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Good morning, and welcome to the Signet Jewelers Fourth Quarter Fiscal 2025 Earnings Call. Please note that this event is being recorded. Joining us today on the call today are Rob Ballew, Senior Vice President of Investor Relations; J.K. Symancyk, Chief Executive Officer; Joan Hilson, Chief Operating and Financial Officer. At this time, I would like to turn the call over to Rob. Please go ahead.

Good morning. Welcome to Signet Jewelers fourth quarter fiscal ‘25 earnings conference call. During today's discussion, we will make certain forward-looking statements. Any statements that are not historical facts are subject to a number of risks and uncertainties. Actual results may different materially. We urge you to read the risk factors, cautionary language, and other disclosures in our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. Acceptance required by law, we undertake no obligation to revise or publicly update forward-looking statements in light of new information or future events. During the call, we will discuss certain non-GAAP financial measures. Further discussion of the non-GAAP financial measures, as well as reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures, investors should review the news release we posted on our website at ir.signetjewelers.com. With that, I'll turn the call over to J.K.

Thanks, Rob and good morning, everyone. I'd first like to thank our Signet team. Your efforts positioned us well to deliver positive same-store sales over the last three months including Valentine's Day. Thank you for all your hard work. Alongside my remarks, we provided a summary presentation on our website to accompany what I'm covering today. Before we talk about the year ahead and my observations on the business, let's quickly recap the holidays and the actions we've taken since. Bridal and services were in line with our expectations over the holidays. However, key gifting price points underperformed in the two weeks before Christmas, leading to a softer fashion performance. While we saw 40% growth in lab-grown diamond fashion, we didn't have enough of the right inventory to meet demand, particularly at the $200 to $500 price point. Since the holidays, the team has been focused on filling these assortment gaps and expanding the availability of on-trend merchandise. Clearly, there's more progress to be made, but I'm pleased with the team's quick adjustments, which delivered positive comp sales in January and quarter-to-date in both bridal and fashion. We will continue to make changes to our assortment this spring to drive improvement for the next two major gifting seasons, Mother's Day and the Winter Holidays, and we are tracking to deliver relevant products throughout the coming months. Now, looking to the future with an eye toward driving organic growth, I have immersed myself in the business over these last few months working alongside Signet’s leaders to understand our challenges and opportunities. We met with critical stakeholders including strategic vendors, jewelry industry leaders, and customers. Now more than ever, I have clear conviction in the upside for Signet and believe in the strong foundation to build on while fully leveraging the benefits of scale that have not been maximized under our current structure. Our overall Q4 performance and lack of growth over the past several quarters informed our new strategy to grow our business. This strategy, Grow Brand Love, is transformative and focuses on accelerating growth and builds on a strong core foundation to create shareholder value. It requires a relentless focus by our team to grow through style and product innovation, captivating experiences, and building brand loyalty, while harnessing centralized core capabilities. In working with our senior team, we've developed three imperatives to drive shareholder value. First, we are moving to a brand mindset rather than banners. This is a critical distinction that I will explain in a moment. Second, we will be relentless in gaining share in the core business and growing in adjacent areas where we have a right to play. And finally, we are changing our operating model and real estate portfolio to accelerate our execution of the first two imperatives. Now, let me take you through them in detail. First, brands build loyalty with customers through emotional and engaging connections, while banners are transactional, literally a static nameplate on the door. Fortunately, our brand portfolio, especially our three largest brands, Kay,

