Q2 2024 Signet Jewelers Limited Earnings Call

Speaker 1: Good morning ladies and gentlemen and welcome to the Cigna jewelers Q2 earnings conference call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session.

Good morning, ladies and gentlemen, and welcome to the Signet Jewelers Q2 earnings Conference call.

At this time all lines are in a listen only mode. Following the presentation. We will conduct a question and answer session. If at any time during this call you'll be quite immediate assistance. Please press star zero for the operator on this call is being recorded on Thursday August 31st 2020, I would now like to turn the conference over to Rob Valeant.

Speaker 1: If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 31st, 2023. I would now like to turn the conference over to Rob Ballou, SVP of Investor Relations. Please go ahead, sir.

VP of Investor Relations. Please go ahead Sir.

Speaker 2: Good morning, welcome to Cigna jeweler's 2nd quarter earnings call on the call today or Cigna CEO Jenna, and she financial strategy and services officer. Joan. During today's presentation, we will make sure.

Good morning, welcome to Signet Jewelers second quarter earnings call on the call today are <unk> CEO , Jim <unk>, the Chief financial strategy and services Officer, Joe Jolson.

During today's presentation, we will make certain forward looking statements.

Speaker 2: Any statements that are not historical facts are subject to a number of risks and uncertainties.

Any statements that are not historical facts are subject to a number of risks and uncertainties.

Actual results may differ materially.

Speaker 2: We urge you to read the risk factors cautionary language and other disclosures in our annual report on Form 10-K . Quarterly reports on Form 10-Q and current reports on form 8.

We urge you to read the risk factors cautionary language and other disclosures in our annual report on Form 10-K quarterly reports on Form 10-Q, and current reports on form 8-K.

Speaker 2: 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 will discuss certain issues related to the

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 will discuss certain non-GAAP financial measures for further discussion of the non-GAAP financial measures. The reconciliation of the non-GAAP financial measures most directly comparable to those GAAP measures investors should review the news release, we posted on our website at Www Dot Signet jewelers Dot com forward slash investors with that I'll turn the call over to Jeff.

Speaker 2: For further discussion of the non-GAAP financial measures, as well as reconciliation of the non-GAAP financial measures most directly comparable to those GAAP measures, investors should review the news release we posted on our website at www.signagewellers.com forward slash investors. With that, I'll turn the call over to Jeff.

Speaker 3: Thank you Rob, and thanks to all of you for joining us today. Before getting into our prepared remarks, I want to thank our Signet team for their dedication, resilience, and discipline to execution this quarter. In a challenging environment, we over-delivered on our commitments. Signet recognition as a great place to work is driven entirely by our team members capability and commitment and the winning and inclusive culture we continue to build together.

Thank you, Rob and thanks to all of you for joining us today before getting into our prepared remarks I want to thank our signet team for their dedication resilience and disciplined execution this quarter and a <unk>.

Challenging environment, we over delivered on our commitments <unk> recognition as a great place to work is driven entirely by our team members capability and commitment and the winning an inclusive culture, we continue to build together.

Speaker 3: There are three key messages I'd like to emphasize today. First, we are on track to deliver the year. In the second quarter, we exceeded our revenue and bottom line commitments and we remain confident in our full year guide.

There are three key messages I'd like to emphasize today.

First we are on track to deliver the year in the second quarter, we exceeded our revenue and bottom line commitments and we remain confident in our full year guidance. We delivered these results in a challenging macro environment, which impacts our mid market customers disproportionately and as we predicted with significantly fewer.

Speaker 3: We delivered these results in a challenging macro environment, which impacts our mid market customers disproportionately. And as we predicted, with significantly fewer engagements in the quarter, resulting from COVID's disruption of dating three years ago. Our performance against these headwinds reflects both the agility of our team and our flexible operating model.

Engagements in the quarter, resulting from Covid disruption of dating three years ago.

Our performance against these headwinds reflects both the agility of our team and our flexible operating model.

Speaker 3: Second, trends are modestly improving. We've seen generally modest improvement in customer traffic and purchase behavior since early June , with lower price points rebounding, particularly in fashion.

Second trends are modestly improving we've seen generally modest improvement in customer traffic and purchase behavior. Since early June with lower price points rebounding, particularly in fashion.

Speaker 3: average transaction value or ATV appears to have stabilized and is trending roughly in line with last year.

Average transaction value or ATV appears to have stabilized and is trending roughly in line with last year.

Speaker 3: Further, our data capabilities now allow us to track 45 signals of couples progressing toward engagement, and these are falling in line as we anticipated, pointing to a multi-year recovery beginning in our fourth quarter. These are all positive signs as we finalize our preparations for the holiday season.

Further our data capabilities now allow us to track 45 signals of couples progressing toward engagement and these are falling in line as we anticipated.

Pointing to a multi year recovery beginning in our fourth quarter.

These are all positive signs as we finalize our preparations for the holiday season.

Speaker 3: Third, we are widening our moat of competitive advantages, especially in our personalized marketing, digital experience, data analytics, and services. We are generating meaningful cost savings on track to land between $225 to $250 million this year and reinvesting to drive market share growth over time.

Third we are widening our moat of competitive advantages, especially in our personalized marketing digital experience data analytics and services, we are generating meaningful cost savings on track to land between $225 million to $250 million this year.

And reinvesting to drive market share growth over time, we remain confident that we can deliver the mid term goals, we outlined at our Investor day earlier this year.

Speaker 3: We remain confident that we can deliver the midterm goals we outlined at our investor day earlier this year.

Speaker 3: Let's take a closer look at each of these three messages, beginning with our performance in the second quarter.

Let's take a closer look at each of these three messages beginning with our performance in the second quarter, we exceeded the high end of our guidance in Q2, delivering approximately one $6 billion in sales and $103 million and non-GAAP operating income we achieved this quarter's results.

Speaker 3: We exceeded the high end of our guidance in Q2, delivering approximately $1.6 billion in sales and $103 million in non-GAAP operating income.

Speaker 3: We achieved this quarter's results despite the meaningful drags of both the challenging macro environment and the predicted decline in engagement.

Right the meaningful drags of both the challenging macro environment and the predicted decline in engagements. We believe we continue to grow bridal share. During this trough and we are confident that engagements are on track to begin their multiyear recovery later this year.

Speaker 3: We believe we continue to grow bridal share during this trough and we are confident that engagements are on track to begin their multi-year recovery later this year.

Speaker 3: Non-GAP operating income reflects core merchandise margin expansion of more than 180 basis points compared to last year. Driven by an increase in services mix, our scaled sourcing efforts, and higher lab created diamond mix, which remains a mid-teen percentage of our diamond business mix.

non-GAAP operating income reflects core merchandise margin expansion of more than 180 basis points compared to last year driven by an increase in services next our scaled sourcing efforts and higher lab created diamond mix, which remains a mid teen percentage of our diamond dose.

S Max because of Sigma strategic efforts in branding style offerings and specialty cuts. The items, we are selling with lcd's carry both a higher margin.

Speaker 3: Because of Cigna's strategic efforts in branding, style offerings, and specialty cuts, the items we are selling with LCDs carry both a higher margin and higher ATV than natural diamonds.

And higher ATV the natural diamonds.

Speaker 3: Importantly, compared to this time pre-pandemic, non-GAAP operating margin is up 250 basis points on 18% higher sales despite 16% fewer stores, showcasing that our transformation and flexible operating model is working as intended.

Importantly, compared to this time pre pandemic non-GAAP operating margin is up 250 basis points on 18% higher sales, despite 16% fewer stores.

Okay, saying that our transformation and flexible operating model is working as intended.

Speaker 3: The second point I want to emphasize is the modest improvement we're seeing in the overall health of our customer. Fashion merchandise sales increased sequentially in the second quarter. Up four points year over year compared to the first quarter results. This was led by Stronger Performances at K and Vanter, which saw improved same store sales for much of the second half of the quarter.

The second point I want to emphasize is the modest improvement we're seeing in the overall health of our customer fashion merchandise sales increased sequentially in the second quarter up four points year over year compared to the first quarter results. This was led by stronger performances at Kay and banter, which saw.

<unk> same store sales for much of the second half of the quarter.

Speaker 3: While overall fashion sales improved modestly, we saw a robust improvement through the quarter for fashion merchandise below $1,000.

While overall fashion sales improved modestly we saw a robust improvement through the quarter for fashion merchandise below $1000. For example, K drove great performance in our refreshed basics assortment comprised of timeless core product like soups in diamonds and gold as well as class.

Speaker 3: For example, K-drove great performance in our refreshed basic assessment comprised of timeless core product like soups and diamonds and gold as well as classic styles in neck and bracelet pieces.

Styles in neck embrace slipped pieces.

Speaker 3: We've seen the same trend at accessible price points in banter, pieces that provide customers with versatility and that they can wear every day.

We've seen the same trend at accessible price points and banter pieces that provide customers with versatility and that they can wear every day.

Speaker 3: K, Zales and Jared also saw comparable sales growth at the highest price points in our fashion assortment as our core banners remained strong in romantic gifting.

Kay Zales and Jared also saw comparable sales growth at the highest price points in our fashion assortment as our core banners remained strong and romantic gifting.

Speaker 3: Our data on independent jewelers shows declines in this segment, reflecting our share gains in the quarter.

Our data on independent Jewelers shows declines in this segment, reflecting our share gains in the quarter.

Speaker 3: As we finalize our preparations for the upcoming holiday season, merchandising assortment plays a critical role in our strategy.

As we finalize our preparations for the upcoming holiday season merchandising assortment plays a critical role in our strategy.

Speaker 3: For example, at K we're leaning into innovation and yellow gold, which continues to trend well and is also multicultural. Appealing K is also focusing on gift box, assortments under $500, as well as strong bridal innovation, including larger center stone pieces and new collections in Neil lane and Monique Lillie.

