First-quarter earnings were a mixed bag for Signet Jewelers, one of the largest retailers in its category. Sales beat company and analyst expectations, even as they decreased 9.0% year over year to $1.4 billion during the Q1 13-week earning period ending May 4.

People popping the question helped drive revenue, according to the company.

“We delivered quarterly results within our guidance and are seeing momentum in the business driven by the accelerating engagement recovery,” said Signet chief executive officer Virginia C. Drosos.

One continued weight on the company earnings is the negative impact of up to 2.0% on sales caused by continued digital integration issues generally related to the 2022 addition of the Blue Nile brand to the Signet Jewelers stable.

Signet Jewelers Ltd. is No. 55 in the Top 1000. It is also the highest-ranked retailer in the database’s jewelry category. The Top 1000 Database ranks North America’s largest online retailers by their annual web sales. Before Signet acquired it, Blue Nile ranked No. 143 in the Top 1000.

Signet Jewelers earnings

The earnings report indicated Signet Jewelers expects problems to be resolved by the second half of 2024. Other brand banners under the Signet umbrella include Kay Jewelers, Jared, Zales, JamesAllen.com and others.

Q1 sales were 9.0% from Q1 of FY24 to $1.4 billion. This reflects a decrease of 1.6% in total average transaction value (ATV) due to a lower number of transactions.

Other notable figures from Q1 earnings included:

• Operating income of $49.8 million, down $51.9 million from Q1 of FY24.
• Adjusted operating income of $57.8 million, down $48.7 million from Q1 of FY24.
• Cash and cash equivalents, at quarter end, of $729.3 million, compared to $655.9 million in Q1 of FY24.
• Year-to-date cash used in operating activities of $158.2 million, compared to $381.8 million in Q1 of FY24.

Digital sales

While Signet doesn’t break out their online sales from the rest of their sales, same-store sales, which include their digital channels, were down 8.9% to Q1 of FY24. Digital Commerce 360 research estimates that Signet’s 2023 web sales totaled $1.64 billion.

Other economic headwinds

The post-pandemic period introduced challenges for Signet as consumer preferences changed. While jewelry and accessories were popular during the pandemic, Signet says that tastes have shifted toward more experiential outlays, such as travel.

According to Signet’s earnings report, other macroeconomic factors that could weigh on earnings this year include:

• Availability of and demand for diamonds, gold and other precious metals, including what Signet referred to as “any impact on the global market supply of diamonds” due to Israel’s ongoing war on Gaza.
• The potential sale or divestiture of the De Beers Diamond Company and its diamond mining operations by parent company Anglo-American plc.
• Ongoing Russia-Ukraine war.
• Expiration of student loan moratorium.
• Inflation.

In the meantime, Drosos expects that as 2024 progresses, some of these challenges mentioned in Signet Jewelers’ latest earnings will subside.

“We expect continued momentum in the second quarter, leading to a positive same-store sales inflection in the second half of Fiscal 25,” she stated.

Other leaders expressed confidence in Signet’s continued growth, navigating some of the macroeconomic challenges.

“Our flexible operating model continues to work as designed, leading to adjusted merchandise margin expansion of 100 basis points, continued working capital optimization, and improved free cash flow over the prior year,” said Joan Hilson, chief financial, strategy and services officer at Signet.

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