Thanks, J.K., and good morning, everyone. Revenue for the quarter was down 6% last year, but finished ahead of our updated guidance. Same-store sales were down 1.1%. Recall that the larger gap between total sales and same-store sales reflects the cycling of the 53rd week in the prior year, representing about 4 points. Our stronger January performance reflects landed product at key price points and engagements that have their strongest months for the fiscal year. Merchandise AUR grew 7% with bridal AUR up 2%, the best quarter performance in two years. Fashion AUR was up 8%, although this is higher-than-expected due to the underperformance of key gifting price points over the holiday season. Turning to gross margin, adjusted gross margin of $1 billion, or 42.6% of sales this quarter, was down 70 basis points to last year, reflecting modest merchandise margin expansion that was more than offset by fixed cost leverage. Items related to year-end adjustments in our digital brands and overhead allocations. Turning to SG&A, adjusted expense was down $32 million to $638 million for the quarter. At 27.1% of sales, SG&A rate was up 30 basis points, related to somewhat higher advertising, partially offset by store labor efficiency. Adjusted operating income was $356 million for the quarter, ahead of our updated expectations, but below the prior year. Adjusted EPS was $6.62 nearly in line with last year as we benefited from a significantly lower diluted share count. Turning to the balance sheet and cash flow, inventory continues to be healthy, ending the year at $1.9 billion or roughly flat to last year, while bringing in newer styles to support our first quarter. Capital expenditures for the year were $153 million, reflecting a lower number of new store openings and renovations as we work to ensure alignment with our new strategy. Both of these are reflected in our FY ‘25 free cash flow of $438 million, or approximately 88% cash conversion of adjusted operating income. Our cash flow enabled us to reduce Signet's diluted share count nearly 20% last year by returning approximately $1 billion to shareholders, including the Preferred Share retirement. Further, we're raising our quarterly dividend by 10% to $0.32 per share, Signet's fourth consecutive annual increase. We ended the year with $1.7 billion in total liquidity. Before turning to guidance, I'd like to touch on some additional factors within our new strategy. Regarding sourcing, we are fully centralizing our sourcing practices to leverage the scale of our buying power and deep market expertise. The newly chartered Signet diamond sourcing team will negotiate pricing across our portfolio and improve our agility as a large buyer in the marketplace for both loose diamonds and finished diamond jewelry. Further, we believe this will provide greater transparency of true demand in the market. This all-incumbencing approach, combined with our integrated retail agreement as a De Beers site holder, makes us confident we can bring the highest quality, responsibly sourced diamonds at the most competitive pricing. Turning to real estate, our strategy is a four-pronged approach to optimize the fleet. First, we'll close negative contributing doors. While this is a small portion of our fleet, it's the lowest hanging fruit. There are 150 underperforming doors we are evaluating for potential improvement or ultimately closure over the next two years, leveraging our shorter lease terms primarily in mall locations. Second, we'll optimize sales transference following closures by shifting sales to remaining doors and to our e-commerce channel, allowing us to further leverage fixed costs. We believe that loyalty to brand and unique product assortment is a key factor to driving transference to new and repositioned locations as well as e-commerce. Third, nearly 200 doors in our fleet have healthy performance, but are in venues that we believe are in decline. Over the next two to three years, we expect to reposition many of these doors to off-mall locations. This will also allow us to create an experience in primarily Kay,

Thank you. [Operator Instructions] First, we will hear from Ike Boruchow at Wells Fargo. Please go ahead.

Good morning, everyone. Thank you for taking my question. This is Juliana on for Ike. First, maybe for J.K., maybe a question on strategy. Given the relative size of the opportunities of [Indiscernible] that you mentioned? How do you think of the current mix of bridal versus fashion? And could you see the shifting over the next few years? And then maybe for Joan in this new guide what are you baking in for holiday and for cube coming this year given what we've seen this past quarter? And how are you thinking of the comp cadence for the rest of the year? Thank you.

Yes. Thanks, Juliana. Thanks for the question. I think the right way to think about it is not so much a penetration or mix question. It's how do we delineate the growth of both. As we said in the script, I think there is opportunity for us to grow share in bridal. And I think one of the key deliverable for us to do that is to have a sharper point of view around the role that natural plays and really reinvigorating the natural diamond penetration in that mix, also sharpening our assortment architecture and modernizing that assortment by brand. On the fashion side of the house, lab-grown diamonds plays a little bit more of a role there because it really does create growth opportunity at lower price points, which really do -- I guess, create expansion opportunities for us from a category standpoint. It's not a mix shift nor is it a trade. It is a new customer. And probably one thing that we could delineate a little bit better is it also opens the door for expanded digital commerce for us. That everyday purchase and the growth that's happening there, much of what's happening online. We're seeing that pull-through in our mix. And so while our penetrations may change a little bit. It's because you're changing both the numerator and the denominator by tapping into that opportunity for growth.

Juliana, with respect to our guidance, as we mentioned, our quarter-to-date sales are running positive. That said, as we look at the full year, our guide anticipates a measured consumer environment, providing for variability in consumer spending. And with that, we -- at the midpoint of our guide, site-store sales is slightly negative. And we don't believe -- we haven't positioned it as a hockey stick, if you will, as we approach holiday. And so we've remained measured throughout the balance of the year in our view of same-store sales.

