Q1 2022 Signet Jewelers Ltd Earnings Call
Pardon me the conference will begin momentarily. Thank you for your patients again the conference will begin momentarily.
[music].
Good morning, and welcome to the signature of <unk> first quarter fiscal 'twenty 'twenty 2 earnings call.
All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions. Please note. This event is being recorded I would now like to turn the conference over to Vinnie Sinisi Senior Vice President Investor Relations and Treasury.
Go ahead.
Hey, great. Thanks, very much Jason and good morning, everyone and welcome to our first quarter earnings conference call on the call today of Signet CEO Janet drove <unk> CFO Joan Hilson. During today's presentation, we will make certain forward looking statements any statements that are not historical facts are subject to a number of risks and uncertainties and actual.
Please go lets may differ materially we urge you to read risk factors cautionary language and other disclosures in our annual report on 10-K quarterly is on 10-Q and current reports on 8 case.
Except as 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'll discuss.
<unk> non-GAAP financial measures for further discussion of the non-GAAP measures as well as reconciliations of them to the most directly comparable GAAP measures investors should review of the news release, we posted on our website at Www Dot Signet jewelers Dot com slash investors and with that I'll turn the call over to Jenna.
Thank you Vinnie and thanks.
Certain of all of you who are on the call with US today I also want to thank our signet team members, who continue to inspire me with their relentless dedication to our customers and to each other we are embracing new capabilities and connected commerce with excellence as evidenced in this quarter's results.
Thanks to our team we built on the momentum of of very strong holiday performance and delivered both a strong Valentine's day and strong mother's day by continuing to serve customers whenever wherever and however, they choose to shop with us.
Further to this weird unlocking our team members' potential we know from listening.
And from our ongoing surveys that our team members are inspired by our purpose, they're proud to be part of our organization and they're confident in the tightly integrated strategies that are guiding our growth.
Our team members inspiration pride confidence expertise and growing.
Digital capabilities are the most important drivers of my confidence in our long term success at as an honor to work at their side.
As I review Signet performance in Q1.
I want to leave you with 3 messages.
Number 1 we outperformed Q1 expectations.
We did and are raising our fiscal 'twenty 2 guidance today.
Number 2 we're making steady progress in all 4 of our cleared of play strategic focus areas and all 3 of our how to win core strength consumer inspired insights connected commerce presence and our culture of innovation.
<unk> and agility, we are continuing to expand these strength because we know they are sources of competitive advantage.
We're outpacing market growth and as a result, we're growing share.
I'll talk through each of these points, but first let's look high level at the Q1 numbers.
<unk> total.
Total sales were $1.7 billion, an increase of more than $250 million or 18% compared to Q1.2 years ago.
This is significant because 2 years ago, we had 467 more stores than we have today.
E Commerce is playing an increasingly important role with sales up more than 110% in the quarter versus last year and 124% versus 2 years ago.
Cash flow from operating activities of $161 million year to date was up 160.
$69 million compared to last year, and $56 million compared to 2 years ago.
Having already paid down debt and with $1.3 billion of cash at quarter end, we are continuing to invest in growing our business and as Joan will discuss returning cash to shareholders.
Our holders.
Ending inventory was $2 billion $373 million lower than last year. Our inventory reduction efforts are now institutionalized lasts about rationalization and more about optimizing our merchandise mix and availability getting the.
The right product to the right places to maximize speed of delivery and sales are digital capabilities give customers access to virtually every piece of jewelry and our system no matter, where it is which is unlocking new levels of inventory productivity.
So this is become more than of working capital.
Tori, we're increasing our ability to flow newness into our inventory pipeline.
<unk> more innovative new products to more customers more frequently.
And with data analytics, we're ensuring we have optimized assortments, where we need them.
Our Q1 performance.
<unk> that we are off to a strong start implementing phase 2 of signet transformation, which we call inspiring brilliance.
On that note I want to transition now to taking a closer look at the progress we're making in each of the 4 where to play a strategic focus areas that we outlined 2 months ago.
In our virtual investor event.
First we are winning in our biggest businesses our strategy for keeping our core strong and growing as holistic. It begins with the work we've done to differentiate our banners, including merchandise assortment price tiers balancing self purchase and gifting.
And offering brands that are designed to appeal to each banners distinct target customer for.
For example, we're generating compelling and highly targeted content, that's tailored for each channel, where we communicate with customers and for the moment in their journey when they are engaging with us.