For example, at Kay, we're leaning into innovation and yellow gold, which continues to trend well and is also multicultural appealing.

<unk> is also focusing on gift box assortments under $500 as well as strong bridal innovation, including larger center stone pieces and new collections in Neil Lane and Monique Olivier.

Speaker 3: and sales will bring new styles into our premier bridal collection, Vera Wang Love, while also introducing new fine jewelry essentials, including super rings and multiple metal options and sizes, as well as diamond fashion at accessible price points for everyday wear and gifting.

At Zales will bring new styles into our Premier Bridal collection Vera Wang Love, while also introducing new fine jewelry essentials, including Sip hearings and multiple metal options and sizes as well as diamond fashion at accessible price points for everyday wear and gifting.

Speaker 3: At Jared, we have lifted the penetration of yellow gold to 30% across bridal, innovated around a collection of gender inclusive bands and engagement rings, and developed a beautiful new elevated entry price personalized charm collection with New York City influencer designer Lisa Salzar with a collection from Lulu Frost. We believe this innovation is on trend culturally and at the right price point.

At Jared we have lifted the penetration of yellow goal to 30% across bridal innovated around the collection of gender inclusive bans in engagement rings and developed a beautiful new elevated entry price personalized charm collection with New York City Influencer designer, Lisa <unk> with the collection.

From Lulu Frost, we believe this innovation is on trend culturally and at the right price points.

Operator: Good morning, ladies and gentlemen, and welcome to the Signet Jewelers Q2 earnings conference call. At their time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 31, 2023.

Speaker 3: Similar to last year, we anticipate that customers will wait a bit later into the holiday season to begin their shopping. Economic pressure on discretionary dollars often leads customers to delay their shopping to Black Friday and the days leading into Christmas. We've built our marketing, labor planning and merchandising strategies for the back half to attract these customers with this in mind.

Similar to last year, we anticipate that customers will wait a bit later into the holiday season to begin their shopping.

Economic pressure on discretionary dollars awesome leads customers to delay their shop into black Friday, and the days leading into Christmas.

Robert Ballew: I would now like to turn the conference over to Rob Ballew, SVP of Investor Relations. Please go ahead sir.

<unk> built our marketing labor planning and merchandising strategy for the back half to attract these customers with this in mind.

Jim: Good morning, welcome to Signet Jewelers' second quarter earnings call.

Speaker 3: In marketing, this means leveraging our customer data to drive smarter, more personalized messaging on the platforms that our customers are using most, making more effective and efficient use of our spend. Within our labor planning, we're using store-by-store, hour-by-hour level data to match labor hours to customer demand. The key message here is that our data and scaled innovation positions us with meaningful advantages for the holidays. The key message here is that our customers are using store-by-store, hour-by-hour level data to match labor hours to customer demand.

In marketing this means leveraging our customer data to drive smarter more personalized messaging on the platforms that our customers are using most making more effective and efficient use of our spend within our labor planning, we're using store by store hour by hour level data to match labor hours.

Jim: On the call today are Signet C, and Janet Drosus, and Chief Financial, Strategy, and Services Officer, 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 risk and uncertainties. Actual results may differ materially.

Jim: We urge you to read the risk factors, cautionary language, and other disclosures in our annual report on form TK. Quarterly reports on form TNQ and current reports on form AK.

Customer demand.

The key message here is that our data and scaled innovation positions us with meaningful advantages for the holidays.

Jim: Except is required by law, we undertake no obligation to revise or publicly update for looking statements in light of new information or future events. During the call, we will discuss certain non-gap financial measures. For further discussion of the non-gap financial measures, as well as reconciliation of the non-gap financial measures, most directly comparable to those gap measures, investors should review the news release we posted on our website at www.signetjewelers.com forward slash investors.

Speaker 3: The third and most important point I want to make is our continued confidence that we can deliver our midterm goals over the next three to five years as we continue to invest to widen our competitive advantages.

The third and most important point I want to make is our continued confidence that we can deliver our midterm goals over the next three to five years as we continue to invest to widen our competitive advantages.

Speaker 3: Two of the most common questions we receive from investors are first, how we've bridged our current year performance from pre-pandemic, and second, how we're bridging the current year to our midterm goals. We've posted a new investor deck this morning, which I believe addresses these two questions. And I'll devote the balance of my remarks to why we are confident in our midterm goals.

Two of the most common questions. We received from investors are first how we've bridged our current year performance from pre pandemic.

Jim: With that, I'll turn the caller to Jim. Thank you, Rob, and thanks to all of you for joining us today. Before getting into our prepared remarks, I want to thank our Signet team for their dedication, resilience, and discipline to execution this quarter.

And second how we are bridging the current year to our mid term goals, we've posted a new investor deck. This morning, which I believe addresses these two questions and I'll devote the balance of my remarks to why we are confident in our mid term goals.

Jim: In a challenging environment, we over-delivered on our commitments. Signet's recognition as a great place to work is driven entirely by our team members' capability and commitment and the winning and inclusive culture we continue to build together.

Speaker 3: We're focused on four growth drivers, winning the engagement recovery, expanding accessible luxury, growing services, and developing unassailable competitive advantages in digital and data-driven marketing.

We're focused on four growth drivers, winning the engagement recovery expanding accessible luxury growing services and developing unassailable competitive advantages and digital and data driven marketing.

Speaker 3: Taken together, we believe these four drivers will lead to a $9 to $10 billion in revenue.

Jim: There are three key messages I'd like to emphasize today. First, we are on track to deliver the year. In the second quarter, we exceeded our revenue and bottom line commitments and we remain confident in our full-year guidance. We delivered these results in a challenging macro-environment, which impacts our mid-market customers disproportionately, and as we predicted, with significantly fewer engagements in the quarter, resulting from COVID's disruption of dating three years ago. Our performance against these headwinds reflects both the agility of our team and our flexible operating model.

Taken together, we believe these four drivers will lead to a $9 billion to $10 billion in revenue.

Speaker 3: 11 to 12% and will non-gap EBIT margin and deluded non-gap EPS of 14 to 16 dollars per share over the next three to five years.

7% to 12% annual non-GAAP EBIT margin and diluted non-GAAP EPS of 14 to $16 per share over the next three to five years.

Speaker 3: Importantly, both the current year and our midterm goals assume no pandemic spending left. With a 1 to 2% compound annual growth rate for the jewelry category from calendar 2019 to calendar 2019.

Importantly, both the current year and our mid term goals assume no pandemic spending lift with a 1% to 2% compound annual growth rate for the jewelry category from calendar 2019 too.

Two calendar 2028.

Speaker 3: The first big opportunity is bridal. By design, bridal is a big business for us. And as engagements begin their recovery later this year, we're positioning ourselves to capture a multi-year tail lens.

The first big opportunity is bridal by design bridal is a big business for us and as engagements begin their recovery later this year, we're positioning ourselves to capture a multiyear tailwind. This is important because bridal is a highly strategic category. It's frequently the most important.

Jim: Second, trends are modestly improving. We've seen generally modest improvement in customer traffic and purchase behavior since early June, with lower price points rebounding, particularly in fashion. Average transaction value, or ATV, appears to have stabilized and is trending roughly in line with last year. Further, our data capabilities now allow us to track 45 signals of couples progressing toward engagement and these are falling in line as we anticipated, pointing to a multi-year recovery beginning in our fourth quarter. These are all positive signs as we finalize our preparations for the holiday season.

Speaker 3: This is important because bridal is a highly strategic category. It's frequently the most important emotional and financial point of market entry into the jewelry category.

Emotional and financial point of market entry into the jewelry category.

Speaker 3: That means that in addition to initial sales, it drives the beginning of lifetime relationships, leading to future purchases for special events, anniversaries, and holidays throughout our...

That means that in addition to initial sales it drives the beginning of lifetime relationships, leading to future purchases for special events anniversaries and holidays.

Throughout our customers' lives.

Speaker 3: We see bridal as a $600 million revenue growth opportunity.

We see bridal as a $600 million revenue growth opportunity.

Speaker 3: Prior to the pandemic, we estimate the number of engagements was consistently close to 2.8 million per year. That began dropping last year, and we estimate it will bottom out this calendar year, 2023, between 2.1 and 2.2 million, or nearly 25% fewer engagements than normal.

Jim: Third, we are widening our mode of competitive advantages, especially in our personalized marketing, digital experience, data analytics, and services. We are generating meaningful cost savings on track to land between $225 to $250 million this year, and reinvesting to drive market share growth over time. We remain confident that we can deliver the midterm goals we outlined at our investor day earlier this year.

Prior to the pandemic, we estimate the number of engagements with consistently close to $2 8 million per year that.

That began dropping last year and we estimate it will bottom out this calendar year 2023 between two one and $2 2 million or nearly 25% fewer engagements than normal.

Speaker 3: Based on our data, we believe engagements will begin recovering in Q4 and fully rebound over the next three years.

Based on our data we believe engagements will begin recovering in Q4 and fully rebound over the next three years.

Speaker 3: Just holding our estimated 30% share of the bridal market and engagement ATB constant, the 650,000 increase in total engagements is worth more than $500 million in revenue from engagement rings alone.

Jim: Let's take a closer look at each of these three messages beginning with our performance in the second quarter. We exceeded the high end of our guidance in Q2, delivering approximately $1.6 billion in sales and $103 million in non-gap operating income. We achieved this quarter's results despite the meaningful drags of both the challenging macro environment and the predicted decline in engagement. We believe we continue to grow bridal share during this trough, and we are confident that engagements are on track to begin their multi-year recovery later this year.

Just holding our estimated 30% share of the bridal market and engagement ATB constant the 650000 increase in total engagements is worth more than $500 million in revenue from engagement rings alone.

