guide, but they can mitigate via vendor shifts, country-of-origin changes, selective onshoring, timing, and design—expect to manage similarly next year if needed.

• Question from Lorraine Hutchinson (Bank of America): Update on bridal units and plans into holiday marketing?
  Response: Bridal is stable with AUR strength; units roughly flat to slightly up via fortified entry points and $2–5K focus, aided by stabilizing natural prices.

• Question from Lorraine Hutchinson (Bank of America): What have pricing tests shown across fashion/bridal?
  Response: Reducing promo depth and days (vs. raising list prices) is working; Jared’s success is being rolled to Kay and Zales with brief price 'cool-down' periods.

• Question from Randy Konik (Jefferies): What headroom remains for fashion AUR as LGD mix expands?
  Response: Significant runway remains; LGD fashion is 14% of fashion (2x last year), supporting continued AUR expansion alongside lower promotions and higher gold.

• Question from Randy Konik (Jefferies): Timing for non-core banners to become neutral and CapEx outlook?
  Response: CapEx ~$145–$160M, mainly real estate, likely steady; Blue Nile improving, James Allen being repositioned; focus stays on strengthening Kay/Zales/Jared.

• Question from Robert (Wells Fargo): Q3 guide below Q2 run-rate and holiday comp plan?
  Response: Guide is prudent despite ongoing momentum; expect modest GM expansion and SG&A deleverage; holiday set with deeper LGD fashion at $250–$500 and full-funnel marketing.

• Question from Robert (Wells Fargo): How did lab-grown perform (comps/margins)?
  Response: LGD fashion reached 14% of fashion sales (2x YoY) with healthy, improving margins; pricing stabilized, supporting higher AUR.

• Question from Mauricio Serna (UBS): Q3-to-date trends vs. July and compares?
  Response: Comps remain positive into August after a strong July; expect some price reset 'cool-downs' in Q3 as new assortments land.

• Question from Mauricio Serna (UBS): How are tariffs embedded in FY guidance (high vs. low end)?
  Response: If India’s 50% rate (incl. Russian penalty) remains, EBIT skews mid–lower; removal of the penalty would move results toward the upper half.

• Question from Dana Telsey (Telsey Group): Holiday playbook changes and marketing spend vs. last year?
  Response: Holiday assortment rebuilt with much more on-trend LGD fashion—tripled below $1,000 and bigger increases below $500; marketing to maximize reach with modestly higher, rephased spend.

• Question from Dana Telsey (Telsey Group): Is the team fully built out; and square footage outlook?
  Response: Leadership largely set; tech leader hire pending; square footage modestly lower due to normal plan refinement.

• Question from Jim Sanderson (Northcoast Research): What was fashion unit decline in Q2 and drivers?
  Response: Units fell high single digits, mainly from gold-driven softness at Banter and strategic exits from low-price promotional items at Zales.

• Question from Jim Sanderson (Northcoast Research): Bridal unit outlook for the year?
  Response: Bridal units expected roughly flat to slightly up in 2H.

• Question from Jim Sanderson (Northcoast Research): Target mix for LGD within fashion as assortments build?
  Response: No fixed target; LGD will continue to grow as it expands (not replaces) fashion demand.

• Question from Jim Sanderson (Northcoast Research): Should we expect marketing spend to outpace revenue in 2H?
  Response: No structural step-up; spend is ROI-driven and flexible—Q2 was up ~4% but overall neutral for the year.