Signet Jewelers Limited

Within merchandise, we delivered growth across all categories, bridal, fashion, and watches. This performance underscores the strength of our assortment architecture and ability to respond to evolving consumer preferences. In bridal, continued focus on differentiated offerings and strategic pricing resonated most for mid-tier consumers, with Kay, Zales, and Peoples all delivering high single-digit sales growth or better. This strong growth was led by long-standing brand collections like Neil Lane, Vera Wang, and Monique Louvier. In fashion, Jared delivered 10% comp sales growth, reflecting strong performance in diamond, gold, and men's jewelry, bolstered by strength of recent collections like Italia D'Oro. Alongside that, we continue to see runway in the fashion category, particularly in lab-grown diamonds, or LGDs, which expanded penetration to 15% of fashion sales this quarter, roughly double last year's rate. In marketing this quarter, we are making progress on modernizing our playbook. This includes a more robust full funnel media strategy, amplified social media and digital first lead content as well as brand ambassadors like Antonia Gentry and Chloe Fineman to drive buzzworthy campaigns. We continue to see double digit growth and impressions off a low to mid single digit increase in spend from this updated approach. At Jared, we're using story led marketing to drive results. This quarter, Jared launched its storied diamond collection in partnership with De Beers. This collection uses blockchain technology to track a stone's journey from its origin in Botswana all the way to its final setting in Jared's collection. Alongside this, we premiered A Diamond is Born, a documentary by Academy Award-winning filmmaker Luc Jacquet. This documentary details the diamond's journey as well as the lives that it enhances along the way. We look forward to seeing the impact of this campaign over the holiday as early results are driving traffic. My second key takeaway today relates to our efforts to expand merchandise margin. Year to date, we have delivered 50 basis points on merchandise margin expansion with 80 basis points for Q3, despite a significant impact from tariffs and increases in gold costs. We have been carefully rolling out a refined pricing and promotion strategy. While this has included select price increases, it's a much more fulsome playbook. We are carefully turning the dials on how many days our brands are on promo, what items are eligible, and depth of discount, particularly periods where there is no pre-existing consumer expectation for value shopping. Promotion can be an effective traffic driver, but over-reliance on it can impact brand equity and ultimately leave money on the table. Brand equity also helps drive margin expansion. Jared is furthest along with its brand identity work and overall pricing and promo strategy, leading to 25% reduced discounting to Q3 last year. Lastly, our high margin services business is also growing faster than merchandise and helping expand margins. It's the overall combination of these efforts driving year-to-day results, despite pressure from tariffs, and notable increases to gold costs. With regards to the current tariff landscape and specifically India, we believe that we have mitigated a majority of the higher rates through strategic sourcing and the merchandise margin actions I've detailed and will be the same levers we look to as we set our sights on the year ahead. Turning to the holiday season, based on customer insight and preferences as well as learnings from last holiday, we have taken a decisive inventory position in key gifting items at targeted price points. This strategy includes on-trend categories like LGD fashion, men's fashion, gold jewelry, and colored stones. For example, we've made a material investment in LGD fashion at price points below $1,000 compared to last holiday. We're also being strategic in our marketing spend this holiday. More than 70% of adults now stream as a primary way to watch video, so we continue to rebalance the channels we spend into in order to drive efficient reach. This work will be even more important as we navigate a period of lower US consumer confidence. We've taken action to meet the more pronounced value expectations of consumers this season with a well balanced assortment and promotional cadence. Delivering on holiday is our highest near term priority, and our Grow Brand Love strategy continues to set the stage for sustainable long-term growth. Summarizing my key takeaways today, first, we delivered our third consecutive quarter of positive same-store sales and grew adjusted operating income double Q3 of last year. Second, our efforts to expand merchandise margin are delivering meaningful and sustainable results that have worked to drive operating margin expansion and offset pressure from tariffs and commodity pricing. Third, we believe we're well positioned for the holiday season with a focused assortment aligned to key categories and price points and supported by a modernized marketing approach. With that, I'd like to turn it over to Joan.

