Signet Jewelers has a pretty good idea when you'll get engaged

By Tomi Kilgore

Kay Jewelers and Zales parent company's stock rallies as data indicates the number of couples nearing engagement will start rising in coming months

Shares of Signet Jewelers Ltd. rallied Thursday after the jewelry retailer, which has store brands including Kay Jewelers, Zales, Jared and Blue Nile, raised its full-year profit outlook, citing signs that the number of couples getting engaged will start increasing in the coming months.

The stock (SIG) rose 5.0% to $75.00, and has run up 10.2% amid a four-day winning streak.

Signet said sales for the quarter to July 29 fell 8.1% from a year ago and have now declined for three straight quarters, as the COVID-related disruptions to dating that started three years ago have led to "significantly" fewer engagements. That's a big deal for Signet, because bridal sales historically represent nearly half of all merchandise sales for the company.

The good news, Chief Executive Gina Drosos said on the post-earnings conference call with analysts, is that she is "confident" that engagements will begin a "multiyear recovery" later this year. Her confidence is based on 45 "proprietary milestones" the company tracks to trace a couple's journey through the four major relationship stages: meeting, exclusivity, committed and engagement.

"While every couple is unique, dating and relationships tend to follow patterns," Drosos said, according to an AlphaSense transcript. "Not every couple experiences...all the 45 milestones we track, but we know that once they reach 25 to 30 of these milestones, they become statistically significantly more likely to move on to engagement."

The company has not responded to a MarketWatch request for information on what the 45 milestones are or how they are tracked. But the company has given some examples.

One "early relationship" trigger is going to a sporting event or concert together, while traveling together is one of the top milestones later in a couple's journey to engagement. Moving in together is another strong predictor of engagement, according to Signet.

At the company's investor day in April, Chief Consumer Officer Jamie Singleton said it's not just one trigger that predicts a strengthening of a relationship, but rather multiple triggers in combination.

"[I]f a couple meets the parents of their partner, they combine their finances and they say, 'I love you' in a visible space such as a social-media post, then that combination is a big, big predictor of engagement," Singleton said.

On Thursday, Drosos said during that the fiscal second quarter, the number of couples approaching the 25 to 30 milestones that make them more likely to get engaged increased by 7 percentage points from a year ago.

"So we're expecting that engagements will begin to improve," Drosos said. "They trough in [the third quarter] and will begin to come up in [the fourth quarter], but it is a multiyear recovery."

With that in mind, the company raised its fiscal 2024 guidance range for earnings per share to $9.55-$10.14 from $9.49-$10.09; the current FactSet consensus is for $9.42. The company kept its full-year total sales outlook at $7.10 billion-$7.30 billion.

For the quarter to July 29, Signet reported net income that dropped to $66.5 million, or $1.38 a share, from $136.8 million, or $2.58 a share, in the same period a year ago. Excluding nonrecurring items, such as charges related to the integration of Blue Nile, adjusted earnings per share of $1.55 beat the FactSet consensus of $1.45.

Sales declined 8.1% to $1.62 billion, above the FactSet consensus of $1.58 billion, as a 12% drop in same-store sales beat expectations for a decline of 12.3%.

Signet's stock has run up 21.4% over the past three months, while the SPDR S&P Retail exchange-traded fund XRT has climbed 12.8% and the S&P 500 index SPX has gained 6.8%.

-Tomi Kilgore

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09-01-23 0716ET

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