Speaker 3: But we are positioning ourselves to grow bridal market share as we are doing in 2023 and create competitive advantage in the bridal ecosystem of jewelry gifting, as well as extending our reach into customers lifetime value. The remaining $100 million or more of opportunity reflects our investments in personalization, customization, and loyalty to accomplish this.

But we are positioning ourselves to grow bright on market share as we are doing in 2023 and create competitive advantage in the bridal ecosystem of jewelry gifting as well as extending our reach into customers lifetime value the remaining $100 million.

Or more of opportunity reflects our investments in personalization customization and the loyalty to accomplish this.

Jim: Non-gap operating income reflects core merchandise margin expansion of more than 180 basis points compared to last year, driven by an increase in services mix, our scaled sourcing efforts, and higher lab created diamond mix, which remains a mid-teen percentage of our diamond business mix. Because of significant strategic efforts in branding, style offerings, and specialty cuts, the items we are selling with LCDs carry both a higher margin and higher ATV than natural diamonds. Importantly, compared to this time pre-pandemic, non-gap operating margin is up 250 basis points on 18% higher sales despite 16% fewer stores. Show casing that our transformation and flexible operating model is working as intended.

Speaker 3: So why are we confident that engagements will recover? Our confidence is based on 45 proprietary milestones we track to measure a couple's journey toward engagement.

So why are we confident that engagements will recover our confidence is based on 45 proprietary milestones, we track to measure our couples journey toward engagement.

Speaker 3: While every couple is unique, dating and relationships tend to follow patterns. Not every couple experiences all of 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.

While every couple has unique dating and relationships tend to follow patterns. Not every couple experiences all of the 45 milestones we track, but we know that once they reached 25 to 30 of these milestones they become statistically significantly more likely to move on to <unk>.

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Speaker 3: This quarter, we saw the pool of couples approaching the 25 to 30 milestones increased by 700 basis points.

This quarter, we saw the pool of couples approaching the 25 to 30 milestones increased by 700 basis points.

Speaker 3: Additionally, we are seeing states like Texas and Florida, which reopened earlier in the pandemic, 10 points closer to pre-pandemic engagement levels compared to California and New York, which reopened later in the pandemic.

Additionally, we are seeing states, like Texas, and Florida, which reopened earlier in the pandemic 10 points closer to pre pandemic engagement levels compared to California, and New York, which reopens later in the pandemic.

Jim: The second point I want to emphasize is the modest improvement we are seeing in the overall health of our customer. Fashion merchandise sales increased sequentially in the second quarter. Up 4 points year over year compared to the first quarter results. This was led by stronger performances at K and banter, which saw improved same-store sales for much of the second half of the quarter. While overall fashion sales improved modestly, we saw a robust improvement through the quarter for fashion merchandise below $1,000.

Speaker 3: One final data point here. When we look at early relationship triggers, we're also seeing improvement the last year. For example, one of the early relationship triggers we've mentioned before is going to a sporting event or concert together, an indicator that is up 7% to early 2022.

One final data point here when we look at early relationship triggers we're also seeing improvement to last year.

For example, one of the early relationship triggers we've mentioned before is going to a sporting event or concert together and indicators that is up 7% to early 2022.

Speaker 3: This is equally important because this recovery will be multi-year and gradual. Signet is well positioned to win in this environment. We have identified a proprietary audience of more than 14 million people who are in dating relationships and are targeting them with education and marketing that's right for them as their journey progresses.

This is equally important because this recovery will be multi year and gradual cigna.

Jim: For example, K-drove great performance in our refreshed basic assortment, comprised of timeless core products like soups and diamonds and gold, as well as classic styles in neck and bracelet pieces. We've seen the same trend at accessible price points in banter, pieces that provide customers with versatility and that they can wear every day. K-zales and Jared also saw comparable sales growth at the highest price points in our fashion assortment, as our core banners remain strong in romantic gifting. Our data on independent jewelers shows declines in this segment, reflecting our share gains in the quarter.

Signet is well positioned to win in this environment, we have identified a proprietary audience of more than 14 million people, who are in dating relationships and are targeting them with education and marketing that's right for them as their journey progresses.

Speaker 3: Our next growth driver is Accessible Luxury, which we believe represents $1 billion in revenue growth potential, driven by tearing up the Jared brand, expanding the Diamonds Direct fleet, and growing our digital banners, James Allen and Blue Nile. We believe Jared represents a $500 million growth opportunity as we expand the assortment of more premium offerings.

Our next growth driver is accessible luxury which we believe represents $1 billion in revenue growth potential driven by tearing up the Jared brand expanding the diamond direct fleet and growing our digital banners, James Allen and balloon style, we believe Jared represents a $500 million.

Jim: As we finalize our preparations for the upcoming holiday season, merchandising a sortment plays a critical role in our strategy. For example at K, we're leaning into innovation and yellow gold, which continues to trend well, and is also multi culturally appealing. K is also focusing on gift box assortments under $500, as well as strong bridal innovation, including larger center stone pieces and new collections. In Neil Lane and Monique Lillier, at sales, we'll bring new styles into our premier bridal collection, Vera Wang Love, while also introducing new fine jewelry essentials, including soup earrings and multiple metal options and sizes, as well as diamond fashion at accessible price points for everyday wear and gifting.

<unk> opportunity as we expand the assortment of more premium offerings.

Speaker 3: Compared to Q2 of fiscal year 20, this strategy has already led to growth of ATV of more than 60% at Jared.

<unk> to Q2 of fiscal year 'twenty. This strategy has already led to growth of ATV of more than 60% at Jared.

Speaker 3: Importantly, this reflects only a low single digit impact from taking price. As Jared's ATV improvement has been driven almost completely by assortment optimization and premium item.

Importantly, this reflects only a low single digit impact from taking price as Jareth ATV improvement has been driven almost completely by assortment optimization and premium items.

Speaker 3: Our test pilot for preferred assortment continues to drive significantly higher comparable revenue than the remainder of the fleet. And based on early results, that alone would be worth more than $100 million in revenue applied to all Jared stores. We will be expanding the preferred assortment to 50 additional stores in the third quarter ahead of the upcoming holiday season with further expansion planned incoming quarters.

Our test pilot for preferred assortment continues to drive significantly higher comparable revenue than the remainder of the fleet and based on early results that alone would be worth more than $100 million in revenue applied to all Jared stores, we will be expanding the preferred assortment to <unk>.

Jim: At Jared, we've lifted the penetration of yellow gold to 30% across bridal. Innovated around a collection of gender inclusive bands and engagement rings and developed a beautiful new elevated entry price personalized charm collection with New York City influencer design or Lisa Salazar with a collection from Lulu Frost.

50 additional stores in the third quarter ahead of the upcoming holiday season with further expansion planned incoming quarters.

Speaker 3: We expected to grow Diamond's direct revenue by $350 million over the medium term as we open more than 20 new locations across the country, each of which we expect will build to over $15 million of average annual revenue. Notably, Diamond's direct revenue is highly skewed to bridle with an ATV that is more than four times the average of our other banners.

We expect it to grow diamond direct revenue by $350 million over the medium term as we opened more than 20, new locations across the country each of which we expect will build to over $15 million of average annual revenue.

Jim: We believe that innovation is on trend culturally and at the right price points. Similar to last year, we anticipate that customers will wait a bit later into the holiday season to begin their shopping. Economic pressure on discretionary dollars often leads customers to delay their shopping to Black Friday and the days leading into Christmas. We've built our marketing, labor planning and merchandising strategies or the back half to attract these customers with this in mind.

Notably diamonds direct revenue is highly skewed to bridal with an ATV that is more than four times the average of our other banners.

Speaker 3: Rounding out growth and accessible luxury are our digital banners. Often the tip of the spear for digital enhancements and innovations are midterm goals reflect a path to more than $1 billion in revenue between Blue Nile and James Allen. We are pleased that the digital replatform was completed on time at the end of July and we are now fully focused on delivering the growth and synergies made possible by this acquisition.

Rounding out growth in accessible luxury our digital banners often the tip of the spear for digital enhancements and innovations our mid term goals reflect our path to more than $1 billion in revenue between Blue Nile and James Allen. We are pleased that the digital re platform was completed on time.

Jim: In marketing, this means leveraging our customer data to drive smarter, more personalized messaging on the platforms that our customers are using most, making more effective and efficient use of our spend. Within our labor planning, we're using store by store, hour by hour level data to match labor hours to customer demand.

At the end of July and we are now fully focused on delivering the growth and synergies made possible by this acquisition.

Speaker 3: Our third growth driver is services, which we see growing by $500 million to $1.2 billion in revenue.

Our third growth driver is services, which we see growing by $500 million to $1 $2 billion in revenue.

Jim: The key message here is that our data and scaled innovation positions us with meaningful advantages for the holidays.

Speaker 3: Services which have a roughly 20 point margin premium over merchandise will see about half that growth from extended service agreements or ESAs as we focus on customer visibility and employee training to enhance our customer shopping experience by providing a path to worry free wear, building trust and growing our lifetime customer base.

Services, which have a roughly 20 point margin premium over merchandise will say about half of that growth from extended service agreements or msas as we focus on customer visibility and employee training to enhance our customer shopping experience by providing a path to worry free way.

Jim: The third and most important point I want to make is our continued confidence that we can deliver our midterm goals over the next three to five years as we continue to invest to widen our competitive advantages. Two of the most common questions we received from investors are first how we've bridged our current year performance from pre pandemic. And second, how we're bridging the current year to our midterm goals.

Are building trust and growing our lifetime customer base.

Speaker 3: We drove a 370 basis point increase to ESA attachment rate on in-store bridal purchases this quarter compared to prior year.

We drove a 370 basis point increase to Esa attachment rate on in store bridal purchases this quarter compared to prior year.

