Signet Jewelers Limited

Good morning and welcome to the Signet Jewelers Fourth Quarter Fiscal 2025 Earnings Call. Please note that this event is being recorded. Joining us today on the call are Rob Ballou, Senior Vice President of Investor Relations, Casey Szymanski, Chief Executive Officer, Joan Hilson, Chief Operating and Financial Officer. At this time, I would like to turn the call over to Rob. Please go ahead.

Good morning. Welcome to Cigna Jewelers' fourth quarter fiscal 25 earnings conference call. During today's discussion, we will make certain forward-looking statements. Any statements that are not historical facts are subject to a number of risks and uncertainties. Actual results may differ materially. We urge you to read the risk factors, cautionary language, and other disclosures in our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. Except as required by law, we undertake no obligation to revise or publicly update forward-looking statements in light of new information or future events. During the call, we will discuss certain non-GAAP financial measures. Further discussion of the non-GAAP financial measures, as well as reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures, investors should review the news release we posted on our website at ir.signajewelers.com. With that, I'll turn the call over to JK.

Thanks, Rob, and good morning, everyone. I'd first like to thank our Signet team. Your efforts positioned us well to deliver positive same-store sales over the last three months, including Valentine's Day. Thank you for all your hard work. Alongside my remarks, we've provided a summary presentation on our website to accompany what I'm covering today. Before we talk about the year ahead and my observations on the business, let's quickly recap the holidays and the actions we've taken since. bridal and services were in line with our expectations over the holidays. However, key gifting price points underperformed in the two weeks before Christmas, leading to a softer fashion performance. While we saw 40% growth in lab-grown diamond fashion, we didn't have enough of the right inventory to meet demand, particularly at the $200 to $500 price points. Since the holidays, the team has been focused on filling these assortment gaps and expanding the availability of on-trend merchandise. Clearly, there's more progress to be made, but I'm pleased with the team's quick adjustments, which delivered positive comp sales in January and quarter to date in both bridal and fashion. We will continue to make changes to our assortment this spring to drive improvement for the next two major gifting seasons, Mother's Day and the winter holidays, and we are tracking to deliver relevant products throughout the coming months. Now, looking to the future with an eye toward driving organic growth, I've immersed myself in the business over these last few months, working alongside Cygnet's leaders to understand our challenges and opportunities. We met with critical stakeholders, including strategic vendors, jewelry industry leaders, and customers. Now, more than ever, I have clear conviction in the upside for Cigna and believe in the strong foundation to build on while fully leveraging the benefits of scale that have not been maximized under our current structure. Our overall Q4 performance and lack of growth over the past several quarters informed our new strategy to grow our business. This strategy, Grow Brand Love, is transformative and focuses on accelerating growth and builds on a strong core foundation to create shareholder value. It requires a relentless focus by our team to grow through style and product innovation, captivating experiences, and building brand loyalty while harnessing centralized core capabilities. In working with our senior team, we've developed three imperatives to drive shareholder value. First, we are moving to a brand mindset rather than banners. This is a critical distinction that I will explain in a moment. Second, we will be relentless in gaining share in the core business and growing in adjacent areas where we have a right to play. And finally, we are changing our operating model and real estate portfolio to accelerate our execution of the first two imperatives. Now let me take you through them in detail. First, Brands build loyalty with customers through emotional and engaging connections, while banners are transactional, literally a static nameplate on the door. Fortunately, our brand portfolio, especially our three largest brands, Kay, Zales, and Jared, all have high consumer awareness and a leading position in the industry. However, growth has been elusive in recent years, reflecting lower consideration. Building brand loyalty, we believe we can drive brand consideration with just a five-point increase worth approximately $500 million in revenue. To this end, we are launching a full modernization of our go-to-market strategy. We're creating a clearer distinction between brands to attract new and loyal consumers that see themselves reflected in the DNA of each brand. To achieve this, our marketing, product, and experiences will invite consumers to follow the stories of our new design collections and collaborations across relevant media channels to drive emotional and everyday connection rather than primarily relying on promotion. Alongside our strategic vendors, we are building in-house design and trend capabilities that will leverage fashion as a differentiator by brand. all with increased speed to market. The first example of this is our Blue Nile by Jared collection. It was developed and released to market in less than half the normal time with a strategic vendor. This collection was one of the best new performers across the holiday. This puts style and innovation in the hands of our brand ambassadors, backed by industry voices, designers, and the creator community. Another example, we created a natural diamond collection called Unspoken at Jared last year. This collection comprised of 14-karat gold infinity-inspired designs that wrap around a brilliant center diamond, infusing style, storytelling, and innovation into a new and unique product. It was one of the stronger introductions over the holidays and gained traction into Valentine's Day. Finally, to round out our go-to-market strategy, we will create a captivating and more modern shopping experience for our customers. Our focus will be an experience reflecting each brand identity. This ranges from new store designs to product presentation, as well as e-commerce for storytelling of style introductions. We are also realigning our real estate footprint to support the positioning of our brands and modernizing our stores through capital improvements. We plan to make meaningful progress this year. Our second strategic imperative is to grow our share in our core, bridal and gold as an example, and further expand into adjacent categories such as self-purchase and gifting. Signet is by far the leader in the U.S. bridal jewelry market today, representing roughly half of our merchandise sales. The total bridal jewelry market in the U.S. is around $10 billion, and we have a