Thank you so much.

Thank you. Next question will be from Lorraine Hutchinson at Bank of America. Please go ahead.

Thank you. Good morning. Just to follow-up on the comp question. Is there -- are there any headwinds that you anticipate? Is there anything in the quarter-to-date number that you think is onetime on the same-store sales? It just seems like a pretty sharp deceleration for the rest of the year, particularly when you have some learnings to fix in the important fourth quarter, it seems like you have an opportunity there to do even better. So just any other context there would be helpful.

Thanks, Lorraine. Our position is that we think we believe it is will serve us well to remain prudent and conservative and conservative in our outlook as we think about the consumer backdrop and the environment that the dynamic environment that we're in today. Q1 performance to your point, we're pleased with that performance. We saw the teams bring in land product post-holiday that filled in the assortment gaps for key gifting periods and still more work to do. But with the quarter running positive, we're seeing bridal recovery occur. So we are really managing our business against a continued improvement in bridal as expected, but we're not including that in any large way in our guidance. So good news on AUR, good news on bridal performance, good news on the fashion response, and we feel that we're positioned properly as we look to the balance of the year.

Thank you. And then the strategy that you laid out is focusing on natural diamonds for engagement and lab-grown for fashion. What is the customer saying to you about lab-grown in engagement? And is there risk that as prices for lab grown fall that could cause some longer-term challenges to the business?

Thanks for the question. I actually might reframe the summary a bit. It's really about having the right roles by brand and the right assortment architecture in place by brand, to recognize what the consumer is telling us, which is there is a place for both in their life. And we think the growth opportunities for lab are more well positioned given price point and design capabilities for fashion and also because of the dynamic you mentioned as it relates to what's the consumer viewpoint on value, et cetera. In natural, we are seeing a return to growth there in engagement. And I think what you'll see us talk about a little more so is what roles do each play in our engagement assortment by brand in a higher tier, more luxury inspired brand like Jared or Diamonds Direct where you still have a prevalent customization percentage of your mix, where you're still doing more loose stones and selling higher price point. Natural should be a stronger part of our assortment. When you're looking at a brand like Kay, which really speaks to a much broader cross-section of customers, there's a little more balance there between the role that lab-grown plays at maybe a lower price point for a more budget conscious consumer, but you still see healthy growth in our natural diamond business. So I think part of what we tried to articulate is just a stronger point of view around how we want to serve customers, meet the demand on both sides, but also be good stewards of the category and also take our responsibility of educating consumers really well. I still think there's a lot of miss education or maybe confusion over what each is and being able to make sure that we're connecting customers to what they're looking for and that, that investment is something they feel confident about. And can look at that piece of jewelry and celebrate all the emotion that they're trying to celebrate is without that question in their mind is really what's driving that set of choices.

Thank you.

Thank you. Next question will be from Paul Lejuez at Citi. Please go ahead.

Hey, thanks, guys. Can you talk about what your expectations are for the engagement category overall at a market level, this upcoming year that are built into your guidance? And I'm also curious if you can talk about the promotional environment in both bridal and fashion and how that translates into what you assume for AURs in each of those categories this year? Thanks.

Thanks, Paul. So as we think of the engagement category, our guidance assumes a range of up low-single-digits to down low-single-digit. But as we think of AUR, we would expect it to be down low-single-digits to flat, just recognizing the thinking around the mix of the product, lab-grown carrying a nice average unit retail. And frankly, the experience we've seen overall in natural as we reported what we've seen in January through first quarter-to-date. So feeling confident about our ability to manage the bridal AUR effectively. And then when we think about fashion, we are flattish in fashion on a unit base, if you will. But the AUR is where we would expect to see some growth as we've been experiencing growth, maybe even a little higher than we had expected in January, but we would expect it to based on the composition, including more lab-grown diamond, into fashion product, we would expect to see AUR growth there. So within our guide for the year, we've given a range down low-single-digit to up. But at the midpoint, as I mentioned, it's slightly negative. And it's really pointing out some of the variability between those two categories, but we believe based on what we've seen to-date, that we have the ability to manage both. So I hope that answers the question.

