Signet Jewelers CEO: Customers displaying 'permanent shift' to online shopping

Signet Jewelers (SIG) shares are trending higher after topping second-quarter earnings estimates on the top and bottom lines. Signet Jewelers CEO Gina Drosos joins Yahoo Finance Live to explain consumer spending patterns the diamond retailer is noticing.

"Over the last couple of months, we have seen some modest increases in traffic and we've seen some resurgence in low-priced fashion," Drosos says. "That's actually a good sign... as women are going back to work, kind of a back-to-school feeling. that typically bodes well as we go into holiday."

Drosos also notes the new ways customers are shopping for and researching jewelry online, stating "close to 80 percent of customers start their shopping journey online."

Video Transcript

ALEXANDRA CANAL: Joining us now is Gina Drosos, Signet Jewelers CEO. Gina, pretty solid quarter here and you guys are looking ahead to an even stronger engagement ring season. I'm curious, though, what changes, if any, you're seeing on the consumer side when it comes to the purchase of those engagement rings? With lab-grown diamonds becoming more and more popular, a lot of consumers looking to that as an affordable option, are you seeing consumers trade down to that or perhaps smaller carat sizes?

GINA DROSOS: Well, we've seen a number of things on the consumer front. We think the customer stays cautious through the holiday season. Over the last couple of months, though, we have seen some modest increases in traffic. And we've seen some resurgence in low-priced fashion. That's actually a good sign. That self-purchase as women are going back to work, kind of a back to school feeling. That typically bodes well as we go into holiday.

And then in terms of engagement, we're really in a one year low in 2023. This is the trough of what happened three years ago, 3 and 1/2 years ago, which is that COVID disrupting dating. And so we're seeing less engagements this year by about 25% versus normal. That trough happens in the third quarter. And we expect it to begin to come back a bit in the fourth quarter.

Lab created is more a part of customers purchases now. It's actually a very nice innovation for a more value-conscious customer. But we're not seeing trade down. For Signet, we actually see a higher average transaction value and a higher margin on lab created versus natural.

AKIKO FUJITA: You mentioned the rebound that you're seeing in lower price points. I wonder how that sort of sets things up for how you think about pricing right now. I mean, does it lead to additional discounts? Or is it really about meeting the consumer where they are in terms of the products you offer?

GINA DROSOS: We're really answering that through our assortment right now. We have a great breadth of assortment across our different banners. We have banter that typically plays in a lower price range. We've tiered up our Jared business significantly. So we're carrying quite stylish high-quality pieces in that banner with Kay and Zales in between. We also now have diamonds direct Blue Nile James Allen in our portfolio.

And while those three businesses skew more toward engagement and bridal, they also have very nice fashion assortments. So our assortment is broad. We will use strategic promotion to drive traffic to get customers into the store. In a macro environment like this, they're often waiting to get the best value. But we'll be able to bring them that great value throughout the season.

ALEXANDRA CANAL: You mentioned getting customers back into the stores. In terms of digital versus brick-and-mortar, are you seeing a clear preference among the consumer? And with that brick-and-mortar, do you anticipate needing to close more stores down the line?

GINA DROSOS: So we've seen a big shift in how customers shop for jewelry over the last several years that we think is a permanent shift. So now, we see close to 80% of customers start their shopping journey online. They're researching. They're going to different websites. They're becoming educated about styles and also about different carat weights or different colors of gold, that kind of thing.

And then we see them come into the store for the kind of expert consultation that a company like Signet is great at providing. We really believe that our jewelry consultants are a competitive advantage and build-- they have great expertise. And so they build a great trust relationship. So while almost 80% of customers start the journey in store, only 20% of them-- i mean, start it online, only 20% transact online. Most are transacting in the store.

AKIKO FUJITA: So what does that mean for your brick-and-mortar footprint? I mean, earlier this year you announced 150 store closures, is there more to come? Or are you pretty comfortable with the number you have right now?

GINA DROSOS: You know, we are always looking at the opportunity to optimize our store footprint. We'll be closing out of that 150 mostly low-performing mall locations in both the US and the UK. We also announced that we were opening about 30 or 35 new doors. Most of those are large footprint doors, like a diamond direct or a Jared. So actually, our square-footage stays about the same. But we believe that we're better positioning the stores.

ALEXANDRA CANAL: Gina Drosos, Signet CEO, thanks so much for your time.

GINA DROSOS: Oh, thank you.