Signet Jewelers CEO Gina Drosos joins Yahoo Finance Live to discuss earnings, jewelry demand, consumers shifting their spending patterns, and the wedding industry in the wake of the pandemic.

Video Transcript

BRIAN SOZZI: All right, we're still tracking shares of jeweler Signet after a stunning 20% pop on Tuesday, following better than expected earnings. The company struck an upbeat tone for the holidays on its earnings call, citing strength in website visits. Joining us now is Signet Jewelers CEO Gina Drosos. Gina, it's good to see you in our studio for a change.

GINA DROSOS: I know.

BRIAN SOZZI: Thanks for coming down. Appreciate it.

GINA DROSOS: It's great to be here.

BRIAN SOZZI: Let's start on those website visits because we are smack in the middle of the holiday shopping season. What are you seeing people browse for? And what does the demand environment feel like to you?

GINA DROSOS: It's really interesting. One of our strategies has been to lead digital commerce in the jewelry category. It's a category that traditionally was very brick and mortar based. People only went into a store so they could be consulted or try on the product. Now we're actually selling a lot of jewelry online, but mostly browsing. 67% of our customers go online before they come into store.

BRAD SMITH: That's interesting. And particularly for the environments that we had found being beneficial for Signet is the number of people that had to, unfortunately, put off some of the matrimonial celebrations or the weddings. We saw a great year, of course, here in 2022, but that's expected to tick down in 2023 as some of that demand starts to dissipate a little bit. What does that look like for your business?

GINA DROSOS: You know, it's very interesting. Bridal is a great business to be in. I mean, every year, there are engagements, weddings, anniversaries. The first meaningful blip in decades happened because of COVID. So fewer people got engaged. Many fewer people got married during COVID because they wanted to be able to have a celebration with friends and family.

This, 2022, is the year of the wedding, but we've seen engagements tick down a bit versus last year's peak, probably down a little bit next year, too. What we've done is pivot more to fashion jewelry. Romantic gifting has been very big coming out of COVID, people really wanting to celebrate those they love the most.

JULIE HYMAN: And Gina, some of the other changes that you highlighted in the earnings and in the conference call has to do with the price points at which people are buying right now. And it sounds like the lower end is maybe waning a little bit, as we're seeing consumer trends change. Can you give us a little bit more detail on where on the spectrum we're seeing the buying?

GINA DROSOS: Sure. Last year was a big year for lower priced jewelry. Stimulus was in the market. People really spending on themselves, which was great to see. Self purchase tends to be a lower priced purchase than bridal or romantic gifting. So we saw a big increase last year. That's been offset this year somewhat. We're still up on a stack basis. But we've seen lower income customers be more challenged. You know, discretionary price increases are impacting their discretionary spend more so than higher income customers.

JULIE HYMAN: Are we seeing even engagement in the higher end jewelry, are we seeing buyers make different decisions at all? Are they bringing down what they're willing to spend at all?

GINA DROSOS: No, we've seen a lot of strength at the higher end. Our average transaction value was up 8% in the quarter, up 27% versus three years ago. That is, in part, because of the pivot that we've made, recognizing that lower income customers would be more challenged. For that customer, we've added value engineered product really to give them a great value, financing alternatives. But we've also pivoted our marketing and our assortment to attract a higher end customer.

BRIAN SOZZI: Within all the categories you sell at a Kay or a Jared, what is growing the fastest-- necklaces, rings, bracelets? What stands out to you?

GINA DROSOS: You know, diamond tennis necklaces are really big this holiday season. Yellow gold continues to trend. Diamond set in yellow gold for bracelets and for rings have been great. But probably one of the most interesting trends is men's jewelry. Men's is really trending. Black diamond--

BRIAN SOZZI: Black diamonds.

GINA DROSOS: Yes.

BRIAN SOZZI: And is it OK for me to stack my necklaces? I went over to the Jared site and there's a promotion on the top of the site. I see a guy with, I think, three necklaces on. I only have one. I only have one, Gina.

GINA DROSOS: This is popular. So absolutely. Women have been layering necklaces for a couple of years now. But this year is the year that you're the--

BRIAN SOZZI: So what you're saying is I'm off trend. I'm off trend.

JULIE HYMAN: You can do whatever you want.

BRIAN SOZZI: But I want to. I wouldn't mind helping the margins out at Signet if I look cool. It's all good.

GINA DROSOS: Agree.

JULIE HYMAN: I also want to ask you about Blue Nile and the integration there because I know analysts have a lot of questions about the profitability trajectory for Blue Nile. What can you tell us?

GINA DROSOS: So Blue Nile is losing money at this point. It lost money in the third quarter. We anticipated that. And we more than offset that loss with an overperformance on our core business, which was nice to see. We anticipate it will lose money again in the third-- I mean in the fourth quarter. And we've said that it should be accretive to our business by the third quarter of next year.

BRIAN SOZZI: I used to follow Blue Nile a lot. Why does it lose money? It doesn't carry inventory, right?

GINA DROSOS: You know, what we're really looking at right now is the appropriate balance of their inventory and assortment so that we can really get the right margin structure, a good, better, best structure into Blue Nile and their marketing spend.

BRIAN SOZZI: You still like--

GINA DROSOS: There's a lot of efficiency in--

BRIAN SOZZI: Are the stores still useful to have?

GINA DROSOS: Blue Nile has about 23 showroom stores. So you don't really buy product in the stores. You go and a consultant helps you choose something that we then custom make for you and send it to you. Or you can pick it up in the store. It's very effective.

BRAD SMITH: In the event of a mild recession, as we've heard from some bank CEOs, economists, what would that signal for the jewelry industry? What do you forecast or even model to some of your own business outlook as well?

GINA DROSOS: You know, jewelry is not immune to macroeconomic pressure, but I would say it's very different from most of the rest of retail. Jewelry inherently holds its value, and customers know that. So they know that if they buy a nice piece of jewelry, it will be worth at least the same, if not have appreciated, a year later. So we see in tough times, even including recession, jewelry actually does much better than the rest of retail.

BRAD SMITH: Signet Jewelers CEO Gina Drosos joining us here on set. Thanks so much for taking the time.

GINA DROSOS: Thank you.