Our merchandise assortment is also uniquely targeted for each banner, including Neil Lane, and Adriana propel at Kay Vera Wang and Disney Enchanted at Zales, Levien end, Panini tornado at Jared and others across our portfolio.
Perhaps most importantly.
We're focused on product our merchants are continuing to innovate and scour the market for emerging ideas in bridal. This means of larger high quality diamonds with more radiance and sleeker designs for the gift giver collections with meaning really help our customers express their feelings and.
And for the self purchasing woman in man, our most innovative collections reflect the style changes that we have seen this year.
Yellow gold layered neck pieces and fully outfitted ears, we're finding that customers want to wear jewelry with all looks including casual athleisure.
<unk> professional and they want to do so, particularly now that they are reigniting their social lives.
Our differentiated banner propositions are working.
All of our U S banners delivered double digit revenue growth compared to 2 years ago, we attribute much of this to the success.
Yes, we're having attracting new customers across our banners with our holistic marketing and customer experience strategies, while maintaining the loyalty of existing customers as well.
For example, roughly 60% of our sales growth in Q1 across Kay and Zales came.
New customers, we've benefited from stimulus spending and other tailwind of course, but we believe that we've captured more than our fair share of this spending by having the right target at Assortments with the right level of newness differentiated by banner. This is evidenced by case.
I'm from long growth and gifting and sales is in self purchase further increasingly optimized assortments for our target customers led to an ATV increase of nearly 20% in these banners versus 2 years ago.
When we combine our knowledge of product.
As a jeweler and our knowledge of customers as a retailer along with the scale of our data driven operations, we win especially in our biggest businesses.
Second, we're making progress on our strategy to accelerate services, which are returning to pre pandemic.
Demick levels services are especially important because they are of long term relationship builder. The glue that connects of lifetime value of relationship and purchases between a customer and our signet team.
We jump started services in Q1 in several ways.
We enhanced our financial services by expanding and strengthening payment offerings for customers.
We recently announced a new and more favorable agreement with 2 long term partners a D S and Genesis. This gives us the ability to provide more payment flexibility more simply at.
And more profitably than we could before.
We're also continuing to expand customization services. This remains a growing trend among recently engaged people, 13% designed their ring from scratch, we're offering customization tools across all our.
Our largest banners with the Vera Wang love configuration or Zale.
Sales customers can choose of diamond or of Gem Stone center K enables customers to create a completely customizable engagement ring with a create your own design tool or design of ring with Neil Lane to get that.
Handcrafted Hollywood Glamour style, just the way they want and Jared customers have a variety of ways to put their personal touches on jewelry, whether adding an engraved phrase 2 of ring or working directly with jarret artisans online or in person at 1 of our in store Foundry Studios.
Yes.
Consistent with this customization sales are up low double digits and Jared stores with of foundry.
We also continue to build on our investments in James Allen.
A specialist in the custom jewelry space and we're seeing strong results with more than 130% revenue.
Growth to last year.
Further we launched custom design and restoration events across Kay Zales and Jared in Q1, we offered customers at 10% discount to bring an existing pieces of jewelry to be re imagined or restored to their previous brilliance. These.
Revenues on their own enabled us to exceed our goals for the quarter and we plan to continue hosting them banner by banner going forward.
We're also moving into new areas, such as jewelry rental subscriptions with the acquisition of rocks box and we're quickly growing brand.
Awareness through cross promotion within our banners Jared for example offered customers of free 2 months of subscription to rocks box when purchasing of Jared piece, and then provided a bounce back coupon to anyone who activated of rocks box subscription.
We will be offering of growing range of cross.
Cross banner promotions like this in the months ahead, including of rocks box rental offering partnership with piercing pagoda. This summer.
We are building momentum in services, which we continue to believe is a billion dollar growth opportunity on the path to the $9 billion overall.
We're all revenue goal, we laid out at our virtual investor event.
The third strategic focus area of where we're making progress is expanding mid market accessible luxury end value. We're focused sharply on growing the top end of the mid market with more intentional accessible.
<unk> luxury offerings for example, Jared fastest growth this quarter came through higher price point merchandise, primarily above $3000. This includes Jared new premium diamond assortment with sales of larger stones up roughly 30% of 2 years ago chosen.
And platinum Panini tornado and Royal Asher were strong merchandise drivers.
Piercing pagoda is expanding our strength at the value end of the mid market delivering its strongest quarter ever in Q1.
Just to emphasize ever means Q1 fiscal 'twenty.
2 with higher total revenue than any prior quarter for pagoda, including fourth quarters.
Customers are highly receptive to our new assortment with particular emphasis on gold, which represent 75% of pagoda sales.