Thanks, J.K., and good morning, everyone. Revenue for the quarter was approximately $1.4 billion, with comp growth up 3% to last year. This reflects the expansion of average unit retail of 7%. Unit performance improved sequentially, while still down to last year, driven by a better performance at banter and sales. Fashion AUR grew 8% largely on assortment mix to LGD fashion, which carries a higher AUR, as well as higher gold prices. Bridal AUR grew 6% in the quarter, reflecting a growing mix of LGD wedding and anniversary bands, which also carries a higher AUR than other bands. Importantly, services grew high single digits in the quarter, with nearly five consecutive years of positive comps. We saw growth in extended service agreements, or ESAs, which saw attachment rates up over 1.5 points in the quarter. This reflects higher attachment online for bridal, and higher in-store attachment and fashion. Moving on to gross margin, we delivered a rate expansion of 130 basis points to last year. This was led by merchandise margin expansion of 80 basis points, which JK detailed a moment ago. We also delivered 30 basis points of occupancy leverage reflecting the efficiency within our operating model to expand margins on a slightly positive comp. Lastly, we drove a 20 basis point improvement from distribution efficiencies, taking advantage of higher gold prices by accelerating scrap recovery, as well as better shrink performance. The SG&A rate for the quarter was nearly flat, despite a 70 basis point impact from higher incentive compensation. Excluding the incentive compensation, SG&A improvement reflects more efficient marketing spend and store labor planning, as well as favorability in transaction fee costs. Adjusted operating income was $32 million for the quarter. This result is ahead of our guidance equally on higher sales and operating efficiencies across gross margin and SG&A. The combination of our capital allocation strategy, further tariff mitigation efforts, the improvements in our operating model, and the focus on the three largest brands led to a more than 2.5 times increase in adjusted EPS. Turning to real estate, the work to refresh stores this year is already delivering mid-single-digit sales lists to stores recently renovated at Kay, Jared, and Zales. Additionally, early results from the reposition in FK stores are also showing positive traction, pacing towards just over a two-year payback as we continue to relocate high-performing doors away from declining venues to better locations in otherwise strong markets. Now turning to the balance sheet, inventory ended the quarter at $2.1 billion, down 1% to last year. despite a nearly 50% increase in gold costs and higher tariffs. Cash ended the quarter at $235 million with total liquidity of approximately $1.4 billion with an undrawn ABL. Free cash flow improved by more than $100 million for the quarter and by more than $150 million year-to-date from timing of receipts that will shift payment to the fourth quarter and inventory discipline. We repurchased approximately $28 million or roughly 300,000 shares in the quarter, bringing our year-to-date repurchases to nearly $180 million or 2.8 million shares, which represents more than 6% of a diluted shares outstanding. Our remaining repurchase authorization is approximately $545 million. Turning to guidance, we are modestly updating our expectations. This includes raising the low end of our full year guide to reflect our beat in the third quarter, further tariff mitigation efforts, and a measured outlook for the fourth quarter. This measured outlook reflects external disruptions since late October and potential continued softness in consumer confidence. We believe it prudent to have a cautious approach to guidance given we've seen softer traffic in the past five weeks, particularly among brands with more exposure to lower to middle income households. We are raising our full year same store sales low guide to down 0.2% and maintaining our high guide of plus 1.75% and introducing a fourth quarter same-store sales range of plus 0.5% to down 5%. With just over 70% of the quarter to go, we're well within that range. Our guidance assumes merchandise margin rate to be roughly flat to a slight increase in the quarter, providing some flexibility for the current macro environment. we are raising our full-year adjusted operating income low guide by $20 million to $465 million and maintaining our high guide of $515 million. This translates to an increased adjusted EPS range of $8.43 to $9.59 per diluted share, inclusive of share repurchases to date. Lastly, we're introducing a fourth quarter range of $277 to $327 million of adjusted operating income. We also continue to expect $145 to $160 million in capital expenditures for the year, inclusive of pulling forward real estate spend to take advantage of the strong returns we've seen to date. Before we turn to Q&A, I'd like to thank the team for your dedication, resilience, and focus this year. I wish a happy and healthy holiday season to you and to your families. Operator, let's now go to questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Paul Leshway with Citi. Your line is now open.

Hey, thanks, guys. I'm curious if you could talk about what you've seen quarter to date, and specifically over the Thanksgiving weekend, how that might have informed your comp guidance for 4Q, and maybe you could just dig in a little bit more about the external disruptions since late October that you referenced. Just wanted to understand what you were referring to, if that was a traffic comment that you just made or if it was something else. Thanks.

Yeah, Paul. Thanks for the question. You know, I think we've been pretty cautious as it relates to Q4 all year long. And, you know, our guide, we're We're maintaining a little bit of softness at the start of November, which obviously you've seen everything from consumer confidence surveys to issues with government shutdown snap. Our consumers are dealing with a lot. And what we saw quarter to date is really seeing that play out a little bit, most notably in the brands that have you know, a greater density of lower and middle-income customers. Outside of the U.S., consistent trends in those brands of ours that have more exposure to high-income customers, we're still seeing, you know, spends be consistent. And so while we've watched, you know, moderation of that and really believe that, you know, the holiday is going to happen per normal and that, you know, we've got confidence in our plan moving forward, we also believe didn't feel like that, you know, that prudence around Q4 was, was wrong. We've been pretty consistent in that guide all year. And, uh, I think this is a reflection of that. I, as far as, you know, as far as the weekend, um, you know, we don't, I don't know. I, what I, what I've learned is I've looked through our data and seen play out as first of all, black Friday to cyber Monday is just not as, as big of a, of an impact on our quarter. You know, if you look at the month of November, it's, it's 25% of our total, uh, quarter. So for us, December is a whole lot more important than, uh, you know, good black Friday, bad black Friday in between really has, has, you know, very little bearing on, on our results. Uh, our overall performance is so much more tied to those 10 days leading into, to Christmas. When you, when you look at, at the volume, those days are, are, are more important than, than the whole month that we just, uh, that we just finished. Uh, I think we've seen fairly consistent results quarter to date, you know, from all the way through black Friday. So no, you know, no big, no big change there and, and no, uh, you know, call for, for pessimism, but I think we're right to be guarded. And I do think we've got a customer that, um, is, is going to be more intently focused on, as they come through the holiday, and our guide and our actions are really focused on that.