nearly 30% dollar share. We believe we can grow our share in this category through assortment and price point architecture, along with more modern design enhancements. We will leverage our in-house design and strategic vendor partners in bridal as well to bring to market a more timely pipeline of new and trending designs in a range of price points. The U.S. fashion jewelry market is over $50 billion, of which we have a mid single-digit share. in everyday jewelry we have only a low single digit share put another way growing our bridal share by one point is worth 100 million dollars in revenue while one point of fashion is more than five times the impact given our high brand awareness and the significance of our scale i believe we have the right to win here through both milestone gifting and self-purchase We're opening our aperture to an opportunity to drive more everyday shopping, making us less reliant on key holidays, diamond pricing, and the bridal market. That said, everyday jewelry is also the fastest-growing part of the industry, and we believe will continue to grow for the foreseeable future. Our third and final strategic imperative is to redesign our operating model to better support the execution of our strategy, Grow Brand Love. We will simplify how we work, increase efficiencies, improve accountability, and reduce costs, all in support of future sales and profit growth. We expect this reorganization to transition over the next quarter, and I am setting higher expectations for the brand leaders to move with greater speed. We're creating an executive leadership team predominantly with the brands, merchandising, marketing, and corporate functions reporting to me, and most of operational teams reporting to Joan, in addition to Blue Nile and James Allen, in her role as chief operating and financial officer. We're also streamlining the organization to speed up decision-making and enable an action orientation for our new go-to-market strategies. Our new model includes reducing the number of our senior leadership team members by roughly 30%. Let me further explain this reorganization. First, we will simplify the structure underlying our brand portfolio and services. Organizationally, we will centralize the leadership and operation of Cignet's brands into four distinct customer families. First, Core Milestone and Romantic Gifting Jewelry, reflecting Kay and Peoples. Second, Style and Trend, composed of Zales and Banter. Third, Inspired Luxury, made up of Jared and Diamonds Direct. And fourth, Digital Pure Play, including Blue Nile, James Allen, and Roxbox. Second, we will be centralizing a number of functions in order to maximize benefits of scale and optimize spend. This includes media buying, certain core basic merchandising and sourcing functions, services, and an integrated digital and IT function. In marketing, we've begun a search for a new chief marketing officer who will be tasked to deliver on the benefits at scale by allocating ad spend to the highest returns for the company while working with the brands to develop creative content and storytelling. Within merchandising, we have many products that we consider core across most of our brands, including solitaires, pendants, stud earrings, and some gold merchandise. Centralizing the buying of this core product will realize sourcing savings and operational efficiencies while allowing the brands to focus on creative design, product assortment, and fashion innovation. This change will also simplify the processes for our strategic vendors. It will enable continued improvements in working capital, as we believe we will be able to rationalize the assortment and lower our inventory levels over time. In services, we'll centralize all repair capabilities under one leader to expand opportunities and accelerate growth in mail-in repair, business-to-business, and personalization. Next, we're going to maximize our technology investments by combining and aligning our digital and IT teams into an integrated function. Again, streamlining the organization to gain speed and improve efficiencies. Finally, we will be reorganizing our store operations team to a brand-specific structure to manage efficiencies and improve speed of decision-making and execution. This will also enable each brand to sharply identify and deliver more distinct experiences for their customers. These changes will allow us to adapt to evolving market conditions through meaningful simplification and increased accountability, while bringing us closer to consumers and realizing the scale advantages that Cigna is capable of achieving. I also wanted to discuss our position and more proactive strategy relative to the diamond category. We recognize it's been a dynamic time in the diamond industry, one that we have a good track record of navigating. In my experience, companies that focus solely on risk or solely on opportunities during times of disruption underperform. Companies that aggressively pursue opportunities while considering risk mitigation tactics, I believe, can thrive in dynamic times. To this end, we will work to protect the allure and value of natural stones and engagement rings while pursuing the significant opportunity lab diamonds provide to grow fashion, particularly within self-purchase and gifting. We're evaluating our brand architecture across our portfolio to be more intentional about diamond assortment mix. Additionally, SIGMET intends to collaborate with De Beers and other industry leaders on more effective marketing, enhanced traceability, and delivering more dynamic consumer education this year. Critically, fashion lab-grown diamonds carry a significant AUR premium within our assortment at attractive margins. As an example, LGD fashion sales are up 60% in our big three brands quarter today, driving fashion AUR growth, margin expansion, and five points of penetration growth in the category to low double digits. We expect this trend to continue bolstering AUR and margin while providing customers new styles and trends, encouraging our customers to trade up from gold jewelry, melee natural diamonds, and cubic zirconium pieces. I'd like to sum up with my key takeaways today before turning it over to Joan. First, we are pivoting from a banner mindset to a relentless focus on our brands. Second, we will focus on growing the core business, bridal and gold, while expanding into adjacent areas where we have a right to win, like self-purchase, gifting, and e-commerce. And third, we are realigning our organization to achieve our objectives, increase accountability, and realize economies of scale. We're excited to execute our Grow Brand Love plan as we reorganize the company to deliver on a framework that can support sustainable profit growth and shareholder value creation in the years ahead. We will have an outsized focus on our big three brands, Kay, Zales, and Jared, while evaluating the role and potential of the other brands in our portfolio. My intention is to keep a sharp eye on their contributions to shareholder value and position within our portfolio. I look forward to updating you as we execute against this strategy. Joan?