<unk> now has more than 1.
35 stores on track to deliver a million dollars in sales this year and we currently have 4 pagoda locations that already have more than a million dollars in sales to date. This fiscal year of feet that took until August to achieve in fiscal 'twenty.
We.
<unk> hundred eager to keep piercing pagoda growing and highly relevant we're taking 2 critical steps in that direction by investing in advertising and launching of branding refresh the.
The strong return on our additional investment in advertising was proven this quarter as we continued to increase pagodas banner.
Her awareness sales were up 3 times to Q1 of last year and up 80% to 2 years ago on a smaller store base in both years.
Our second step updating branding is 1 that we believe will further accelerate our return on advertising spend or.
Our customer research.
Research indicates that the piercing pagoda name doesn't have the same modernity that our merchandise and banner experience spring. So we're testing the opportunity to freshen end broadened pagoda brand equity and attract new customers, while retaining existing ones.
Our fourth strategy.
<unk> is to lead digital commerce in the jewelry industry.
Our ability to combine digital and in store experiences at the scale, we're able to is of significant competitive advantage and we're continuing to innovate and to invest in both for.
For perspective K delivered.
Nearly 17% more brick and mortar sales per square foot of physical store space than in the first quarter 2 years ago at Zales is delivering 35% more in total Q1 e-commerce sales were up more than 110% compared to last year.
At brick and mortar same store sales were up more than 105%.
As part of our growing connected commerce approach, we are integrating our physical stores into the digital customer experience with data driven in store consultations.
Buy online pickup in store.
And curbside and increasingly seamless interaction across our websites stores and inventory pipeline.
This integration is making a difference while physical foot traffic is still down compared to this time 2 years ago, we've delivered growth through both higher conversion and.
<unk> for average transaction value. We believe this is because we are starting to provide a best in class experience from the first touch point of the digital shopping experience all of the way through in person store consultations and fulfillment.
We added more than 100 new features.
Higher end capabilities across our digital platforms in Q1 to ensure every digital touch point is a moment of customer delight.
Virtual try on for K drove over a 110% increase in its add to cart rate and nearly a 70% increase in.
At her conversion in Q1.
We also rolled out Google business messages and Apple business chat features that allow customers to engage virtual jewelry consultants in real time or offline from search results or maps.
Applications like these are laying the ground.
And work for further enhancements later this year as we build our agile team infrastructure and iterative innovation capabilities.
Last year, we implemented virtual selling at the end of Q1 and had around 50000 virtual interactions with customers.
This <unk>.
In or we had more than 450000 virtual interactions and importantly conversion is also improving as our teams capabilities continue to mature.
Further our car to checkout conversion rate is up and the rate of site visits that turn into cart views is up as.
As well our digital development teams are not settling for creating the best online jewelry experience, they're setting the bar higher by finding and innovating the best online consumer experiences in any category and then bringing those experiences for our jewelry customers.
Quarter I'll share..1 quick example of how this integration and growing digital capability is working we recently worked with a customer who came to us through our virtual chat feature with our mission and the deadline.
He wanted to propose to his girlfriend the next day.
Erica.
1 of our virtual of consultants noticed the urgency and in his messages and she made at her mission to help him achieve his.
This customer soon to be fiance had a dream ring in mind, our Cushing cut 2 carat thin pave rang in white gold.
Erika immediately began searching our virtual.
Well inventory to identify stores nationwide that had or could create the piece. He was looking for she found of store near him that had the cushion cut with of color clarity in size that he needed Eric.
Erika connected him directly to that store.
The next morning, he was greeted in person.
<unk> store consultant Yarra, who was ready to serve the customer loved the ring and bought it on the spot at 25000 dollar sale I might add.
The team sat and size of the ring, while he waited he proposed that evening. She said, yes, and he sent our team photos of the happy moment.
This customer told us he loved being able to start his shopping journey virtually look at pieces online chat with a virtual consultant.
Have us do the shopping with him and then have the diamond and ring together for him to view in person.
That's the power of Signet connecting digital.
It'll end physical alongside our mission of helping all people celebrate life and express their love.
Even in 24 hours or less.
What I hope you can see is that we are growing in each of our integrated strategic focus areas.
At the best strategies are tightly integrated.
At and create more value because they are mutually reinforcing.
It's making a difference as we've outpaced market growth over the last year and are gaining market share.
I also want to emphasize that we are delivering the performance I've outlined with a deep sense of purpose.