Jim: We've posted a new investor deck this morning, which I believe addresses these two questions and I'll devote the balance of my remarks to why we are confident in our midterm goals. We're focused on four growth drivers, winning the engagement recovery, expanding accessible luxury, growing services and developing unassailable competitive advantages in digital and data driven marketing. Take it together, we believe these four drivers will lead to a nine to $10 billion in revenue, 11 to 12% and will non-gap EBIT margin and deluded non-gap EPS of 14 to $16 per share over the next three to five years.

Speaker 3: Product education for our jewelry consultants, or JCs, as well as pricing transparency for our customers has been key.

Product education for our jewelry consultants or jcs as well as pricing transparency for our customers has been key.

Speaker 3: We continue to introduce product enhancements like post-purchase attachment. This feature allows customers to purchase the ESA up to 30 days after the jewelry purchase. Allowing our JC's to follow up, for example, with the purchase sir after the gifting occasion. The progress we've made in ESA is one of the reasons services outperformed merchandise again this quarter as we delivered more than 4% growth in services revenue.

We continue to introduce product enhancements like post purchase attachment. This feature allows customers to purchase the Esa up to 30 days after the jewelry purchase, allowing our JC has to follow up for example, with the purchaser after the gifting occasion.

The progress we've made in ESA is one of the reasons services outperformed merchandise again this quarter as we delivered more than 4% growth in services revenue.

Speaker 3: Customization, repair, and piercing will drive the rest of the growth in services. Last month, we acquired SJR National Repair, primarily a full service jewelry and watch repair services business. This acquisition compliments the recent transition of Signet's Blue Nile Seattle fulfillment center to a new enterprise wide repair facility.

Customization repair and piercing will drive the rest of the growth in services last month, we acquired S. Jr. National repair, primarily a full service jewelry and watch repair services business. This acquisition complements the recent transition of Signet Blue Nile Seattle.

Jim: Importantly, both the current year and our midterm goals assume no pandemic spending lift with a 1% to 2% compound annual growth rate for the jewelry category from calendar 2019 to calendar 2028.

Fulfillment center to a new enterprise wide repair facility.

Speaker 3: Signet's National Service Network now enables business to business repair services, watch repair and mailing capabilities among other offerings.

<unk> National Service network now enables the business to business repair services watch repair and mailing capabilities. Among other offerings. We are also increasing the number of locations that provide piercings as well as soldering for permanent jewelry, which is a growing trend, particularly among gen.

Jim: The first big opportunity is bridal. By design, bridal is a big business for us, and as engagements begin their recovery later this year, we're positioning ourselves to capture a multi-year tailwind. This is important because bridal is a highly strategic category. It's frequently the most important emotional and financial point of market entry into the jewelry category. That means that in addition to initial sales, it drives the beginning of lifetime relationships, leading to future purchases for special events, anniversaries, and holidays throughout our customers lives.

Speaker 3: We are also increasing the number of locations that provide piercings, as well as soldering for permanent jewelry, which is a growing trend, particularly among Gen Z and social media platform users.

Z and social media platform users.

Speaker 3: The final growth driver is our increasingly digital and data driven approach to marketing, which enables highly personalized communication and experiences.

The final growth driver is our increasingly digital and data driven approach to marketing, which enables highly personalized communication and experiences.

Speaker 3: We see a $450 million opportunity here.

We see a $450 million opportunity here.

Speaker 3: We're continuing to grow our newly implemented customer data platform or CDP. This platform is helping us drive both more effective marketing and customized digital shopping experiences.

We're continuing to grow our newly implemented customer data platform or CDP. This platform is helping us drive both more effective marketing and customized digital shopping experiences.

Jim: We see bridal as a $600 million revenue growth opportunity. Prior to the pandemic, we estimate the number of engagements was consistently close to 2.8 million per year. That began dropping last year, and we estimate it will bottom out this calendar year, 2023, between 2.1 and 2.2 million, or nearly 25% fewer engagements than normal. Based on our data, we believe engagements will begin recovering in Q4 and fully rebound over the next three years.

Speaker 3: We increased our return on advertising spend by more than 20% this quarter when compared to this time last year by enhancing our targeting and optimizing our channel next.

We increased our return on advertising spend by more than 20% this quarter when compared to this time last year by enhancing our targeting and optimizing our channel mix.

Speaker 3: Further, when a known customer visits our websites, we personalize their experience with content based on the customer's known interests, intent, and prior shopping behavior. This more personalized shopping experience often targets relevant life. For example, dating, anniversaries, graduations, or potential engagements. We recently launched personalized product recommendations for our customers as our first activation and have plans for many others.

Further when a known customer visits our website, we personalize their experience with content based on the customer's known interests intent and prior shopping behavior. This more personalized shopping experience often targets relevant life for example, dating anniversaries graduations or potential engaged.

Jim: Just holding our estimated 30% share of the bridal market in engagement ATB constant, the 650,000 increase in total engagements is worth more than $500 million in revenue from engagement rings alone. But we are positioning ourselves to grow bridal market share as we are doing in 2023 and create competitive advantage in the bridal ecosystem of jewelry gifting, as well as extending our reach into customers lifetime value. The remaining $100 million or more of opportunity reflects our investments in personalization, customization, and the loyalty to accomplish this.

We recently launched personalized product recommendations for our customers as our first activation and have plans for many others.

Speaker 3: This level of personalization at scale is a clear competitive advantage.

This level of personalization at scale is a clear competitive advantage.

Speaker 3: Rounding out my comments on personalization and customer data, I've quickly point out that we continue to make great progress in participation and impact with our loyalty program.

Rounding out my comments on personalization and customer data.

Quickly point out that we continue to make great progress in participation and impact with our loyalty program. This quarter, we increased our total enrollment by more than 30%. The ATV of our loyalty members. This quarter was 40% higher than non loyalty members, we continue to test.

Speaker 3: This quarter we increased our total enrollment by more than 30%.

Speaker 3: The ATV of our loyalty members this quarter was 40% higher than non-woylty members.

Speaker 3: We continue to test loyalty offerings that elevate the shopping experience in ways unique to jewelry and special occasions.

Jim: So why are we confident that engagements will recover? Our confidence is based on 45 proprietary milestones we track to measure a couple's journey toward engagement. While every couple is unique, dating and relationships tend to follow patterns. Not every couple experiences all of 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. This quarter, we saw the pool of couples approaching the 25 to 30 milestones increased by 700 basis points. Additionally, we are seeing states like Texas and Florida which reopened earlier in the pandemic, 10 points closer to pre-pandemic engagement levels compared to California and New York, which reopened later in the pandemic.

Loyalty offerings that elevate the shopping experience in ways unique to jewelry and special occasions.

Speaker 3: What I hope you can see is that we have concrete, achievable building blocks that get us to our midterm goals and these strategic initiatives are in flight and showing the results we expect.

What I hope you can see is that we have concrete achievable building blocks that get us to our mid term goals and these strategic initiatives are in flight and showing the results we expect.

Speaker 3: Signet's business fundamentals are strong and the structural changes we've made over the past few years are working as we intended. As a result, we believe our confidence in our midterm goals is well placed. I'll now pass it over to Joan.

<unk> business fundamentals are strong and the structural changes we've made over the past few years are working as we intended as a result, we believe our confidence and our midterm goals is well placed.

I'll now pass it over to John .

Thanks, Jen and good morning, everyone.

Speaker 3: Our performance to this quarter reflects the strength and importance of our flexible operating model as we deliver down our commitments amidst a challenging retail landscape. We drove over $1.6 billion in sales to this quarter, down 8.1% to this time last year, with same store sales down 12%.

Our performance this quarter reflects the strength and importance of our flexible operating model as we delivered on our commitments.

<unk> a challenging retail landscape.

We drove over $1 $6 billion in sales this quarter down eight 1% to this time last year with same store sales down 12%.

Jim: One final data point here. When we look at early relationship triggers, we're also seeing improvement the last year. For example, one of the early relationship triggers we've mentioned before is going to a sporting event or concert together, an indicator that is up 7% to early 2022.

Speaker 3: We have seen top line improvement since the May timeframe, with second quarter comp sales better than the first quarter, driven by a stronger June in July .

We have seen topline improvement since the may timeframe with second quarter comp sales better than the first quarter driven by a stronger June and July .

Speaker 3: Ryle performed as we expected and we saw an increase in conversion in the second quarter compared to the first quarter.

Brio performed as we expected and we saw an increase in conversion in the second quarter compared to the first quarter we.

Jim: This is equally important because this recovery will be multi-year and gradual. Signet is well positioned to win in this environment. We have identified a proprietary audience of more than 14 million people who are in dating relationships and are targeting them with education and marketing that's right for them as their journey progresses.

Speaker 3: We saw sequential improvement in price points below $1,000, particularly with the in-the-fashion assortment.

We saw sequential improvement in price points below $1000, particularly with the in the fashion assortment.

Speaker 3: Our average transaction value in North America grew more than 4% with 5 points attributable from Blue Nile.

Our average transaction value in North America grew more than 4% with five points attributable from Blue Nile.

Speaker 3: Compatible ATV was relatively flat, consistent with the last quarter.

Comparable ATV was relatively flat consistent with the last quarter.

Speaker 3: Compared to pre-pandemic, our core banners have grown low single digits driven by off-mall and e-commerce growth.

Compared to pre pandemic, our core banners have grown low single digits, driven by off mall and ecommerce growth.

Jim: Our next growth driver is accessible luxury, which we believe represents $1 billion in revenue growth potential driven by tearing up the Jared brand, expanding the diamond's direct fleet, and growing our digital banners, James Allen, and Blue Nile. We believe Jared represents a $500 million growth opportunity as we expand the more premium offerings. Compared to Q2 of fiscal year 20, this strategy has already led to growth of ATV of more than 60% at Jared.

Speaker 3: Services represent nearly half of the growth in our core banners over the last four years with fashion driving the balance, consistent with our strategic priority.