I think it does. I think the second part of that about promotional environment is we're really not -- we're not seeing a different approach in that space right now. We do have some modest margin expansion built in. That is really more about execution on our end. It's not I think, a reflection of a change in the promotional environment one way or the other. It's about tighter assortment architecture and really controlling what we can control, Paul. But we do -- we sat in a category that is measured and considered purchase, which means it's got a little bit different profile as it relates to consumer responsiveness. This isn't a category like maybe some other apparel others that is quite as responsive to disposable income changes and therefore, ramps up or ramp down from cadence in response to the outside world quite on the same arc. I think we see some predictability there. I feel like we've got the right plans to manage it and feel like the choices that we're making around how we drive mix and assortment better position us to be able to deliver that. And as Joan said, we're also watching what's going on with consumer to make sure that we're responding accordingly.

Yes. Got it. Thank you. And then just one follow-up, Joan, free cash flow target for the year, maybe you can tie that into how you plan to manage inventory?

So we haven't given a free cash flow target per se, Paul, for the year, but our inventory management continues to be a strength for us as we reported our year-end inventory was flat brought in flat to last year as we brought in new products and new styles in January to support our first quarter. So the teams are focused on turning our inventory, at least in line with last year and believe that will serve us well as we manage our cash flow go forward, which, as you are aware, is our single biggest lever outside of operating income within our cashflow.

Thank you guys, Good luck.

Yes. Thanks.

Next question will be from Dana Telsey at Telsey Group. Please go ahead.

Hi, good morning, everyone, and nice to see the progress. J.K. as you've made this pivot with the AUR improving? How you're thinking about fashion versus bridal. Any thoughts as to the cadence through the year about what -- how you're thinking about it and where you would have the most traction? And then Joan would be up to 150 store closures. How do you think of the timing of determining yes, these channel close these 50 will close? And what are the markers that you're looking at? Thank you.

Sure. Dana, I appreciate the question and the comment. I guess the way that I would think about the year is we should continue to build progress. I think the first half of the year is -- and even what you've seen in results in Q1 is about an increased focus on execution and really a better focus on how we allocate inventory to meet customer demand and sort of read and react to the market. Over time, our work around refining assortments and really clarifying the role of each brand in our portfolio to get better differentiation should help us continue to expand into those adjacent growth categories. And ultimately, the indicator there is going to be same-store sales. And how do we take a set of brands that have really, really high awareness and really get traction as it relates to consideration and conversion. That I'm realistic about the fact that you behaved your way into that outcome and we've got a lot of work to do across the assortment work to do in terms of how we better tell stories and connect with customers. But the nice thing about it is, I think from maybe the spirit of your question, I think there's near-term things that are execution-related that allow us to drive improvement, like you're seeing in these results while we build towards the longer-term larger opportunities in our business.

Dana, with respect to store closures, we will evaluate the locations based on what -- even though they're negative contributors at this moment, we see some traction in our business. And we really want to understand the potential of the store based on the market and what the opportunity is it within the four walls? Or is it the real estate location itself? And we're really leaning in with the store teams to understand what they believe the opportunity can be for us. So our marker will be top line performance, our ability to drive that four wall contribution and then evaluate where we think is there a better location within the market for us for that store or elsewhere or does it shift to our e-commerce channel as an example. I think it's important to note that as we will also evaluate sales transference as an opportunity to drive profitability. And we know that our jewelry consultants or our brand ambassadors are very important to the loyal customer base, as well as the unique product offering that Signet brands can bring. So we'll put that in the context of the strategy as well to really evaluate the upside potential for all of our locations. And then with respect to the repositions, we have very strong performing stores, and we want to anticipate properly what the potential decline of those malls might be, and we want to be ahead of any downturn potential in sales given a mall performance overall. And so we're getting ahead of that over the next -- and we expect over the next two to three years to evaluate that. And we're in a good position to do that economically because of our average lease term is just over two years. So I really like the approach that we have to really improve our real estate position the appearance of our fleet to match the brand strategy that we're laying out under Grow Brand Love.

Thank you.

Thank you. Next question will be from Mauricio Serna at UBS Financial. Please go ahead.

Great. Good morning. Thanks for taking my questions. First, could you give us a range of where the first quarter to date comp sales are at? And also, would be very interested in seeing -- sorry, you get in more detail on how was the performance for Valentine's and kind of like the cadence after that, you saw like any changes in behavior? And another follow-up on that, what are your expectations for the total industry, the jewelry industry in the U.S. for this year in terms of growth? Thank you.

