Signet Jewelers Posts Strong Fourth Quarter and Year

Signet says it's the nation's largest retailer of diamonds and has been driving sales by differentiating the assortments and marketing of its various brands.

March 17, 2022, 9:05am

Jewelry is having a moment — and it’s evident from the strong fourth-quarter and year-end results reported Thursday by Signet Jewelers.

A surge of engagements and weddings, greater acceptance of lab-created diamonds, women stacking and layering on necklaces and bracelets, men taking a keen interest in gold and bold pieces, and the desire to look good for Zoom calls, at least from the waist up, helped boost Signet’s net income to $305.7 million, or $4.91 a share, for the fourth quarter ended Jan. 29. That’s up from $245.7 million, or $4.12, earned in the year-ago quarter.

Operating income rose to $402.4 million, up from $291.9 million in the year-ago period.

Total sales rose 28.6 percent to $2.8 billion, or $624.8 million more than the 2020 quarter, and 30.6 percent more, or $658 million, than the 2019 period.

Investors reacted positively to the results, driving Signet’s stock price up 7 percent, or $5.42, to $83.14 on the NYSE Thursday.

“Weddings are back,” stated Jamie Singleton, president of Signet’s Kay, Zales and Peoples divisions, and chief marketing officer. “During the pandemic, we saw a tremendous amount of engagements. This year, two and a half million weddings will take place in the U.S., more than we have seen in nearly 40 years.”

Signet Jewelers Posts Strong Fourth Quarter — Diamond engagement rings from the “Chosen by Jared” collection.

In an exclusive interview, Singleton said bridal, while an important part of Signet’s business, amounts to much more than engagement rings. “Wedding days give us the opportunity to provide jewelry for the bride and groom, bridesmaids, the mother of the bride, and guests attending the wedding. And when couples attend weddings, the likelihood of themselves getting engaged is high,” Singleton explained.

“People are dating again and building new relationships,” Singleton said. “We will see the engagement cycle continue, and when people get engaged, they [typically] buy wedding bands within two months.”

She also said, “Men’s jewelry is on fire. We are seeing young, fashionable men wearing gold and diamonds. They’re wearing earrings, neckpieces, bracelets and rings.”

Singleton also Signet sets itself apart from the competition by being vertically-integrated and able to provide larger stones and lab-created diamonds, which gives a lift to the business.

While inflation generally reduces the will to spend, in the case of jewelry, it’s apparently not all bad. The rising inflation, according to Singleton, is motivating consumers to choose gifts that are “lasting and meaningful,” which is where jewelry fits in since it often embodies sentiment.

Signet’s performance encouraged the company to raise its quarterly dividend 11 percent to 20 cents a share, payable on May 27 to shareholders of record on April 29.

Jewelry can be a more profitable category for retailers considering it’s a less expensive merchandise category to ship compared to others, because of its smaller size. Rising shipping costs have been a factor in reducing profitability at many retailers.

Signet executives also attributed its positive performance to strong execution of its strategies, including differentiating the assortments and the marketing, from banner to banner.

“Kay is very sentimental, geared to the gift-giving customer, while Zales is bolder style-inspired. At Jared, we have a customer who is very aspirational and looking for affordable luxury,” Singleton said.

“We are also tailoring the experience in our stores to be reflective of that. In our Jared stores, we have the Foundary,” which is an interactive way for customers to customize jewelry with the help of jewelry experts.

“Zales has become very digitized in the stores,” she added.

“We are spending more on our store environments than we have in five years. Customers want to come back to stores. [Last year,] we began seeing customers looking for store hours and locations and giving us signals they wanted to come in.”

By channel, brick-and-mortar store sales reached $2.3 billion, and were up 34.6 percent to last year, and 21.7 percent from the 2019 period. Same-store sales grew 23.8 percent from 2020 and were up 35.4 percent from 2019.

E-commerce sales were $556 million last quarter, up 8.7 percent over last year and up 85.4 percent from the 2019 period. “We doubled our e-commerce over the past four years but more customers close their sale in the store. Over 70 percent of them start their journey online. It’s very much a connected mind-set.”

“The investments we have made in our Connected Commerce capabilities and differentiated banner assortment and marketing have driven meaningful share gains, with all categories and all banners outpacing jewelry industry growth,” said Signet chief executive officer Virginia C. Drosos, in a statement Thursday. “Despite a challenging macro environment ahead, we believe that we are well-positioned in partnership with our strategic suppliers. We’re confident in the sustainable competitive advantages we’ve built and our ability to leverage our enhanced infrastructure and scale to continue growing ahead of the jewelry industry.”

Signet expects first-quarter revenues to be between $1.78 billion and $1.82 billion, and revenues for all of 2022 to reach between $8.03 billion and $8.25 billion.

Operating income for the first quarter is forecast at $177 million to $186 million, and for the year, between $921 million and $974 million. Earnings per share are seen coming in at $12.28 to $13 for 2022.

“Our fiscal 2023 guidance reflects topline performance that we believe will outpace the market while also delivering a double-digit operating margin by leveraging sustainable advantages, notably fleet optimization, inventory efficiency and an enhanced labor model,” said Joan Hilson, chief financial and strategy officer. “With a strengthened balance sheet and confidence in our team’s execution, we will continue prioritizing investments that build sustainable competitive advantages and drive shareholder value. To that end, we’ve increased our capital spend for fiscal 2023 as well as our quarterly common dividend and will remain focused on share repurchases.”

For all of last year, sales reached $7.8 billion, up $2.6 billion, or 49.7 percent, compared to 2020 and up $1.7 billion, or 27.5 percent, compared to 2019.

Brick-and-mortar sales were $6.3 billion, up 56.2 percent compared to 2020 last year and 17.2 percent compared to 2019. Same-store sales increased 48.5 percent.

E-commerce sales reached $1.5 billion, up 27.6 percent from 2020 and 101.4 percent compared to 2019.

Signet operates about 2,800 stores primarily under the brand names Kay Jewelers, Zales, Jared, H. Samuel, Ernest Jones, Peoples, Banter by Piercing Pagoda, JamesAllen.com, Diamonds Direct and the jewelry subscription service, Rocksbox.