Services represents nearly half of the growth in our core banners over the last four years with fashion driving the balance consistent with our strategic priorities.

Speaker 3: Consumer access to credit in the quarter was healthy and approval rates remained near in a historical norm with overall payment plan penetration at 44% and the amount financed are both relatively consistent to last year.

Consumer access to credit in the quarter was healthy and approval rates remained near historical norms with overall payment plan penetration at 44% and the amount financed are both relatively consistent to last year.

Speaker 3: While we're not directly impacted by rising or declining delinquency rates, those rates among our finance partners have been stable in recent months. Within our agreements, we have guaranteed commitment levels.

While we're not directly impacted by rising or declining delinquency rates those rates among our finance partners have been stable in recent months within our agreements we have guaranteed commitment levels.

Jim: Importantly, this reflects only a low single digit impact from taking price. As Jared's ATV improvement has been driven almost completely by assortment optimization and premium items. Our test pilot for preferred assortment continues to drive significantly higher comparable revenue than the remainder of the fleet. Based on early results, that alone would be worth more than $100 million in revenue applied to all Jared stores. We will be expanding the preferred assortment to 50 additional stores in the third quarter ahead of the upcoming holiday season with further expansion planned incoming quarters.

Speaker 3: Turning now to gross margin, we delivered $611 million of gross margin or 38 percent of sales. Rufly in line with last year.

Turning now to gross margin, we delivered $611 million of gross margin or 38% of sales roughly in line with last year.

Speaker 3: Overall merchandise margin expanded 80 basis points largely due to higher services margin as well as a higher penetration of services.

Overall merchandise margin expanded 80 basis points, largely due to higher services margin as well as a higher penetration of services.

Speaker 3: Additionally, while organized retail crime laws is up across retailers generally, our mitigation efforts have resulted in a decrease in store losses compared to the same time last year. Boosting gross margins by 15 basis points.

Additionally, well organized retail crime loss is up across retailers generally our mitigation efforts have resulted in a decrease in store losses compared to the same time last year boosted gross margins by 15 basis points.

Jim: We expected to grow diamond's direct revenue by $350 million over the medium term as we open more than 20 new locations across the country, each of which we expect will build to over $15 million of average annual revenue. Notably, diamond's direct revenue is highly skewed to bridle with an ATV that is more than four times the average of our other banners.

Speaker 3: offsetting those gains as deleveraging a fixed cost, such as occupancy, on lower sales.

Offsetting those gains is deleveraging of fixed costs, such as occupancy on lower sales.

Speaker 3: Now, turning to our non gap spend of 507Million dollars or 31% of revenue was 420 base points higher than last year. Our total S and a dollars increased due to the blue Nile acquisition.

Now turning to SG&A.

Our non-GAAP spend of $507 million.

Or 31% of revenue was 420 basis points higher than last year. Our total SG&A dollars increased due to the Blue Nile acquisition as.

Jim: Rounding out growth and accessible luxury are our digital banners. Often the tip of the sphere for digital enhancements and innovations are midterm goals reflect a path to more than $1 billion in revenue between Blue Nile and James Allen. We are pleased that the digital replatform was completed on time at the end of July and we are now fully focused on delivering the growth and synergies made possible by this acquisition.

Speaker 3: As we said, we continue to make strategic investments to enhance our mode of competitive advantages.

As we said we continue to make strategic investments to enhance our moat of competitive advantages.

Speaker 3: which was approximately 120 basis points of the D-leverage in S-GNA during the quarter. The remaining balance is due to advertising shift, Intacute 2 from Mother's Day timing, and D-leveraging of fixed cost on lower volume.

Which was approximately 120 basis points of the deleverage in SG&A during the quarter. The remaining balance is due to advertising shift into Q2 from mothers day timing and deleveraging of fixed costs on lower volume.

Jim: Our third growth driver is services, which we see growing by $500 million to $1.2 billion in revenue. Services which have a roughly 20 point margin premium over merchandise will see about half of that growth from extended service agreements or ESAs as we focus on customer visibility and employee training to enhance our customer shopping experience by providing a path to worry-free wear, building trust and growing our lifetime customer base. We drove a 370 basis point increase to ESA attachment rate on in-store bridal purchases this quarter compared to prior year.

Speaker 3: As a result, we drove a non gap operating margin of 103M dollars this quarter or 6.4% of sales above our guidance range on the improved performance in June and July .

As a result, we drove our non-GAAP operating margin of $103 million this quarter or six 4% of sales above our guidance range on the improved performance in June and July .

Speaker 3: We remain on track to deliver cost savings in the range of $225 to $250 million, which is reflected in our guidance, which is split fairly evenly between gross margin and SGNA.

We remain on track to deliver cost savings in the range of $225 million to $250 million, which is reflected in our guidance, which is split fairly evenly between gross margin and SG&A.

Speaker 3: Key drivers of the savings include non-customer impact initiatives, such as product sourcing initiatives through the loop, cloud integration, enhanced credit agreements, and advertising efficiencies.

Key drivers of the savings include non customer impact initiatives, such as product sourcing initiatives.

Loop cloud integration enhanced credit agreements and advertising efficiencies.

Jim: Product education for our jewelry consultants, or J.C.'s, as well as pricing transparency for our customers has been key. We continue to introduce product enhancements like post-purchase attachment. This feature allows customers to purchase the ESA up to 30 days after the jewelry purchase, allowing our J.C.'s to follow up, for example, with the purchaser after the gifting occasion. The progress we've made in ESA is one of the reasons services outperformed merchandise, again this quarter, as we delivered more than 4% growth in services revenue. Customization, repair, and piercing will drive the rest of the growth in services.

Speaker 3: Tracking as we expected through the first half of the year, we achieved approximately $75 million of savings.

Tracking as we expected through the first half of the year, we achieved approximately $75 million of savings.

Speaker 3: As we mentioned last quarter, we plan to close up to 150 stores as part of our fleet optimization efforts over the next 12 months.

As we mentioned last quarter, we plan to close up to 150 stores as part of our fleet optimization efforts over the next 12 months.

Speaker 3: Approximately 90% of these expected store closures are in mall locations and or are among the lower performing stores in the UK market.

Approximately 90% of these expected store closures are in mall locations and door are among the lower performing stores in the UK market.

Speaker 3: We also expect to open between 30 to 35 new stores, primarily K, Gering, and Diamond Direct locations, which have bigger stores and higher ATVs than the closures.

We also expect to open between 30 to 35, new stores, primarily Kay Jared and Diamond direct locations, which have bigger stores and higher atvs from the closures. This means that while our store count will decline by roughly 4% our total square footage will be similar.

Jim: Last month, we acquired SJR National Repair, primarily a full service jewelry and watch repair services business. This acquisition complements the recent transition of Signet's Blue Nile Seattle fulfillment center to a new enterprise wide repair facility. Signet's National Service Network now enables business to business repair services, watch repair, and mailing capabilities among other offerings. We are also increasing the number of locations that provide piercings, as well as soldering for permanent jewelry, which is a growing trend, particularly among Gen Z and social media platform users.

Speaker 3: This means that while our store count was acclaimed by roughly 4%, our total square footage will be similar to the prior year.

To the prior year.

Speaker 3: We ended the quarter with $2.1 billion in inventory, which was down $97 million to last year. Inventory, excluding Blue Nile, was down 167 million, or 8%, compared to last year, and when compared to pre-pandemic, it was down 20% excluding acquisition.

We ended the quarter was $2 $1 billion in inventory, which was down $97 million to last year inventory, excluding blue Nile was down $167 million or 8% compared to last year and my compared to pre pandemic. It was down 20% excluding acquisitions.

Speaker 3: Our inventory turns at 1.4 times consistent with the first quarter is 40% improved compared to pre-pandemic.

Our.

Tori churns at one four times consistent with the first quarter is 40% improved compared to pre pandemic, we see.

Jim: The final growth driver is our increasingly digital and data-driven approach to marketing, which enables highly personalized communication and experiences. We see a $450 million opportunity here. We're continuing to grow our newly implemented customer data platform, or CDP. This platform is helping us drive both more effective marketing and customized digital shopping experiences. We increased our return on advertising spend by more than 20% this quarter, when compared to this time last year, by enhancing our targeting and optimizing our channel mix.

Speaker 3: We see opportunities to further improve our turns over time.

See opportunities to further improve our turns over time.

Speaker 3: The health of our inventory has improved significantly over the last 4 years with clearance inventory reduced by approximately 50% compared to pre-pandemic, providing room for critical newness within our assortment.

The health of our inventory has improved significantly over the last four years with clearance inventory reduced by approximately 50% compared to pre pandemic, providing room for critical newness within our assortment.

Speaker 3: Now turning to the balance sheet, we ended the quarter with over $690 million of cash and equivalence down 162 million compared to a year ago. Recall that we've paid out $200 million in legal settlements in the first quarter, as well as acquired Blue Nile last Q3 for nearly $390 million.

Now turning to the balance sheet, we ended the quarter with over $690 million of cash and equivalents down $162 million compared to a year ago recall that we paid out $200 million in legal settlements in the first quarter as well as acquired Blue Nile last Q3.

<unk> for nearly $390 million.

Jim: Further, when a known customer visits our websites, we personalize their experience with content based on the customer's known interests, intent, and prior shopping behavior. This more personalized shopping experience often targets relevant life, for example, dating, anniversaries, graduations, or potential engagements. We recently launched personalized product recommendations for our customers, as our first activation, and have plans for many others. This level of personalization at scale is a clear competitive advantage.

Speaker 3: Excluding those one time items, we would have increased our cash position by roughly $425 million Compared to the prior year

Excluding those onetime items, we would have increased our cash position by roughly $425 million.

Compared to the prior year.