We're committed to ongoing leadership and corporate citizenship and sustainability and we view ESG initiatives as an important growth driver. This past quarter, we released the company's first ever of corporate citizenship and sustainability report.
This reflects our continued leadership prioritized.
Nation and board oversight of ESG initiatives.
We announced our 2030 corporate sustainability goals through our 3 loves love for all love for our team and love for our planet and products.
As we enhance our corporate citizenship and sustainability.
All of the goals, we believe in prioritizing our own team. This quarter, we launched Signet first team member experience, which is focused on providing team members with an exceptional and inclusive place to work, while also providing a robust set of learning and career development opportunities.
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Having been named a certified great place to work company last year, we aim to keep our high engagement and discretionary effort momentum going.
And we are active in the communities we serve as advocates for change we made the first donation from our Signet love inspires.
<unk> Foundation to the equal Justice initiative as there is much to be done to fight systemic racism.
And in line with our mission of celebrating life and expressing love for all of the company is celebrating pride month of cross Signet banners and has endorsed the human rights counsels business.
Business statement on anti LGBTQ plus state legislation.
As a global company with long standing partners and vendors around the world. We donated to the good Jarrod charitable trust in India with the intention of support for Covid relief efforts.
We.
We believe these purpose inspired actions are attracting even more top talent to our highly dedicated team.
And are attracting an appealing to customers who are voting with their wallets and support of companies and brands that share their values and take a stand.
In.
In summary, the inspiring brilliant phase of our transformation is off to a strong start we outperformed expectations in Q1, and we're making progress in all of our strategic focus areas.
We're growing our core strength and the meaningful competitive advantages and most importantly.
Accordingly, we are outpacing the market growing share and fulfilling our purpose as a company.
We still have plenty of hard work to do to sustain our performance and deliver long term growth, but we're encouraged by the momentum that's building and inspired by the opportunity to serve our.
Our customers and help grow the jewelry industry.
I'll now turn the call over to John Thanks, Gena Hello, everyone.
Inspiring brilliant is advancing our transformation and has accelerated our growth to deliver a strong first quarter performance.
Our top line.
<unk> is outpacing the U S specialty jewelry market and we believe we are winning share, particularly in the mid market.
There are 4 key highlights of quarter first our financial performance was strong in the quarter as we grew our top end bottom lines on a lower store base.
We grew our topline through higher conversion and average order value despite lower traffic of.
Our top line strength was complemented by our continued cost discipline and leveraging of our fixed cost base.
Second our balance sheet is strong at.
Fishing use of working.
King capital through inventory reduction and spend management.
Delivered an increase in liquidity to last year.
Third we successfully executed new credit agreements, resulting in benefits to our customers and favorable economics to signet reflected in our raise.
Savings guidance.
Lastly, we are committed to invest in signet growth and are raising our capital expenditures for the fiscal year. We are investing in our talent banner differentiation and technology. We are also pleased to announce today the reinstatement of a common dividend debt.
Of course rating our confidence in cash flows and business performance. Despite our conservative view of the back half.
Turning to the quarter first quarter total sales grew 98, 2% over last year on a lower store base. Our sales growth was broad based we saw strong performance.
Demonstrates formats regions channels and categories.
While overall jewelry category trends remain healthy we continue to outpace the market growth.
According to Mastercard data the U S specialty jewelry market grew over 72% for the 3 months ending.
Warm enthral compared to that market growth our U S. Banners grew total sales more than a 109% this quarter.
Our integrated strategic choices, including new connected commerce capabilities modern marketing strategies.
And enhanced product assortment of.
Enable enabling a more than 250 basis point increase to our brick and mortar conversion rate within our biggest businesses versus 2 years ago.
Yeah.
Moving onto gross margin, we delivered approximately $680 million this quarter or 43.
Percent of sales.
Well that rate is of significant improvement to last year. When we look back versus 2 years ago. This is a 540 basis point improvement.
We expanded our gross margin rate through a combination of factors first our top line performance allowed us to leverage fixed costs.
Our own we are benefiting from cost savings within gross margin.
Services revenue carries a more favorable margin profile and is growing importantly, compared to 2 years ago in programs such as extended service agreements lastly, through enhanced pricing discipline and new capabilities.
We improved our merchandise margin during the quarter.
Flexible fulfillment and ship from store provide our customers nearly all of our product across our channels, while more effectively managing our inventory throughout its lifecycle for the first time shift from store automation is now available across all.
All of our banners.
Turning to SG&A, SG&A was approximately $512 million or 33% of sales.