The only thing that I would ask about J.K. I was going to add that the guide that we've given and what we've said in our prepared remarks is that we believe we're well within the top-line guide for the fourth quarter, which is important. And to J.K.' 's point, we have 70% of the quarter ahead of us. And so at this position we believe it's prudent to be conservatively positioned and provide for variability in consumer spending.

Got it. And then I guess just to follow up on the 10 days leading up to Christmas, obviously I think you kind of had a miss there last year. So was it your expectation that once we get to that point that you would see an acceleration in sales as we move to that period within the quarter?

No, we think we're well positioned for it. I mean, I would say we, you know, the, if you recall the, the opportunity that we had last year was we really were under, uh, under inventory, uh, relative to the sub 500 and sub $1,000 price points, uh, particularly in the fashion side. And, you know, I, I mean, depending on what, what bucket you're looking at and what, what brand you're looking at, we we've got anywhere from five to eight times, uh, the, the inventory there, well-positioned on trend, same investment, particularly in LGD fashion at those lower price points that has been driving improvement all year. And we're really ready for the business and I think have the right promotional cadence set up to be able to support what's going to resonate with customers. So We're certainly building towards that, and I think we're positioned to be able to deliver value to customers during that time period, which also should represent an opportunity for us to drive performance different than last year. You got it. Thank you. Good luck. Yeah. Thanks, Paul. Appreciate the question.

Your next question comes from Lorraine Hutchinson with Bank of America. Your line is now open.

Thank you. Good morning. Last quarter, you spoke to the low end of guidance if the India tariffs remained. What were the key mitigating factors that had the biggest impact to allow you to raise that low end today?

I appreciate the question, Lorraine, and maybe more importantly, I appreciate the work our team has done to deliver it. We've We've never fully dimensionalized a number as it relates to tariffs, in part because it moved around a lot. I think one of our challenges has always been, if I gave you a number on Tuesday, on Wednesday, it might look a little bit different just based off of the volatility there. And even though even though we haven't seen the India tariffs pull back, you know, through a combination of a number of things, a lot of moves as it relates to country of origin to really partner with our supplier. When I talk about our teams, I'm not just talking about our merchants and supply chain folks who've worked hard, but upstream, our supplier partners have really been nimble. And, you know, we've moved some production to the U.S., we've moved some production to other countries, we've you know, found ways to build efficiency in the supply chain. You know, in this environment, given the commodities, there is a little bit of price that has moved through. And I think, you know, we've been able to mitigate that and mute it ultimately to try to protect value for our customers along the way. And, you know, given what our team has worked through, particularly over the last couple of months, not only does that position as well for the holiday, but ultimately these are the same levers that that we will use to drive the businesses next year. But I, I'm, I love the ask the question, cause I think it, it really does point to the fact that, you know, despite we, this, this disruption and moving from, you know, effectively a low of, of 5% tariff to north of 50% tariff in, in, in India, our team's been able to do that, grow the business and actually raise the bottom side of guide and take that downside off of the table. which I just think is great work across our business and also puts us in a position of strength as we're moving into this next year.

Thanks. And then can we just talk a little bit more about pricing? With gold prices and tariffs, it sounds like you are pulling the pricing lever a little bit. How do you tread carefully enough, given that you're seeing that pressure at the low-income consumer, I guess? How do you balance