Speaker 3: Our four capital allocation priorities continue to be led by strategic investments to drive organic growth, including $75 million in expenses this year focused on our digital and consumer insight capabilities, and up to $200 million in capital investments.

Our forward capital allocation priorities continue to be led by strategic investments to drive organic growth, including $75 million in expenses. This year focused on our digital and consumer insight capabilities and up to $200 million in capital investments.

Speaker 3: Our other three capital allocation priorities include capital returns to shareholders, maintaining a strong balance sheet, and small capability building tuck-in acquisitions like SJR repair.

Yeah.

Our other three capital allocation priorities include capital returns to shareholders, maintaining a strong balance sheet and small capability building tuck in acquisitions like guest Jr. Repair.

Jim: Rounding out my comments on personalization and customer data, I'd quickly point out that we continue to make great progress in participation and impact with our loyalty program. This quarter we increased our total enrollment by more than 30%. The ATV of our loyalty members this quarter was 40% higher than non-woylty members. We continue to test loyalty offerings that elevate the shopping experience in ways unique to jewelry and special occasions.

Speaker 3: Capital returns to shareholders remain an important part of capital allocation. We repurchased $43.3 million of shares in the quarter, or nearly $700,000 shares, and have repurchased $82.4 million year to day.

Capital returns to shareholders remain an important part of capital allocation.

We repurchased $43 $3 million of shares in the quarter are nearly 700000 shares and have repurchased $82 $4 million year to date.

Speaker 3: We had approximately $718 million in remaining repurchase authorization at the end of the quarter. This morning, we also declared a 23-cent dividend to common shareholders, which as a reminder, is 15% higher than a year ago, and we believe being a dividend growth company is an integral part of our capital allocation strategy.

Jim: What I hope you can see is that we have concrete achievable building blocks that get us to our midterm goals and these strategic initiatives are in flight and showing the results we expect. Signet's business fundamentals are strong and the structural changes we've made over the past few years are working as we intended. As a result, we believe our confidence in our midterm goals is well placed.

We had approximately $718 million in remaining repurchase authorization at the end of the quarter. This morning. We also declared a <unk> 23 dividend to common shareholders, which as a reminder, is 15% higher than a year ago, and we believe being a dividend growth company.

<unk> is an integral part of our capital allocation strategy.

Speaker 3: Within our debt structure, 148Million dollars in bonds are now current. And we anticipate paying those off at maturity next June with cash on hand.

Within our debt structure $148 million in bonds are now current and we anticipate paying those off at maturity next June with cash on hand.

Jim: I'll now pass it over to Joan. Thanks, Jenna.

Joan Hilson: Good morning, everyone. Our performance to this quarter reflects the strength and importance of our flexible operating model as we deliver down our commitments amidst a challenging retail landscape. We drove over $1.6 billion in sales this quarter down 8.1% to this time last year with same store sales down 12%. We have seen top-line improvement since the May timeframe with second quarter comp sales better than the first quarter driven by a stronger June in July.

Speaker 3: The convertible preferred shares, which dilutes our share count by approximately 15% are redeemable in November 2024 and we are weighing our options to address those at this time and look forward to sharing those plans when we are able.

The convertible preferred shares which dilutes our share count by approximately 15% are redeemable in November 2024, and we are weighing our options to address those at this time and look forward to sharing those plans when we are able.

Turning to guidance.

Speaker 3: Consistent with my comments last quarter, we continue to anticipate a cautious consumer driven by macro pressure, reflected in traffic decreases. We will continue to use strategic levels of promotion to encourage traffic and conversion.

<unk> with my comments last quarter, we continue to anticipate a cautious consumer driven by macro pressure reflected in traffic decreases.

We will continue to use strategic levels of promotion to encourage traffic and conversion.

Joan Hilson: Ryle performed as we expected and we saw an increase in conversion in the second quarter compared to the first quarter. We saw sequential improvement in price points below $1,000 particularly within the fashion assortment. Our average transaction value in North America grew more than 4% with five points attributable from Blue Nile. Comparable ATV was relatively flat consistent with the last quarter. Compared to pre-pandemic, our core banners have grown low single digits driven by off-mall and e-commerce growth.

Speaker 3: For the third quarter, we expect revenue in the range of $1.36 to $1.41 billion and non-gap operating income in the range of $10 to $25 million. The top end of our range assumes confidence similar to the first half.

For the third quarter, we expect revenue in the range of 136 to one for $1 billion.

non-GAAP operating income in the range of $10 million to $25 million.

The top end of our range assumes comp trends similar to the first half.

Speaker 3: We continue to expect the D-lverage, a fixed cost to continue in the third quarter on lower sales.

We continue to expect the deleverage of fixed costs to continue in the third quarter on lower sales.

Speaker 3: as well as the impact of strategic investments, which will be marginally higher as the percentage of sales in the third quarter, due to seasonally slower revenue.

As well as the impact of strategic investments, which will be marginally higher as a percentage of sales in the third quarter due to seasonally slower revenue.

Joan Hilson: Services represent nearly half of the growth in our core banners over the last four years with fashion driving the balance consistent with our strategic priorities. Consumer access to credit in the quarter was healthy and approval rates remain near in a historical norms with overall payment plan penetration at 44% and the amount of finance are both relatively consistent to last year. While we're not directly impacted by rising or declining delinquency rates, those rates among our finance partners have been stable in recent months.

Speaker 3: We expect to achieve approximately $65 million of cost savings in the third quarter. Of note, Blue Nile becomes comparable beginning in the third quarter.

We expect to achieve approximately $65 million of cost savings in the third quarter of note Blue Nile becomes comparable beginning in the third quarter.

Speaker 3: For the full year, we are reaffirming revenue and non-GAAP operating income guidance. Recall that fiscal 24 revenue guidance is in the range of 7.1 to 7.3Billion dollars. And non-GAAP operating income in the range of 635 to 675Million dollars.

For the full year, we are reaffirming revenue and non-GAAP operating income guidance recall that fiscal 'twenty for revenue guidance is in the range of seven one to $7 3 billion.

And non-GAAP operating income in the range of $635 million to $675 million.

Joan Hilson: Within our agreements, we have guaranteed commitment levels. Pretty now to gross margin, we delivered $611 million of gross margin or 38% of sales, roughly in line with last year. Overall merchandise margin expanded 80 basis points largely due to higher services margin as well as a higher penetration of services. Additionally, while organized retail crime loss is up across retailers generally, our mitigation efforts have resulted in a decrease in store losses compared to the same time last year, boosting gross margins by 15 basis points.

Speaker 3: We're raising our non-GAAP earnings per share guidance to be in the range of $9.55 to $10.14, reflecting share repurchase.

We are raising our non-GAAP earnings per share guidance to be in the range of $9 55.

To $10 14.

Reflecting share repurchases in the second quarter.

Speaker 3: Recall in the fourth quarter, we believe we will begin the multi-year engagement recovery. We will cycle shutdowns in the UK in the fourth quarter and our strategic investment impact is lower as a percent of sales due to the seasonally strong holiday revenue.

Recall in the fourth quarter, we believe we will begin a multi year engagement recovery, we will cycle shutdowns in the UK in the fourth quarter and our strategic investment impact is lower as a percent of sales due to the seasonally strong holiday revenue.

Speaker 3: Before we move on to Q&A, I want to thank our team for their focus on the consumer, which enabled us to exceed our revenue and bottom line commitments in the quarter, and advance our strategic priorities. But that will open the line for Q&A.

Before we move on to Q&A I want to thank our team for their focus on the consumer which enabled us to exceed our revenue and bottom line commitments in the quarter and advance our strategic priorities with that we'll open the line for Q&A.

Joan Hilson: Offsetting those gains is due leveraging a fixed cost such as occupancy on lower sales. Now turning to FGNA, our non-gap spend of $507 million or 31% of revenue was 420 basis points higher than last year. Our total FGNA dollars increased due to the Blue Nile acquisition. As we said, we continue to make strategic investments to enhance our mode of competitive advantages, which was approximately 120 basis points of the D-Leverage in S-GNA during the quarter.

Yeah.

Speaker 1: Thank you, ma'am. Ladies and gentlemen, we will now begin the question and answer session. Should we have a question, please press star followed by the number one on your touch phone. Again, that star followed by the number one on your touch phone. If you would like to avoid your request, please press star followed by the number.

Thank you ma'am, ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the number one on your Touchstone Sun again, Thats Star followed by the number one on your Touchtone phone. If you would like to withdraw your request. Please press star followed by the number Q.

Speaker 1: Your first question comes from the line of E.K. by retail from Wells Park. Go.

Your first question comes from the line of <unk> from Wells Fargo. Please go ahead.

Speaker 2: Hey, okay, good morning everyone. I guess two questions from me. Maybe Joan.

Okay.

Everyone I guess two questions for me maybe Joan.

Joan Hilson: The remaining balance is due to advertising shift, into Q2 from Mother's Day timing and D-Leveraging of fixed costs on lower volume. As a result, we drove a non-gap operating margin of $103 million this quarter, or 6.4% of sales above our guidance range on the improved performance in June and July. We remain on track to deliver cost savings in the range of $225 to $250 million, which is reflected in our guidance, which is split fairly evenly between gross margin and S-GNA.

Speaker 2: a little bit more just back to credit given what's in the headlines of late. Can you just, you know,

A little bit more just back to credit given what's in the headlines of late.

Can you just.

Speaker 2: Just make sure we all understand, like is there a profit share that's embedded in your credit arrangements today? I know your credit business is very different than what it was five years ago. So I guess my first question there is, is there a profit share? And then how do you, yes or no, how do you think about potential headwinds on your top line in a tightening credit environment? And then I have a follow up after that.

Just make sure we all understand like is there a profit share thats embedded in your credit arrangements today I know your credit business is very different than what it was five years ago. So I guess my first question is is there a profit share and then how do you, yes or no.