Here again the rate reflects a significant improvement to last year, but it was also a 290 basis point improvement to 2 years ago.
We're effectively using data analytics to create of labor model that integrates our new capabilities, resulting in a 60% improvement in labor productivity versus 2 years ago.
Our new labor model, coupled with our enhanced product assortment and marketing.
Strategies resulted in a 15, 2% increase in our North America average transact transaction value to last year.
In addition to labor productivity improvements, we are continuing our cost savings efforts, including technology harmonization optimizing our real.
Estate portfolio portfolio and overall spend management.
Non-GAAP operating profit was $168.9 million compared to an operating loss of $142.5 million in the prior year.
First quarter non-GAAP diluted EPS was $2.23.
It's up from a loss per share of $1.59 in the prior year.
Turning to the balance sheet, we continue to drive working capital efficiencies, we reduced our inventory by 373 million to this time last year accounts payable also remains an important.
<unk> component of our working capital management, and we continue to effectively manage payment terms within our network of vendors.
We ended the quarter with $2.5 billion in liquidity up over $1.2 billion to last year.
Recall, we have no drawings under our revolver.
<unk> longer term obligations mature in calendar 2024.
Turning now to financial services, and as recently announced we finite finalized agreements to restructure our credit offerings.
We've extended and expanded agreements with 2 of our longstanding credit.
And owners through calendar year 2025.
The terms of of new agreements will help to streamline the process for customers as an example.
We'll originate a wider array of customer profiles and Genesis will expand our second look program to do the same.
I'd note that all banners will now harmonized to offer our customers no down payment financing with a minimum monthly payment structure. These agreements, which are effective July 1 also provide favorable economics to signet.
As these agreements were more favorable than originally.
We contemplated we're raising our fiscal 'twenty 2 cost savings guidance by $20 million to a range of $75 million to $95 million and we now expect cumulative 3 year cost savings to be in the range of $220 million to $240 million.
Recall our.
Agreements with third party non prime receivable purchasers are in place until the end of June.
We have signed a non binding letter of intent with them and are currently working towards a definitive agreement and the terms would remove consumer credit risk from our balance sheet.
Currently <unk>.
Now I'd like to discuss our fiscal 2022 financial guidance.
We continue to expect stronger sales performance in the first half of the fiscal year.
As the vaccine rollout progresses, we continue to believe there could be a shift in wallet share away from the jewelry category.
At port experience oriented categories.
The magnitude and timing of which is difficult to predict.
As such we're planning for increased marketing expenses to continue to fuel momentum in the front half as well as proactively manage against changes in consumer.
Being asked of the year progresses at.
As a result, we continue to conservatively plan for same store sales to be negative in.
In the second half of the fiscal year. Additionally, India continues to see the tragic impact of a pandemic and while we've proactively managed accounts disruption.
<unk> to date supply chain risk could increase later in the year.
We expect second quarter total sales in the range of 1.6 to $1.65 billion with same store sales in the range of 76% to 82% and non-GAAP EBITDA of.
118 million to $130 million.
For the fiscal year, we now expect total sales to be in the range of $6.5 billion to $665 billion with same store sales in the range of 24% to 27% and.
Non-GAAP EBIT of $490 million to $545 million.
We remain on track to open up to at 100 locations and close at least 100 locations with 9 openings and 9 closings this year.
This includes the testing of formats.
It's that are quick to setup and require significantly less inventory on hand, as well as formats that contain multiple banners.
We will continue using format testing this year to determine the best way to offer our customers our breadth of capabilities as efficiently and effectively.
Possible.
Our long term capital priorities remain to invest in the business pay down debt and return capital to our shareholders first in keeping with these priorities and as a result of our performance and cash generation, we are increasing our capex.
<unk> of $25 million to invest.
And growth initiatives.
This brings our fiscal 'twenty 2 capital expenditures to a range of $175 million to $200 million with a continued focus on digital and technology investments to further strengthen our competitive.
Spinach and long term positioning.
Second recall that we paid down the balance of our revolver and file of alone in Q4 of fiscal 'twenty, 1 and our remaining maturities, which carry favorable interest rates come due in calendar 2024, and third on capital return.
Of advanced today were pleased to return cash to shareholders through a common quarterly dividend.
Which has been reinstated at 18 per share.
Before we open the call for Q&A I'd like to take a moment to thank our signet team. We're proud of the results we delivered this quarter.
<unk> and were proud of our team's execution and commitment to each other and to our customers.
And as we look ahead, we remain focused on our continued transformation under inspiring brilliance.