need to offset some of these cost pressures with the consumer struggles that you're seeing yeah it's you know thank you i i i think that's the the art and science of of of running a retail business right now and and for us um you know i'll break it into two parts gold as a as a straight commodity is you know and when you think about that think about you know more gold forward pieces or or know things like gold chain for example um that are that are all about gold i think historically we've seen that customers understand that's commodity market they understand the value associated with it and um as as we as we pass along the fluctuations of price on the that are purely commodity driven um we generally see customers recognize that value. And we're obviously tethered to a market and look to leverage our scale and strength of supply chain to make sure that we're offering the right value proposition relative to the rest of the market. I think our team does that well. And historically, every time we see what we think may be a ceiling, we recognize the consumer understands that commodity price and tends to be resilient because of the residual value of what they're buying. And so, um, you know, we may see a little bit of a drop off in units and gold as a result of some of those price increases, but from, uh, uh, that, you know, that plays out across the market and we know how to navigate that pretty well in the case of, you know, tariffs and, or, you know, other, the other side of that coin, that's where it really becomes important for us to think about design. Um, you know, all of the elements of a piece of jewelry and how do we leverage design and our supply chain and supplier partner base to really drive sharp adherence to some of these key price points. And I think that is more important this time of year than ever. You know, if I look at a business like, you know, Kay, for example, sub $500, we're You know, we're significantly higher in inventory and positioning than where we were last year, because we know that's going to be critically important to that customer. That customer, you know, will understand those key price points, whether it's, you know, that item that I buy for $199 or $299 or $500. And we work hard to engineer a product that still delivers value proposition and carries that emotional value, but can stay within the price point ranges that make sense for the holiday.

Thank you. Your next question comes from Brandy Koenig with Jefferies. Your line is now open.

Great. Thanks a lot. I guess, Joan, maybe what would be helpful is to kind of hindsight fourth quarter last year, maybe give us a little bit more color on, if not quantitatively, more qualitatively, how the quarter played out and kind of how you think about that as it pertains to, you know, for fourth quarter this year, I think you said that the 10 days, 14 days, whatever it was before Christmas last year were pretty difficult providing opportunity. So just be helpful to kind of get some perspective on how everything kind of played out last year to give people some perspective, how things should, you know, maybe play out this year. And then as a follow-up to that, you know, commentary on, Maybe JK can give us some perspective of what you're kind of instructing teams to do, you know, to execute, you know, the holiday season to make it a success. You've done a good job or done work around marketing and merchandising. So just kind of just give us your thoughts on what you're instructing everyone to kind of get done over the next, you know, 30 to 60 days. Thanks, guys.

So thanks, Randy. With respect to last year, I mean, it was clear that we had assortment gaps. in key gift-giving price points, particularly under $1,000 and even more so under $500. And we did not have the lab-grown penetration in fashion, particularly in fashion, somewhat in bridal, but we didn't have that penetration last year. This year, lab diamonds are roughly 40% of our bridal business, and they're up to 15% double last year in our lab-grown fashion business. So we've closed that gap and really responded to what the customer was asking for last year that we didn't have, and we've now bridged that gap. So we feel strongly about this sortment architecture that we've been able to put forward. Importantly, Randy, the next step of that is we need to be in-depth positioned and key price points in key styles. The team has worked very diligently to ensure that as we progress through the holiday selling period and we approach the last 10 days before Christmas, which we know is critically important, we're in stock in the key items that the customer is responding to. One of the things that we're seeing that gives us confidence is that our conversion from quarter to quarter has been relatively consistent. So we believe as we get closer to the holiday selling period, we're seeing strength in our traffic and brick and mortar stronger that, you know, that will bode well for us on top of the conversion metric that has remained relatively consistent. So that speaks to, for us, the strength of our assortment and closing that gap. We also have fortified post-holiday selling. As you'll recall, we lead up to Valentine's Day in the month of January. It's not as big of a holiday for us, but it's an important holiday for us. And we've ensured that we are in stock and have receipt flow post the holiday selling season, which will bode well for the first quarter of next year.

Um, I think as far as the next 30 to 60 days, I mean, Joan, Joan touched on it. I, December is, is a critically important month and, and you know, it is particularly important because that's when, that's when customers that shop our category, you know, really do come more into the mindset of, of, of making a purchase. And, and, you know, we're a, we are a great last minute option, whether that's because people save for it or, or because it's a simple solution at the end. I think it's incumbent on us to, to make sure that we make that as frictionless for customers as possible. Um, and you know, I think if, if of anything, you know, this category, um, can be a little bit intimidating to customers and, uh, you know, at a time period where, where I think there's a little bit more going on with a little bit more uncertainty and, and, uh, in our lives leading up to the holiday as consumers, the more we can simplify and focus our message for them, I think the better off we are. And to Joan's point, that really does mean, you know, honing in on simple value propositions, trying to really streamline, you know, promotions so that it's less complex and we're much more straightforward with customers around what the value proposition is. I think that's a risk. And one of the things we've learned as we've looked at the consumer response this month is simpler is better. And so the more we can simplify that and be straightforward, the better off we are. And then from an operational standpoint, it is about making sure we've got inventory in the uh, you know, have product available, uh, not only for, for shipment online, particularly in the first half of the month, but as we move towards the end of the month, it's about having product available in store. Um, so that we can focus on the biggest opportunity we have, which is conversion. Um, you know, what we're, what we're seeing is some modest improvements in conversion. So if we, and that was really, that was the opportunity last year. You know, if I, if, if we're really honest about, you know, our shortfall, particularly in those 10 days, it was not a traffic opportunity for us. It was a conversion opportunity. There was a very clear message from customers that we were not as good at delivering the merchandise that they needed to solve the gift that they were looking for. We're much better positioned today to do that. I think you see that playing out in our Q3 results when you look at strength across all categories. And so you know, now it really is about making sure that we get that message in front of people simply where we're executing tightly and have that inventory we've invested in available at the point of purchase. And then ultimately we're doing what we can from an operational standpoint within all the brands to convert and, you know, get them on their way to celebrate in the holiday with loved ones.

