• Revenue: $1.35 billion, down 3% year-over-year.
• Same-Store Sales: Down 0.7%, with a 120 basis point drag from digital banners.
• Adjusted Gross Margin: $486 million or 36% of sales, flat compared to last year.
• Adjusted Operating Income: $16.2 million or 1.2% of sales.
• Adjusted EPS: $0.24, in line with last year.
• Inventory: $2.1 billion, up 2% year-over-year.
• Cash and Equivalents: $158 million at the end of the quarter.
• Share Repurchases: $118 million year-to-date, reducing share count by more than 17% to roughly 43.5 million diluted shares.
• Fourth Quarter Guidance: Same-store sales expected to be flat to up 3%, with adjusted operating income between $397 million to $427 million.
• Full Year Guidance: Same-store sales expected to be down 2% to 3%, with adjusted operating income between $540 million and $570 million, and adjusted EPS between $9.62 and $10.08.

• Warning! GuruFocus has detected 6 Warning Signs with LE.

Release Date: December 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Signet Jewelers Ltd (NYSE:SIG) reported its sixth consecutive quarter of sequential same-store sales improvement, indicating a positive sales momentum.
• The company is well-prepared for the holiday season with a go-to-market strategy expected to drive positive same-store sales in the fourth quarter.
• Fashion sales were positive, with strong sell-through of new merchandise, and lab-created diamond fashion sales grew by more than 30%.
• The company completed the redemption of all remaining preferred shares, which is expected to have a permanent accretive impact.
• Signet Jewelers Ltd (NYSE:SIG) has increased inventory penetration of newness to over 30% in core banners, up more than 10 points, to drive holiday selling.

Negative Points

• Same-store sales finished down 0.7% in the third quarter, with a significant impact from digital banners and hurricanes.
• The digital banners, James Allen and Blue Nile, faced challenges, impacting traffic and search placement, leading to a 120 basis points drag on same-store sales.
• Engagement units in North America were down 2% due to performance in digital banners, with overall North America Bridal ATV down mid-single digits.
• The company incurred leadership transition costs of approximately $7 million, which were not initially contemplated in the full-year guidance.
• Revenue for the quarter was down 3% to $1.35 billion, reflecting continued challenges in the digital segment.

Q & A Highlights

Q: Can you clarify the impact of digital banners on your guidance and the margin expansion despite a lower comp? A: Joan Hilson, Chief Financial and Operating Officer, explained that the core banner performance was generally positive, but the digital banners had a significant impact, contributing to a 120 basis point drag on comps. The margin expansion is driven by merchandise margin improvements, particularly from new fashion products, which carry a higher margin.

Q: Can you expand on the digital integration issues and their impact on performance? A: Joan Hilson noted that the API integration challenges are largely resolved, but the delayed replatforming and aided search upgrades impacted digital banner performance. Improvements have been seen in November, but a 1-point impact is still expected in the fourth quarter.

Q: What are you seeing in terms of costs for natural and lab-grown diamonds, and how does this affect retail pricing? A: Joan Hilson stated that lab-grown diamond costs are decreasing faster than retail prices. Signet is managing this through branded product offerings and new fashion assortments, which help maintain average transaction values (ATV) despite some declines in engagement-related ATVs.

Q: Can you provide insights into the quarter-to-date same-store sales and expectations for fiscal 2025? A: Joan Hilson mentioned that the high single-digit same-store sales over Black Friday to Cyber Monday are included in the fourth-quarter guidance. The two weeks before Christmas are crucial for sales. Detailed fiscal 2025 guidance will be provided in the next earnings call.

Q: How is the Bridal category performing, particularly in terms of average transaction value? A: Joan Hilson reported that engagement units are recovering, with a 4-point sequential improvement in North America banners. However, the digital banners' high penetration of engagement products has impacted overall ATV, which remains stable due to a strong fashion assortment.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.