Signet Jewelers’ stock soared yesterday, in spite of second-quarter financial results showing continued sales declines.

That’s because while Signet’s same-store sales fell 3.4% during the quarter ended Aug. 3—and overall sales were down 7.6%—the same-store drop was smaller than in recent quarters (it was 8% in the first quarter).

More importantly, comps have turned positive in the third quarter to date, Signet said on a conference call with analysts following release of its Q2 financial results.

“We are seeing momentum in same-store sales, led by strength in fashion and the engagement recovery,” Joan Hilson, chief financial, strategy, and services officer, tells JCK separately. “We expanded merchandise margin 120 basis points, and we grew [average transaction value] 1.6%, despite industry promotional pressure. We’re on track to deliver our fiscal ’25 guidance.”

Analyst Paul Zimnisky says Signet has “always been a volatile stock” and “Wall Street has had a difficult time valuing it.” But he believes traders responded well to the favorable metrics—particularly regarding improving comps and wedding engagements—that were announced on the call.

After talking about an engagement “trough” caused by the COVID-19 pandemic, Signet is finally seeing some signs of an increase in popping the question, CEO Gina Drosos said on the call.

“The engagement recovery is happening,” she said, according to a Motley Fool transcript. “Google and Instagram searches for engagement rings are now up significantly in recent months.… [We see] the highest number of couples ready to get engaged [that] we’ve seen since we began tracking [engagement] milestones a few years ago.”

However, she added that “customers are approaching engagement in a more cautious way in this macro environment, slowing the recovery.”

The call also featured a lot of talk about lab-grown diamonds. Drosos said, “Lab diamond fashion jewelry continues to grow, up more than 25% in the quarter to last year” and is driving higher average transaction value.

On the negative side, Drosos said that “impacts from market declines in lab-created diamond pricing had a more material impact on our digital banners [Blue Nile and James Allen].”

Hilson tells JCK that “the online banners have a disproportionate share of bridal, which also has a high penetration of lab-created diamonds.”

She adds that Signet generally has “been able to navigate the competitive pressure in lab with our branded offerings, as well as the balance of higher-price-point natural in our assortment.”

Hilson says lab-created penetration at Signet overall was up to “roughly mid-teens”—higher in the past when it pegged the number at low teens.

She notes that Signet’s partnership with De Beers to promote natural diamonds, announced in May, will soon bear fruit.

“We are launching our first creative campaign, targeting younger consumers, discussing the positive aspects of natural diamonds,” she says. “One thing to remember is that two-thirds of consumers still prefer natural diamonds. So we have also launched an all-store natural diamond training campaign, which close to 100% of all store members will have completed before this holiday selling season.”

In other segments, Drosos said on the earnings call that “services continues to be a source of strength…growing 1.4% in the quarter.… Services has grown every quarter for the past two years.”

Signet is “also seeing traction in watches, led by new designs in Citizen and Bulova,” Drosos noted.

The company has made some staff reductions at its Ohio office, but Hilson says they affected less than 1% of its workforce. Signet expects to trim $200 million from the bottom line this year, but most of those savings are not employee-related.

(Photo: Getty Images)

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