Great. And then when you think about the bridal category versus the fashion category, just as an industry, how do you think, how do you feel about those two different sectors? And then when you think about architecting the business over the next and changes to it over the next 12 to 24 months, you know, are you thinking about changing the balance between bridal and fashion at all? Any changes you contemplating, you know, thoughts on the portfolio, you keep talking to a distortion of capital. uh, towards the mega brands of K Zales and Jared, just kind of curious on how you're thinking about the next 12 to 24 months of kind of moving things around the chessboard.

Yeah, it's a, it's a great question. I'll, I'll, I'll answer part of it and probably push part of it till after the holiday, because I, I, you know, the, the last thing I want to do is introduce a lot of hypotheticals to our team is we should be really focused on closing, uh, closing with customers and really delivering the holiday. Um, you know, to your point, we, we, we love the balance of the two, uh, honestly. And, and, you know, I mean, given the share we have in bridal, uh, we want to maintain that dominance, but we recognize that, you know, that it is, it is harder to gain outsized growth there because we do set the position of dominance. We certainly don't want to see that. Uh, we, we love that, that, uh, that balance within our business. We love being there for customers at that important point in their life. And we're going to continue to be dominant and bridal across the business. No question about that. We talk a lot about fashion just because it's underdeveloped relative to our business. And that's where the opportunity for outsized growth is. So mathematically, that may change the mix over time. It isn't about a pivot away from fashion. It's absolutely about a pivot or excuse me, a pivot away from bridal. It's more about a pivot into the opportunity that fashion presents for our business and the overall lift that that can provide to the total portfolio. And I think the work we're doing to further delineate and position our brands to be complimentary in that regard give us degrees of freedom to lean a little more heavily in some brands into fashion and also stay a little more staunchly in the bridal-focused area for other brands. As far as the portfolio is concerned and capital, I think once we get through the holidays, it's a great time for us to talk about some of the other strategic opportunities that we have. We've alluded to a few of them, and I think given, as we've said all along, some of the other non-core brand decisions, once we get through Q4, we'll be in a position to lay out thoughts. But I think The focus we've had on our core brands to really reignite growth across our business is what gives us not only confidence, but the degrees of freedom to really think a little more aggressively around how we deploy capital strategically across the business to continue to generate growth. Super helpful. Thanks, guys. Thanks, Randy. Appreciate it. Happy holidays.

Your next question comes from Ike Borachow with Wells Fargo. Your line is now open.

Hey, good morning, everyone. The first question is really just about promo. Maybe, J.K. or Joan, could you talk about the Black Friday week, what your strategies were? Did you deviate from those at all? And then kind of how does promo play into the cautious commentary? So, you know, understanding the comp guide, but just kind of curious how your markdown strategy is planned for the holiday today.

So, um, over the weekend, uh, cyber five, we, uh, stayed on, on plan. We were, um, in terms of our promotional strategy, we were pleased with, um, how we, um, were able to. Lean out some discount in the appropriate places within our business and, uh, really believe that that strategy served us well, uh, from particularly from a margin perspective. As we head into the holiday selling season, I would say that we are into peak selling. We have a plan that gives us flexibility. I noted that our guide for the fourth quarter allows for some variability in consumer spending. And I believe and we believe as a team that that's a prudent measure. just as we navigate our way through the next 70% of business in our quarter. So it's important that we retain that flexibility. The discounting, as we think about it, one of the things from an earlier question is our assortment architecture that we've created for the fourth quarter gives us those price point buckets, Ike, that really allow us to serve customers at different levels under And it provides for the variability in consumer household incomes that our portfolio spans in terms of the mid-market. So our strategy allows for that not only in promotion, but in assortment architecture. We believe that's just as important. We have a nice assortment in what we would consider wild price points with depth in those styles. that can serve customers under $1,000 and under $100. So it's really about understanding the customer for each of the brands.

Got it. And then within that, Joan, could you maybe, for 4Q specifically, the gross margin plan, could you kind of intertwine your promo plan along with whatever the tariff headwind is? Basically, could you stack the puts and takes for 4Q gross margin that's embedded in the EBIT guide?