And now I'll turn the call over to the operator to begin the Q&A session.
Thank you we will now begin the question and answer session to ask a question you May press stores and 1 on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then 2.
The first question comes from.
Cash way from Citi. Please go ahead.
Hey, Thanks, guys couple of questions..1 just remind us what percent of your product comes from India of what Youre seeing currently in terms of.
Delays at the SEC.
You mentioned I think.
Putting in <unk>.
Paul did marketing expense curious if you could just size of that for us of the award when comparing that to when you say an increase.
Out of the book versus.
In 19 levels and then last curious if you could just share of performance of stores.
Of that you've got the chair.
Center.
Increase of another 1 of your banners versus those that sort of stand alone and in the center.
Hi, Paul I'll start out on the India question.
We haven't actually given a percentage of merchandise that comes from any different country, but let me answer your questions.
Question at a different way so.
First and foremost we're very concerned about the families and teams of our India partners. It's 1 of the reasons why we made a donation to the Goodyear of trust that I.
Offered earlier.
<unk> talked about earlier, we've also been at very close touch with our vendors on their production plans.
<unk>, we've actually pulled forward significantly our holiday orders and what this does is it gives our vendors the opportunity to better plan their production.
And as they do that they can create more social distancing keep their employees safe.
That kind of thing as we look at their capacity even.
Some of them are running in.
In the 50% range or in the 70% range of capacity, we believe that we have secured sufficient capacity to deliver the orders that we need between now and holiday.
Part of this comes because we've really strengthened our relationship.
Can ship with strategic vendors over the last couple of years, we've narrowed that vendor base and as we worked with those vendors they've diversified their production capabilities, so they're not singularly.
In India for production many of them have expanded to other markets, whether that's China.
China, or Thailand, or Vietnam, and so we're able to access those production sites as well so any disruption that we.
Might see from this year, we've already factored into our guidance.
And Paul with respect to marketing our expense marketing increases in spend are reflected as well.
In our guidance and I would remind you that as we said in the past we can.
<unk>.
Leverage our cost base on a slightly positive.
It's a slightly positive comp so that's in our thinking as well in Q1, you can see that we were able to leverage.
<unk> significantly and you know that as well, having incremental marketing spend so marketing for US is an effective mix mix of digital and social and we are working that on a day by day week by week basis with our marketing team. So we feel very good about our ability to be flex.
Our coal and we're holding them.
Of the marketing spend within our guidance because of of at the year progresses, and the relative uncertainty of the back half and the potential shift of customer behavior to travel and other experienced oriented categories. We believe that's very important for.
For us to maintain that flexibility with respect to real estate and multiple banners in specific malls as we've said in the past for our data analytics, we look at our real estate on of trade area basis, and so we do have.
Clearly locations with multiple banners of pagoda.
Flex of the sales.
Our Kay Jared James Allen and what we find is that it's based on the market, we don't see of distinctive difference.
Between banners within it.
Specific mall and as I mentioned in my remarks, we saw.
<unk> performance.
Ross.
Category geography real estate so we're.
We're really not seeing a distinctive difference stronger cross all.
Got it. Thank you good luck.
Thank you.
Again, if you of a question. Please press Star then.
1 of.
The next question comes from Dana Telsey from Telsey Advisory Group. Please go ahead.
Congratulations on the nice progress as you look at the average transaction value up both obviously in North America and international what do you. How are you thinking about pricing and was at in any particular.
Strong category, where you're seeing the change in just any any other particular category callouts, particularly as we go into the back half of the year end any product and marketing initiatives, we should be watching for thank you.
Yeah.
Hi, Dana Thanks, so much I'll start on that 1 of.
At the 80.
<unk> increases that we're seeing are actually broad based so we saw them both in brick and mortar and in E Commerce, and we saw them across our banners and we saw at in both bridal and fashion.
We would credit that to a couple of things..1 is I think we're doing a better job getting the right customers to the right band.
Uh huh.
Based on all of our targeted marketing and our new more distinctive banner value propositions, and then were better targeting the assortments that we have available in those banners.
We anticipated that there would be some tail winds from stimulus and tax refund checks.
Ban and we actually broadened our assortment to reach more price points.
So that when we had customers either interact with us online or in store, we could get higher conversion rates. That's what we saw and particularly when we have accounts sold sale so for.
Sample in E com when someone interacts with 1 of our virtual consultants versus just navigating fully on their own we're seeing that ATV is up substantially.
So that consultation really makes a difference to give customers confidence in the product that they're buying.
So so broad based and I think also reflective of some of the new strategies that we're putting in place.