Do you think about potential headwinds on your on your topline in a tightening credit environment.

And then I have a follow up.

Speaker 3: Great, thanks for the question. As you know, we are consumers have access to a broad range of credit through strong partnerships that provide a variety of financing options and it's on a cascading level.

Great. Thanks for the question.

As you know we are consumers have access to a broad range of credit through strong partnerships that provide a variety of financing options and it's on a cascading.

Joan Hilson: Key drivers of the savings include non-customer impact initiatives, such as product sourcing initiatives through the loop, cloud integration, enhanced credit agreements, and advertising efficiencies. Tracking, as we expected, through the first half of the year, we achieved approximately $75 million of savings.

Level.

Speaker 3: We've continued to achieve a financing penetration of roughly flat year-to-date to last year, as 44% to dimension. And 39% of that is with our private label credit card program.

We've continued to.

Achieve a financing penetration thats roughly flat year to date to last year is 44% just to dimension. It in 39% of that is with our private label credit card program, we have guaranteed commitment levels with our financing partners in terms of <unk>.

Joan Hilson: As we mentioned last quarter, we plan to close up to 150 stores as part of our fleet optimization efforts over the next 12 months. Approximately 90% of these expected store closures are in mall locations, and or are among the lower performing stores in the UK market. We also expect to open between 30 to 35 new stores, primarily K, Jiren, and Diamond Direct locations, which have bigger stores and higher ATVs than the closures.

Speaker 3: We have guaranteed commitment levels with our financing partners in terms of

Speaker 3: credit approval. And as you know, we have no consumer credit balance sheet risk, and we have no revenue or loss sharing provisions within our agreement. So while we don't share in, you know, the credit risk with our credit partners, our partners have indicated that our portfolio, the liquidity rates are in line with last year.

Credit approval and as you.

No we have no consumer credit balance sheet risk and we have no revenue or loss sharing provisions within our agreement so while we don't share in.

The credit risk with our credit partners.

Our partners have indicated that our portfolio delinquency rates are in line with last year.

Speaker 3: And we also have strong partnerships, including second looks for lower credit scores.

Joan Hilson: This means that while our store count was acclaimed by roughly 4%, our total square footage will be similar to the prior year. We ended the quarter with $2.1 billion in inventory, which was down $97 million to last year. Inventory excluding Blue Nile was down 167 million, or 8%, compared to last year, and when compared to pre-pandemic, it was down 20% excluding acquisitions. Our inventory turns at 1.4 times, consistent with the first quarter, is 40% improved compared to pre-pandemic.

And we also have strong partnerships, including second looks for a lower credit scores.

Speaker 2: Got it. And then just one more follow up just on margin. So can you just kind of looking at the back half and specifically to 4Q, can you kind of talk about the bridge of the margin that you've seen in the first half and the improvement or the stabilization you're kind of planning in the back half? Thanks.

Got it and then just one more follow up just on margin. So can you just kind of looking at the back half and specifically to <unk> can you kind of talk about the bridge or the margin that you've seen in the first half of the improvement or stabilization youre going to planning in the back half. Thanks.

Speaker 3: All right, thanks for the question. In the first half of the year, we saw a point of impact from Blue Nile, roughly a point from strategic investments that of roughly $7,000,000 that we anticipate for the year. And two points essentially from the D-Lavgar-Jun 6th cost given the lower comp range of double-

Alright, Thanks for the question in the first half of the year, we saw a point of impact from Blue Nile roughly a point from strategic investments that of roughly seven 5 million that we anticipate for the year.

Joan Hilson: We see opportunities to further improve our turns over time. The health of our inventory has improved significantly over the last four years, with clearance inventory reduced by approximately 50%, compared to pre-pandemic, providing room for critical news within our store. Now turning to the balance sheet, we ended the quarter with over $690 million of cash and equivalence, down 162 million compared to a year ago. Recall that we've paid out $200 million in legal settlements in the first quarter, as well as acquired Blue Nile last Q3 for nearly $390 million.

And two points essentially from the deleverage on fixed costs, given the lower comp range of double digits in the third quarter. The street, the strategic investments will be slightly a higher slightly higher impact because of the seasonally lower sales, but for the overall back half, but blue Nile.

Speaker 3: In the third quarter, the strategic investments will be slightly higher, slightly higher impact because of the season only lower-

Speaker 3: But for the overall back half, the blue Nile impact will begin to obey. We'll have less the leverage on six costs with improved comp sales and Q and 4Q from engagement recovery in UK cycling of the shutdowns. And then more cost energies, particularly in 4Q. This will allow operating margins to improve in the back half of the year.

<unk> impact will begin to abate.

We'll have less deleverage on fixed cost with improved comp sales in Q4, Q from engaged rent recovery and UK cycling.

Of the shutdowns and then more cost synergies, particularly in four Q. This will allow operating margins to improve in the back half of the year.

Joan Hilson: Excluding those one-time items, we would have increased our cash position by roughly $425 million, compared to the prior year. Our four capital allocation priorities continue to be led by strategic investments to drive organic growth, including $75 million in expenses this year, focused on our digital and consumer insight capabilities and up to $200 million in capital investments. Our other three capital allocation priorities include capital returns to shareholders, maintaining a strong balance sheet and small capability building tuck-in acquisitions like SJR Repair.

Great. Thanks.

Speaker 1: Thank you. Your next question comes from the line of Lorraine Hattinson from Bank of America. Please go ahead.

Thank you.

Next question comes from the line of Lorraine Hutchinson from Bank of America. Please go ahead.

Speaker 4: Thank you, good morning. Can you talk to the factors driving the improved fourth quarter sales and maybe just give us some more clarity on how much benefit you've included from the expected recovery engagements, the lapping of the issues in the UK, and any other considerations?

Thank you. Good morning can you talk to the factors driving the improved fourth quarter sales and maybe just give us some more clarity on how much benefit you've included from the expected recovery engagements the lapping of of the issues in the UK and any other considerations.

Speaker 4: Sure, hi, Lorraine. Let me start on that and then Joan, feel free to jump in. We, you know, let me, let me go through a little bit what's included in our guidance and what's not included in our guidance. So what is included is an assumption that the overall consumer environment stays the same or even worsens modestly. The cost savings that Joan talked about in her remarks of $225 to $250 million, which is largely back ended.

Sure Hi, Lorraine, let me start on that and then John feel free to jump in.

We let me let me go through a little bit what's included in our guidance and what's not included in our guidance. So what is included is an assumption that the overall consumer environment stays the same or even worsens modestly the cost savings that John talked about in her remarks of 225.

Joan Hilson: Capital returns to shareholders remain an important part of capital allocation. We repurchased $43.3 million of shares in the quarter, or nearly $700,000 shares, and have repurchased $82.4 million year to date. We had approximately $718 million in remaining repurchase authorization at the end of the quarter. This morning, we also declared a 23-cent dividend to common shareholders, which as a reminder, is 15% higher than a year ago, and we believe being a dividend growth company is an integral part of our capital allocation strategy.

To $250 million, which is largely back ended.

Speaker 4: engagement decline. So we are expecting the that engagements will begin to improve. They trough in Q3 and will begin to come up in Q4, but it is a multi-year recovery. So we have assumptions in that engagements will still be below year ago in the fourth quarter.

Engagement decline. So we are expecting the debt engagements will begin begin to improve the trough in Q3 and will begin to come up in Q4, but it is a multi year recovery. So we have assumptions and that engagements will still.

It'll be below year ago in the fourth quarter.

Speaker 4: And we are assuming that the UK cycles the shutdowns that were in fourth quarter last year.

And we are assuming that the UK cycles, the shutdowns that were in fourth quarter last year.

Joan Hilson: Within our debt structure, $148 million in bonds are now current, and we anticipate paying those off at maturity next June with cash on hand. The convertible preferred shares, which dilutes our share count by approximately 15% are redeemable in November 2024, and we are weighing our options to address those at this time and look forward to sharing those plans when we are able.

Speaker 4: So set a different way of what's not in is we're not assuming improvements in macro trends, we're not assuming whether improvements and we're not assuming any change in the normal flow through from sales.

Set a different way of whats not in as we're not assuming improvements in macro trends, we're not assuming weather improvements and where we're not assuming any change in the normal flow through from sales.

Thank you and then.

Uh huh.

Speaker 3: I was just going to add on the low end of guidance. You know, it allows for softening trends as a softer macroeconomy or slower recovery engagements might occur and modest higher student loan repayment impact. So just a little bit of modest impact related to that in the low end of our guidance.

I was just going to add on the low end of guidance.

Joan Hilson: Turning to guidance. Consistent with my comments last quarter, we continue to anticipate a cautious consumer driven by macropressure, reflected in traffic decreases. We will continue to use strategic levels of promotion to encourage traffic and conversion. For the third quarter, we expect revenue in the range of $1.36 to $1.41 billion, and non-gap operating income in the range of $10 to $25 million. The top end of our range assumes confidence similar to the first half.

It allows for softening trends as a soft or softer macro economy here for a recovery engagements might occur and modest modest hire a student loan repayment impacts so just a little bit of.

Of modest impact related to that in the low end of our guidance.

Speaker 5: Sorry, Lorraine, go ahead with your next question. Thank you. Yeah, Joan, I was just hoping you could talk us through your priorities for cash flow as you enter the back half.

Sorry, if I can go ahead with your next question. Thank you.

Yeah, John I was just hoping you could talk us through your priorities for cash flow as you enter the back half.

Speaker 3: So, you know, cash flow in the back half, we've talked about the

So.

Cash flow in the back half we've talked about the.

Speaker 3: the strategic investments that we're making and, you know, there's roughly 75 million of those throughout the year, but we're committed to advancing our strategic priorities.

The strategic investments that we're making and there is roughly $75 million of those throughout the year, but we're committed to advancing our strategic priorities are.