So for the fourth quarter, our GMM rate, our gross merchandise margin rate, considers flat to a slightly up view. And that's what's giving us the flexibility that we may need depending on those consumer spending patterns. You'll recall like leading into the third quarter, we had an expansion of 50 basis points. And again, you heard our results this quarter were very good in terms of margin expansion. Some of that came from pricing, and a large part of it also came from architecture within the assortment. So we're continuing through that, but giving our – continuing with the architecture, but giving ourselves that pricing flexibility. So that's the overall view of the GMM. As you know, and we've said in the past that our gross margin, we're able to leverage gross margin on a slightly positive comp. And so that considers, you know, just some of the work that we've been doing in our operating model efficiency within our distribution centers. We actually took advantage of, and we'll continue to do so in the fourth quarter. We took advantage of the gold pricing and accelerated some planned scat scrap recovery that we typically do in our business, but we accelerated it to take advantage of the pricing. So we're taking all of those measures in hand and bringing those forward into the fourth quarter as well.

Just so I'm clear, so the merchant margin flat to up, but if the comp is negative, would gross margin be down due to deleverage on fixed costs within COGS?

Yes, that's accurate.

Okay. All right. Thanks, Jesse.

Your next question comes from Dana Tesley with Tesley Group. Your line is now open.

Good morning, everyone. And nice to see the progress. I think you had mentioned about some of the smaller banners like James Allen or Banter. The second half of the year, a guide towards the 60 to 90 basis point margin drag. Is that still in place or has anything changed there? And two other things, given the upcoming holiday season and the opportunity for this year, What is the percentage of newness that you're thinking about in the assortment, whether for bridal or fashion for this fourth quarter? And Joan, any updates on the real estate optimization plans? Thank you.

So I'll start with James Allen. Right now, our guide would assume that it would negatively impact comps by 120 basis points. It's been relatively consistent. throughout the back half. We've seen some slight improvement in certain periods of time, but overall that's the negative impact that we would see on overall comp. We saw it in this quarter and we would expect the same in the fourth quarter. With respect to newness, we target roughly 30%, Dana. The most important part of that is what is the content of the newness and the depth in styles. And so in the past, we may, as we saw last year, we had a breadth of assortment, but weren't deep enough in styles that were resonating with the customer. So while the factor, the percentage is important, it's the content and depth of the key item that's most important. And then the real estate update, I mentioned it in my prepared remarks, but we're very pleased with the results in our refresh program. And, you know, it's up mid-single-digit comps from the brands that we've refreshed and largely our largest brands. And the renovations have been particularly strong for us, just over a two-year payback. And you can really see the results of that within our Jared business. The team has done a terrific job in bringing to the customer a more modern view of that brand and upscaled the interior to meet the product assortment that has been leveled up from an offering perspective, but obviously while maintaining the right assortment architecture to cover a wide range of price points. So really pleased with that. We still intend to close up to 100 stores this year. Over the next two years, we think it's roughly 150 stores. Several of those, Dean, are in a banter which have been in declining malls, and we'll understand if there's a reposition strategy for those locations. Banter is a highly productive brand for us, and it has a strong four-wall contribution, and so we'll really evaluate where the future might be in terms of newer locations for that brand. Thank you.

next question comes from jeff flick with stevens your line is now open uh good morning thank you for taking my uh question um yeah i was wondering if you could maybe unpack a little bit more you know i think those must have been following the story you know we've all looked at q4 as this kind of this battle between the consumer versus you know the improvements you're making um you know if i use last year's ebitda you know 394 and the high end of your EBITDA this year at 374, you know, it kind of implies that almost no matter what the consumer element is a bigger factor than the, you know, the improvements that you're making. It kind of seems like, you know, your improvements are, you know, whether it's the fashion or just, you know, the lab done diamonds. Could you maybe just unpack, is that how it should be read or is it possible that know things could come in much better because you know from the get-go it seems like the the consumer element seems to be a much bigger factor than the you know what was thought to be pretty sizable improvements uh potential for q4 this year yeah jeff i and maybe maybe joan and i can tag team this one i i think there's there's there's two things to to unpack there um you know as far as as

any sort of guardedness on Q4. I do think from day one of this year, we have, despite the opportunity for improvement and top line for Q4, we've been a little bit guarded just knowing that some of the consumer uncertainty, what that may mean to the competitive landscape, we want to retain the flexibility to be responsive in the market to their needs, as well as uh, you know, some of the curve balls as it relates to costs, not just on the commodity side, but especially with tariffs, uh, those have all been considerations and, and, you know, uh, led to what has been a, actually a pretty consistent guide for Q4, uh, from day one. Um, when you, when you're looking at, at, you know, EBIT for that quarter, incentive comp is a pretty big factor when you start thinking about the reload of incentive comp and how that plays out. And so you've got a little bit of apples and oranges that may be going into the comparison there. But listen, I think this is an environment where we also want to retain the ability to be responsive to the to the consumer at a, at a time period where, you know, they have been dealing with a lot and we feel like, you know, maintaining that flexibility to continue to drive momentum is, is really important for us. And I think our guide, uh, reflects that. And, and so, and I don't know, John, if there's anything you want to add to it, but that's, that's, if I were trying to summarize or give you a synopsis of, of maybe how to square up those two parts of the story, that's the intersection that makes sense to me.

