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.