Well, I'll take the first two. So for the quarter, we're pleased with the performance on a comp sales basis, and we're at -- near the high-end of our guidance range. So pleased with that, we saw a nice holiday as well. The new product landed in time for the holiday build and we were able to fortify key price points for gifting and in bridal. And so we've seen improved levels related to both those factors. And I'd say, throughout the quarter, it's quarter-to-date, that's what we're seeing is towards the high-end of our guide. So we feel pleased with where we're positioned currently.

Yes. And I'd say from an industry standpoint, within our guide, we see it flattish plus or minus low-single-digits. I think that's the consensus read you'd see out there, and that's kind of the way we've baked it into our guide.

Great. And just another follow-up on gross margin. Like how should we think about that for the year. I think you've alluded some modest merchandise margin expansion, but on a gross margin basis, how should we think about that? And any details on like the cadence of what could that look like for the year? Thank you.

We have experienced in a moderate GMM expansion to date within our first quarter, and we're pleased with that. We have not assumed an increase in that expansion throughout the balance of the year within our guidance. So we expect to continue with a moderate expansion throughout the year.

Got it. And sorry, one very last one. As you think about just like the high-end and low-end of the sales guide like from a -- I guess, like, what are like the puts and takes that get you from like the low end to the high end on -- essentially, that's the question.

So as I mentioned earlier, Mauricio, if I'm understanding your question, I apologize, I think the voice is a bit garbled. The -- I mentioned the bridal units and bridal AUR, we're really in a range of low-single-digit, increased low-single-digit decrease and really looking at a range within bridal and fashion that balance each other. We're pleased with the AUR that we're seeing in bridal to date, very pleased with fashion AUR that we're seeing. And so we're really toggling that being down low single to up low single in a unit basis and then really working through our sort and then driving AUR.

Got it. Thank you very much and good luck.

Thanks, Mauricio.

And last question will be from Jim Sanderson at Northcoast Research. Please go ahead.

Hey, good morning. Thanks for the question. I wanted to go back to the many changes you outlined in process of Signet. I wonder how do you see the Signet profit model evolving in terms of flow-through on incremental sales, assuming business normalizes and you start to see some improvement on your sales trends. And this is in the context of the, let's say, 7% EBIT margin you've been reporting the past couple of fiscal years.

So as we navigate the operating model change, we've noted, Jim, that there is $50 million to $60 million of cost out largely in SG&A offsetting most of the reset incentive comp. So as we think of driving comps in our core banners we believe that, that's the most efficient flow-through that we can expect. And then we will balance performance as J.K. mentioned in his remarks, with the other brands within our portfolio to ensure that they're contributing. So our model is designed to continue to drive in merchandise margin expansion and continue to leverage SG&A with that comp for growth. So we would expect a range of 30% to 35% flow-through overall as we see comps increase. That's our goal and believe that the operating structure that we're putting forward that we should be able to achieve that over time.

Yes. Joan, nailed it that the only other thing I'd add to it, maybe to build on is I think having an outsized focus on our largest brands is the best way to pull that through. We're certainly evaluating the total portfolio. But for the most part, they're accretive, they just don't generate the same kind of top line impact to help pull it through. And so by maintaining that outsized focus on really Kay,

All right. And just a quick follow-up question on the engagement category. Your range, I think, of low-single-digit negative to positive. Is that a reflection of you -- thinking you need to capture market share in order to achieve growth in the category? Or is the backdrop that the industry trend is flattish to declining? Just kind of how that range reflects what's going on with consumer demand, pardon me.

We're seeing consumer demand for engagements up in January and as well as in February. And clearly, our goal, Jim, is to drive market share gain in the engagement category. And what we're positioning is a conservative view within our own model and within our guidance this year, but certainly, our intention is to drive market share gains as we see engagements continue to recover over the course of the year.

And you still see that recovery in process industry-wide? Is that the right way to look at that?

We believe in the engagement recovery and directionally, and we are positioning our business within our guidance to capture that engagement recovery as it occurs.

Alright, thank you very much.

Thank you. At this time, I would like to turn the call back over to Mr. Symancyk for closing remarks.

Okay. Thank you, everybody, for your time today. This company has clear runway ahead, and I believe we have the right strategy with Grow Brand Love in place along with the strategic advantages to grow market share and drive shareholder value. Really, thank you for joining us today, and I look forward to sharing more of our progress as we move through the year. Thanks. Goodbye.