The only thing I'd add is that our Q3 momentum, we feel the business has momentum. We are seeing a slightly increase in conversion rate, which to us speaks to the architecture and the assortment that we're bringing forward. We are able to reset some of the, with respect to tariffs, we've been able to you know, offset those while, you know, driving in this, the assortment architecture that continues to aid us in merchandise margins. So that's a positive, Jeff. And then I think, you know, some deleverage on fixed costs at the lower end of our guide is part of that. But to JK's point, almost at the hike, we expect a deleverage in us, JNAG. but it's entirely related to the incentive comp reset, much of what we saw in third quarter. And at the low end of the guide, it's really to a lesser degree incentive comp, but also that fixed cost to leverage. So we'd like the assortment, we'd like the position, and just responding to what might happen at the range of our guides.

Oh, yeah, and don't misunderstand the question. I think it's prudent to give the guidance that you gave. We're just trying to, you know, handicap those two kind of opposing forces. You know, one quick question on the Indian tariffs. Is there any chance you can give us a sense of the dollar amount if, let's say, tariffs were to go back to, say, 25%, 20%, which is kind of what the other countries are getting? You know, how much of an eventual, obviously, it won't be instant because of the way inventory turns. but how much of a get back or how much dollars have you absorbed or could you get back?

Um, that's a, I, that, that is in this world, that is a, a, what should be a simple question, but, but is, is actually much harder, um, only because, you know, in some cases we've made decisions around relocating, uh, to different country of origin or even potentially changing, uh, design and what we would buy to, to, you know, to maintain not just assortment architecture, but margin architecture and some of those, you know, some of those things. So it's, it's, and I would say the, you know, the gosh, it's because we haven't dimensionalized a headwind. I can't, you know, I can't as easily articulate what the give back may be. I would say, you know, the, The plus of that pullback would be the range of product and the predictability of supply chain relative to really being able to lean into top line driving performance is greatly aided by a reduction in tariffs. I think one of the challenges that many retailers, not just us, are facing as it relates to to the timing of some of the tariff announcements is literally running out of runway relative to Q4 and having to make decisions on what do you pass on? What do you absorb? What do you not do that maybe you would have considered before? And so above all, I mean, listen, I think our team has done an exceptional job of navigating that uncertainty and positioning us to be there for the consumer, not just for Q4, but delivering this performance throughout the year. And honestly, some of what we've had to develop in terms of nimbleness and responsiveness within the supply chain, that's going to carry a benefit for us moving forward. I mean, the better we are at controlling our inventory and really mastering all of the input costs that come along the supply chain for a scale player like us gives us a a competitive advantage. And, and so, you know, in the, in the classic sense of, you know, that which does not kill you makes you stronger. Like this is, this is one of those things that, um, you know, we're, we're finding the blessing in it and, and, you know, going to leverage that to our benefit moving forward. Uh, but that uncertainty and, and the short runway leading up to Q4 certainly hamstrings, some of the degrees of freedom relative to assortment planning and, and, you know, uh, would only benefit from stability, particularly if that stability comes with a more moderate tariff than what we've been dealing with. And so I know I didn't answer your question relative to dollar amount. It's hard because we never gave you a dollar amount on the front side. But I at least want to convey to you that we're thoughtful around what levers there are for us to pull that can be accretive to the business. ultimately when we land at a little more normalized state relative to the tariff environment.

So I guess to close that from a qualitative basis, the only thing in the tariff landscape that changes next year is that the Indian tariffs go down, obviously, because the other tariffs seem to be a little more set at this point. So you kind of have an idea of the landscape. But if the Indian tariffs go down, all things being equal, that's going to be a positive for 2027 and beyond.

Um, yeah, it should. I mean, I, I think inherently, you know, quantifying, uh, quantifying the, you know, the, the overall, you know, dollar impact, I think is a little bit harder thing to do, but absolutely. That gives you more, more opportunity to play offense.

Awesome. Well, best of luck with the fourth quarter and look forward to catching up soon.

Thanks Jeff.