And then with respect to the product and marketing initiatives that I would just add on here dana's as genocide of at a point in our biggest banners, we were able to attract 60% of our growth.
Was related to new customers. So I think that speaks to the strength of of marketing and reaching out to our customers at the right time and having the right offer for them to support that average transaction value growth.
Got it and just 1 follow up inventory levels. How are you planning inventory levels in the second quarter.
And balance of the year.
So what we're really pleased with Dana is that we've been able to continue on our working capital disciplines end of lifecycle management and as Jennifer said.
Inventory management is now institutionalized and as we think about that that means the flexible fulfillment of the ship from store.
Our automation, our buy online pick up in store and then having our inventory all of our product nearly all of our product available to our cost of all of our customers irrespective of channel.
Is what we're going to continue to work through and drive our assortment at.
And drive our inventory.
You can see importantly, this is opening up our ability and the product teams ability to bring in a more frequent flow of new product and end, particularly important as well when we think about the self purchaser and end the fashion customer so I'm really pleased with how the.
<unk> inventory is being managed by the teams I guess at the 1 thing I would add on that is lifecycle management. We're also because we are accessing product across our store base nationally, we're able to move more quickly through a mark down cycle and.
Seeing that happening and of higher margin way, which is also a benefit for the business.
Thank you.
Okay.
The next question comes from Tim <unk> from Northcoast Research. Please go ahead.
Good morning, and thank you for taking my question.
So I was wondering if you guys could spend a minute walking you through Europe.
Opex.
The increase there.
Maybe in the longer term.
1 of your where you.
You are.
Just maybe in terms of baseball analogy.
We are in terms of the investments.
You want to make end.
Non GM.
Let me start there things.
So with respect to our capital investment in our increase it's really about continuing to drive on digital and technology innovation and we spoke about at our investor.
As of.
Our harmonization process is still underway, we believe we have.
From time to go on that another year or so and then the digitally at digital investments are ongoing and we are pulling forward in accelerating the things that we believe have the greatest opportune.
<unk> for growth and can better serve our customers and remove friction and just integrated connected commerce in a more powerful way. So that's our focus and that will continue.
Throughout the next couple of years at.
And really it supports our vision there.
To date and inspiring brilliance that we're looking to connect our customer wherever and whenever and however, they want to shop Tim.
And I think in terms of the longer term question that you asked what where we are at company, who is hungry and believes and continue.
I'm pregnant so.
I think no matter what phase of the transformation, we were in I would say third inning.
That's because we we feel good about the progress that we're making we've laid a strong foundation. We believe that we are building competitive strengths that are enduring.
Hi.
And can lead to long term sustainable growth, but we always think about of the hard work ahead to really make that a reality and and never lose sight of the goal of which of course is winning the world series.
Thanks for the opportunity of this morning.
At June.
Good.
All of it.
Great color I appreciate that.
And then I guess 1 just.
A little thing you mentioned merchandise margin was up.
During the quarter it seems that across all of retail.
Retailers are getting the prices they want.
Ltd promotional activity can you walk us through.
Whether you guys promotional strategy has changed as you've seen the demand just search.
At least short term I think of long term you kind of indicated that you'd manage it too.
In order to capture better sales, but can you just walk us through how you guys are thinking about promotions from more time.
Sure. Thank.
Through.
From the perspective of merch margin the lifecycle management of itself is helping to really improve our margin is benefiting from the lifecycle management activity, but from a promotional perspective. What we found is that we are because of that we are able to.
Have a leaner markdowns at.
End of April 2 you can see that in our average transaction value. So promotion, we're not necessarily pulling back but it's not as.
Widely cast when we do run of promotions, that's number 1 to the assortment of itself is.
Is.
And the newness is really the customers responding to it so the need for promotion.
Is is less and we're really pleased with that and as Dennis said earlier the.
At ATV or the assortment lift that we're seeing is broad based so it's across.
Fashion and core product in bridal. So it's really a healthy inventory, it's great lifecycle management by the team and <unk>.
Continued evaluation of where we need to take our price points.
Thank you.
Again, if you of a question please.
Stores than 1.
The next question comes from Lorraine Hutchinson from Bank of America. Please go ahead.
Thanks, Good morning.
I wanted to follow up on the commentary of the enhanced relationship with your credit partners.
What's the mix of sales from each type of credit at this point and can you compare the prop.
Stability of sales through your various payment options.
So what we what we can see is that the customer right. Now Lorraine is really there's a mix shift in bank card use versus plc C versus.
