Despite Signet’s collaboration with De Beers, and its new consumer warnings that lab-grown diamonds can lose value, the jewelry giant’s executives say they haven’t soured on lab-created diamonds (LCDs) but will shift their focus in the category to fashion.

“In fashion, we see meaningful runway for LCD expansion in a segment of the industry that is traditionally seen lower overall penetration of natural diamond[s]. It’s a trade-up opportunity,” Signet CEO Gina Drosos said during a conference call following its first-quarter financial results, according to a SeekingAlpha transcript.

“We’ve increased LCD fashion offerings, driving a 14% increase in LCD fashion revenue, compared to a year ago,” she said. “These LCD fashion pieces carry more than two times the [average transaction value] of non-LCD pieces at attractive margins for Signet.”

Signet expects engagements to increase as the year goes on, according to its tracking of post-COVID relationship patterns, Drosos said.

Beginning in April, Signet retrained all its associates to show natural diamonds ahead of LCD alternatives for engagement rings. Joan Hilson, Signet’s chief financial, strategy, and services officer, tells JCK it’s too early to tell if that has made any difference.

Drosos said on the conference call that she expects “the pricing on lab-created to continue to decline. There’s significant availability. The production has become much more efficient. Costs have come down. Retail [prices] have come down at a slower rate, but still are pressured. That’s why the need for a good strategy on it.”

By contrast, Signet sees natural diamonds’ prices “getting to a normalized level,” Drosos said.

Hilson did hint that Signet has concerns that lab-grown price drops could hurt the average price of engagement rings.

“As [lab-created] prices come down, it affects loose stones particularly in the engagement business,” she says, but adds that Signet has been able to “balance” any decreases with “brands and special cuts.”

Signet’s new consumer notice about lab-grown diamonds—which states that “their relative abundance may not ensure that their value will hold over time”—has been added to its brands’ websites as well as to all receipts for lab-created sales. The messages aim to “educate the consumer” about the “overall market,” according to Hilson.

They include some language that synthetic sellers wouldn’t object to, stating that LCDs “are less expensive and make larger diamonds more affordable” and have “the same optical, physical, and chemical properties as natural diamonds.”

Signet is almost certainly one of the biggest retailers of lab-grown diamonds in the world. Its overall sales totaled $7.2 billion in fiscal 2024, and Drosos has told JCK that lab-grown diamonds account for a “low-teens” percentage. If one puts the “low-teens” number at 12%, that means that Signet sold about $864 million worth of lab-grown jewelry in the last fiscal year.

In its financial results for the first quarter of fiscal 2025 (ended May 4), Signet reported a 9.4% drop in sales, to $1.5 billion, from the prior year. Comps fell 8.9% on an annual basis. Operating income was $49.8 million, down $51.9 million from the first quarter of fiscal 2024.

Drosos said that while February sales were weak, business picked up in March, April, and especially May, and Signet hopes to return to positive comps in the second half of the year.

“We’ve continued to see a highly promotional [jewelry] category,” said Drosos. “Independent jewelers were significantly over-inventoried for the last 18 months. That has been now getting back to a more normalized level.”

On the positive side, Signet has seen strength in its services business and by offering “newness,” she said. It also has reduced outstanding debt by 70% since the 2020 fiscal year.

(Image from X)

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