Thank you.

your next question comes from mauricio cerna with ubs your line is now open greg uh good morning thanks for taking my questions uh just a point of clarification on the uh q4 guidance uh you know when you said that you know you are within well within the range does that mean you're at the top and you know midpoint and just trying to understand that part of the guidance and then Also on Q4, thinking about the promotional environment, can you talk about what you've seen so far in terms of like, you know, an industry level, what you've seen in promotions? And do you expect that to maybe year over year be more intense, be in line? Just any thoughts on what you're thinking about the promotional environment will be great. Thank you so much.

So we articulated that we are well within the range of our top line guidance, Mauricio. And the reason that we can position ourselves with that statement is that historically, when you think about the fact that the Black Friday weekend is a very small piece of the overall quarter and that from the run rate of the November month to date into the holiday selling period, even last year as well with some of the assortment gaps that we've had, we see improved run rate historically from November to December as historical, and we've seen over the last several years. So it's really more pertinent to think about the overall guide and understanding the variability in the range is just giving us a range of outcome that gives flexibility for some of the pricing actions, particularly with EBIT. Without being specific, we feel that our business has momentum. And as we look into December, based on our assortment, we are cautiously optimistic about the outcome.

And I think as far as promotion is concerned, you know, I just think in this kind of consumer environment, it's wise for us to be prepared for it. You know, we've seen a little bit more promotional response, I think, with some of the consumer confidence questions that have emerged in November. And I think we're well positioned to be able to deliver on the right value propositions as we get into the real crunch time for our business. So nothing exceptional that I would quantify at this point, Mauricio, but I think anytime you've got a consumer that's dealing with uncertainty, it's wise for us to plan for it and to remain you know, flexible to be responsive so that we can drive top line during a really important time of year.

Thank you so much and good luck on Q4.

Yeah, thanks, Mauricio.

Your next question comes from Jim Sanderson with North Coast Research. Your line is now open.

Hey, thanks for the question and congratulations on the great third quarter. I wanted to dig in a little bit more to the fourth quarter guidance, the lower range, the negative 5%. Given the strength you've had in average unit revenues to date, what would it take with respect to average unit volume declines to get to that negative 5% in fourth quarter, both in bridal and in fashion? Just trying to get a sense of where the greatest risk or weakness could emerge for the fourth quarter.

I'll take that, Jim. With respect to the low end of our guide, bridal units, would be down roughly mid-single digit, which would also, fashion units would also be down similarly. So that's the view of units. We feel that even at the high end of the guide, bridal can be down low single digit in Q4 and achieve our guidance. And so we feel very good about the performance that we're seeing in bridal, particularly in our large brands, We're seeing a high single-digit comp in bridal in K-Sales and Peoples, which is not one of the larger brands, but it's doing quite nicely. So I feel good about the positioning of where the guidance is positioned relative to bridal and to fashion.

All right. But to make sure I understand, even at the higher end, you would expect units to be down let's say low single digits for the bridal category. That's the right way to look at it? Okay, I understand. No, thank you. Thank you. And just a question on the promotional environment. Are you satisfied with your price position, promotional price position, relative to peers as you entered into the December holiday season?

Yeah, it's a great question. We we are, but I would also tell you this is a time period where as people adjust, we also scrape the market and make sure that we're really well positioned. I think the dynamic nature of this environment and just given not only what we've talked about relative to consumer, but just the compression that happens between now and the holiday, I think we're focused on staying vigilant and particularly when everybody is dealing with some input cost changes. I think that creates a a little more focus, certainly on our part, to make sure that, you know, in these commodity-based categories or in any of the key price point offerings that we really maintain the kind of competitive positioning that makes sense. And so, you know, I think we've balanced that really nicely over the course of the year, being less promotional, you know, more broadly, focusing promotion where it makes sense, but also not being gratuitous and eroding brand equity in the process. And I think the other benefit of that is it enables us to really focus our value messaging to customers in a stronger way. We obviously watch the landscape and want to make sure we're maintaining that momentum as we go into such a critical time period, also not losing the progress that we've made relative to some of the discipline around pricing architecture that's paying dividends for us. So That's where we're focused. I think more than not, we feel like we're in the right position. And when or if we have found any categories or subcategories within a brand where we don't like, then we've got the flexibility to also remix and manage it accordingly. So we're delivering the right value.

All right. Thank you very much.

Yeah. Thank you for the question, Jim.

There are no further questions at this time. I will now turn the call over to J.K. Szymanski for closing remarks.

Okay, thank you everyone for joining us today and for your interest in our business. We are fully focused on the critical holiday selling period and we're confident in our strategy and our team's commitment to deliver results. However you celebrate, I want to wish everyone, our employees, partners, shareholders, all of you, a holiday season full of joy, peace, and, of course, love. Look forward to speaking with you next quarter. Goodbye.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and as I say, please disconnect your lines.

Thank you.