Signet Jewelers' Q4 2025 Earnings: A Strategic Pivot

Signet Jewelers (SIG) recently reported its Q4 2025 earnings, revealing a mixed bag of results that highlight both challenges and strategic opportunities. The company's performance during the holiday season was underwhelming, with key gifting price points underperforming and inventory mismanagement leading to a softer fashion performance. However, the company's new strategy, "Grow Brand Love," aims to address these issues and drive organic growth. Let's dive into the details and explore what this means for investors.

Key Takeaways from Q4 2025 Earnings

Signet Jewelers reported a 5.8% year-on-year decline in sales to $2.35 billion, slightly beating analyst estimates of $2.33 billion. Same-store sales decreased by 1.1%, and the company's gross margin contracted by 80 basis points to 42.5%. The operating income for the quarter was $152.6 million, down from $416.3 million last year, with an operating margin of 6.5%, down from 16.7% last year. The operating income was impacted by non-cash impairment charges of $200.7 million, substantially related to Digital brands. Despite these challenges, the company's adjusted EPS of $6.62 beat the consensus estimate of $6.25.

The "Grow Brand Love" Strategy

In response to these challenges, Signet Jewelers has unveiled a new strategy called "Grow Brand Love." This transformative strategy focuses on accelerating growth by building on a strong core foundation to create shareholder value. The strategy involves a relentless focus on growing through style and product innovation, captivating experiences, and building brand loyalty while harnessing centralized core capabilities.

The company has developed three imperatives to drive shareholder value:

1. Moving to a Brand Mindset: Signet is shifting from a banner mindset to a brand mindset. Brands build loyalty with customers through emotional and engaging connections, while banners are transactional. Signet's three largest brands—Kay, Zales, and Jared—have high consumer awareness and a leading position in the industry. By leveraging these brands, Signet aims to create more meaningful connections with customers.

2. Gaining Share in the Core Business and Adjacent Areas: Signet is committed to gaining share in its core business and growing in adjacent areas where it has a right to play. This includes expanding the availability of on-trend merchandise and filling assortment gaps, particularly at key price points like $200 to $500. For example, the company saw 40% growth in lab-grown diamond fashion but lacked sufficient inventory to meet demand. Since the holidays, the team has been focused on addressing these gaps, which has delivered positive comp sales in January and quarter to date in both bridal and fashion.

3. Changing the Operating Model and Real Estate Portfolio: Signet is reorganizing its business to drive a brand mindset and centralizing core capabilities to improve speed, maximize benefits of scale, and deliver organic growth over time. This includes transitioning over 10% of mall locations to off-mall and the eCommerce channel over the next three years, leveraging an average mall lease term of just over 2 years.

Financial Performance and Outlook

Signet Jewelers delivered more than $400 million of free cash flow, its fifth year in a row of strong cash conversion to adjusted operating income. This enabled a reduction in its diluted share count by nearly 20% in FY25 by returning approximately $1 billion to shareholders, including the convertible preferred redemptions. The company's capital allocation priorities are organic growth and return of excess cash to shareholders while maintaining a conservative balance sheet.

For Fiscal 2026, Signet expects revenue of $6.53 billion – $6.80 billion, with an estimate of $6.742 billion. The company sees FY26 adjusted EPS of $7.31 – $9.10 versus the estimate of $9.00. Adjusted EBITDA is expected to be $605 million – $695 million. Signet anticipates first-quarter revenue of $1.50 billion – $1.53 billion versus the $1.504 billion estimate. The company sees first-quarter adjusted EBITDA of $94 million – $106 million.

Conclusion

Signet Jewelers' Q4 2025 earnings report highlights both challenges and opportunities. The company's new strategy, "Grow Brand Love," aims to address these issues by focusing on style and product innovation, captivating experiences, and building brand loyalty. While the company faces near-term headwinds, its long-term prospects look promising. Investors should keep an eye on Signet's progress in implementing its new strategy and its ability to deliver on its financial guidance.