Leasing and we're seeing the customer.
<unk>.
Being able to make a choice, which is what's really important for us is for them to have a choice in.
Have opportunities to buy jewelry through whatever works best for them. So with the change in providers. What we're seeing are the change in the.
Agreements and the new agreements, we just signed we're seeing that the economic benefit is that avs in Genesis through the second look program with Genesis and Avs.
Is the prime provider.
They are able to offer that to a wider array of customers.
<unk> that would have been purchased through.
The the non prime provider in the past, so that's where the benefit is coming from at.
And we're really pleased with the opportunity to harmonize the program as well across our customer base. So its end.
A customer benefit that we can also offer more promotional programs with them.
And the other benefit that I would just highlight as I mentioned in my remarks is that with the non binding letter of intent.
That would as we move forward and get to the definitive agreement that would remove consumer.
At risk from our balance sheet importantly.
The other thing I would just add is from the consumer perspective of variety of finance options that we are now offering is highly appealing it.
It was of much more narrow set in the past.
But for example.
<unk> credit online attachment rate for financing alternatives historically has always been of lower but we're seeing that grow dramatically and particularly among gen. Z customers. We're seeing are of firm spit split PE products grow about 60% of the usage.
<unk> of that product is gen Z. So we're really thinking more strategically about having a mix of financing options that appeal to customers across channels and across demographics.
Thank you.
The last question comes from.
Burrito from Wells Fargo. Please go ahead.
Hey, good morning, everyone.
Just 2 questions from me on the back half comp guidance can you just kind of just maybe give us some insight into it.
How youre thinking about the negative comp.
Do you expect it to worsen.
Curious what's going through your.
Thought process, just because of the business is obviously doing so well in real time, but you obviously have some tough compares so.
Any help there would be great and then maybe John just on installation and clearly there was inflation at a level of <unk>.
Key inputs you have of gold silver diamonds could you kind of talk about that.
Is that impacting you this year or is that more.
22 dynamics that we need to keep in mind is just anything there would also be helpful.
Great. Thanks, Mike.
As you noted at the back half of the year is at you know remains hard to predict for the reasons that I detailed but we think there are both headwinds and tailwind right and so as we think about.
With the tailwind of consumers coming back to the office.
And the shopping that might entail.
<unk> Accessorizing as well, we see to your point on gold, we see continued strength in gold and believe that that is of salt solid trend in that and it's also of fashion.
And and so from a fashion perspective.
We think that there's there's strength there, but as we think about the headwinds the larger headwinds the pent up demand for experienced <unk>.
<unk> based sector of like vacations and restaurants of movies.
That's the unknown.
And we're just prepare for and as we mentioned we're prepared to we have marketing in place in our end as reflected in our guidance to.
Do or do what we can do to control that and as also you mentioned, we did have a back half comp last year that was a positive 10%. So we believe that we need.
That were pretty conservatively plan be realistic but.
Do the things that we can do.
Within our within our strategies to drive our business end.
We are having traction we've at least as we've mentioned with our inspiring brilliant strategy. So we're.
Need to conduct come to life through our marketing our product and our new capabilities and as we mentioned we're growing market share. So we will lean into the good things that we're doing in control of the things that we can.
And all of them pushing.
And on inflation, what we're seeing is it's very interesting there.
Seeing that elasticity and gold and the strength in gold is something that we're able to work through from a pricing perspective, and really work with our vendor base to present product to our customers that enable them to continue to buy gold even with rising prices. So that's that's that and.
If we look at the vendor networks that we do have our relationships are very strong and we're able to work with our vendor teams to put product together.
To satisfy our customers and continue to drive the economics that we need to drive to support our business.
I guess I guess, what I'm asking.
At the inventory turn for you guys is very slow sort of inflation. We're seeing now is really going to come through next year is there anything from an AUC perspective that we should kind of keep in mind that youll be coming up against I guess 12 months from now.
What we're seeing is that we're able to navigate currently and so and as we are buying and buying through our product now.
That we're able to work our way through it and we will continue to do so as we progressed through the year end, if we see anything different will well be sure to work through that and comment on at in the future.
Okay.
Okay.
This concludes our question and answer session.
I would like to turn the conference back over to Jim <unk> for any closing remarks.
Well. Thank you again, everyone for your questions and your ongoing engagement in our business. We are pleased with our organization's performance this past quarter and confident in our ability to deliver guidance we've shared here today.
I want to thank our team members and partners for their dedication agility and excellence as we move into this next phase of our transformation.
Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Okay.
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