Joan Hilson: We continue to expect the de-loverage of fixed costs to continue in the third quarter on lower sales, as well as the impact of strategic investments, which will be marginally higher as the percentage of sales in the third quarter due to seasonally slower revenue. We expect to achieve approximately $65 million of cost savings in the third quarter. Of note, Blue Nile becomes comparable beginning in the third quarter. For the full year, we are reaffirming revenue and non-gap operating income guidance.

Speaker 3: Our intention is to continue with returning capital to shareholders. We want to make sure that we are fighting our Boom channel with a strong connection

Our intention is to continue.

Returning capital to shareholders we.

<unk> today.

Speaker 3: You know, our dividend, which is 15% higher than last year this time. And we'll continue to manage our inventories.

Our dividend, which is 15% higher than last year. This time.

And we will continue to manage our inventories.

Speaker 3: consistent with the advancements that we've made with digital analytics capabilities. What's really important of

Consistent with the advancements that we've made with digital analytics with our analytics capabilities and what's really important about the inventory management is.

Speaker 3: The inventory management is, in Mari Marks, and we're 4% down to last year, 8% down, excluding acquisitions. Our inventory is healthy, and it's a true strength for us. And so when we look at this terrain to previous, pre-pandemic levels, we're 20%.

Joan Hilson: Recall that fiscal 24 revenue guidance is in the range of $7.1 to $7.3 billion and non-gap operating income in the range of $635 to $675 million. We are raising our non-gap earnings per share guidance to be in the range of $9.55 to $10.14. Re-flecting Sherry Purchases in the second quarter. Recall in the fourth quarter, we believe we will begin the multi-year engagement recovery. We will cycle shutdowns in the UK in the fourth quarter and our strategic investment impact is lower as a percent of sales due to the seasonally strong holiday revenue.

In my remarks, and were 4% down to last year, 8% down excluding acquisitions, our inventory is healthy and it's a.

True strength for us and so when we look at we look at the spring two previous pre pandemic levels were 20%.

Speaker 3: down overall but 50% down in clearance. Why that's important to our cash flow is that is enabling us to bring in newness.

Down.

Overall, but 50% down in clearance why that's important to our cash flow is that is enabling us to bring in newness.

Speaker 3: that we're excited about. Jenna mentioned a number of those ideas within her prepared remarks. So, continuing to manage inventory diligently, leveraging analytics, inventory right place, right time, and continuing to manage, you know, turn effectively.

We're excited about and I mentioned.

A number of those ideas within her prepared remarks, so continuing to manage inventory diligently leveraging analytics inventory right place right time.

And continuing to manage churn effectively.

Okay.

Thank you.

Jim: Before we move on to Q&A, I want to thank our team for their focus on the consumer, which enabled us to exceed our revenue and bottom-line commitments in the quarter and advance our strategic priorities. But that will open the line for Q&A. Thank you, ma'am.

Speaker 1: Thank you. Your next question comes from the line of Paul Lijue from City. Please go ahead.

Thank you.

And next question comes from the line of Paul <unk> from Citi. Please go ahead.

Speaker 2: Hey everyone, Brandon Cheaton-Mond for Paul. I just want to circle back on the credit question. Are you seeing any difference in approval rates? I understand that you probably haven't agreement that a certain fight goes score has to get approved. But are you seeing differences in the customers that are purchasing on credit?

Hey, everyone Brandon Cheatham on for Paul I, just wanted to circle back on like the credit question are you seeing any difference in approval rates I understand that you probably have an agreement with a certain FICO score has to get approved.

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should we have a question, please press star followed by the number one on your touchstone phone. Again, that star followed by the number one on your touchstone phone. If you would like to withdraw your request, please press star followed by the number two.

Are you seeing differences in like the customers that are purchasing on credit.

Speaker 6: there any kind of difference in like, you know, the fight the score that they have. And then, you know, the amount of customers that are using credit to make purchases, you know, can you give us any details where that is now compared to pre-pandemic? I think during the pandemic that came down, but are you seeing that starting?

Is there any kind of difference in what you know.

The FICO score to the home and then.

The amount of customers that are using credit to make purchases.

ETA by retail: Your first question comes from the line of ETA by retail from Wells Park Hill. Please go ahead. Hey, okay.

Can you give us any details for the others now compared to a pre pandemic I think during the pandemic could come down but are you seeing that starting to normalize.

Joan Hilson: Good morning, everyone. I guess two questions from me. Maybe Joan, just a little bit more just back to credit given what's in the headlines of late. Can you just, you all understand like, is there a profit share that's embedded in your credit arrangements today? I know your credit business is very different than what it was five years ago. So I guess my first question there is, is there a profit share? And then how do you, yes or no, how do you think about potential headwinds on your, on your top line in a tightening credit environment?

Speaker 3: Thanks, Brandon. With respect to the private labor credit card program, as I mentioned, our penetration rate is 39%. And it's really relatively consistent to the prior year. Lower than pre-pandemic, we saw a shift.

Thanks, Brandon with respect to the private label credit card program as I mentioned, our penetration rate is 39% and it's really a relatively consistent to the prior year lower than pre pandemic, we saw a shift.

Speaker 3: in cost-reusage, pre-pendemic, it was above 50%. And so we've seen that shift, but that's been relatively consistent over the last couple of years. What we are seeing is that approval rates are

In a customer usage pre pandemic it was above 50% and so we've seen that shift, but that's been relatively consistent.

Over the last couple of years, what we are seeing is that approval rates are.

Speaker 3: consistent in-store, but down related to the ability to apply for credit online. So it's really just a shift in channel, but our core 80% of our business in-store is relatively consistent with respect to approval rates. What we are also seeing is that the average amount of financial ?? on finances increased.

Consistent in store, but down related to the ability to apply for credit online. So it's really just a shift in channel, but our core 80% of our business in store is relatively consistent with respect to approval rates what we offer.

Joan Hilson: And then I have a follow-up after that. Great. Thanks for the question. As you know, we are consumers have access to a broad range of credit through strong partnerships that provide a variety of financing options and it's on a cascading level. We've continued to achieve a financing penetration. That's roughly flat year to date to last year. It's 44% just to dimension it. And 39% of that is with our private label credit card program.

We are also seeing is that the average amount financed with the increased.

Speaker 3: to last year, which really is in sync with our average transaction value, including our blue-nile acquisition is up over the prior years. So, amount finance is continuous to be.

Two last year, which.

Really is in sync with.

Our average transaction value, including our Blue Nile acquisition.

<unk>.

Over the.

The prior year. So amount financed is continues to be strong for us. So we're very pleased with the credit portfolio and the work that we're doing.

Joan Hilson: We have guaranteed commitment levels with our financing partners in terms of credit approval. And as you know, we have no consumer credit balance sheet risk. And we have no revenue or lost sharing provisions within our agreement. So while we don't share in, you know, the credit risk with our credit partners, our partners have indicated that our portfolio delinquency rates are in line with last year. And we also have strong partnerships, including second look for lower credit scores. Got it.

Speaker 3: strong for us. So we're very pleased with the credit portfolio and the work that we're doing to continue to offer wide variety of options for our customers.

To continue to offer a wide variety of options for our customers.

Speaker 4: The only thing I'd add is that we do have two financing alternatives that are not FICO dependents. That's progressive leasing and our installment loans kind of pay later split pay with a firm. And those are really catching hold. So I think the way that Jen's team has built this cascade of financing alternatives is working in our favor.

Yes, the only thing I'd add is that we do have two financing alternatives that are not FICO dependent that's.

That's progressive leasing and our installment loans kind of pay later split pay with a firm and those are really catching hold so I think.

The way that John's team has built this cascade of financing alternatives is working in our favor.

Speaker 2: It was very helpful and then I was wondering if you could talk about like how material costs are trending I think I've seen diamond prices

Okay very helpful. And then I was wondering if you could talk about like how material costs are trending and I think I've seen RIN prices of.

Joan Hilson: And then just one more follow-up. Just on margin. So can you just kind of looking at the back half and specifically to 4Q, can you kind of talk about the bridge of the margin that you've seen in the first half and the improvement or the stabilization you're kind of planning in the back half? Thanks. Sorry, thanks for the question. In the first half of the year, we saw a point of impact from Blue Nile, roughly a point from strategic investments of roughly $7.5 million that we anticipate for the year, and two points, essentially, from the D-Lava-junct fixed cost given the lower comprehensive range of double digit.

Speaker 2: started to come down. You know, does that end up helping your margins and anything that you can talk about them?

It started to come down.

Does that end up helping your margins.

You can talk about on that.

Speaker 4: There are a couple of things that are helping our margins. That was a good story in the quarter. One is the strategic sourcing efforts that we've put in place. So we work with our vendors far in advance to make sure that we can get the best pricing on our product and then that can be passed through to our customers in great value to drive top line as well as have a bottom line benefit. So that's an ongoing effort for us.

There are a couple of things that are helping our margins that was a good story in the quarter. One is the strategic sourcing efforts that we've put in place. So we work with our vendors far in advance to make sure that we can get the best pricing on our product and then that can be path.

Through to our customers and great value to drive topline as well as have a bottom line benefit.

Joan Hilson: In the third quarter, the strategic investments will be slightly higher, slightly higher impact because of the seasonally lower sales. But for the overall back half, the Blue Nile impact will begin to obey. We'll have less the leverage on six costs with improved comp sales and 4Q from engagement recovery in UK cycling of the shutdowns and then more cost energies, particularly in 4Q. This will allow operating margins to improve in the back half of the year. Great, thanks. Thank you.

So that's an ongoing effort for us.

Speaker 4: We also have put increasingly more analytics against what we call strategic revenue management. So how we manage the combination of pricing, promotion, discounting and assortment levels at different price points, and that work is really helping the margin. And then finally, it's what Joan talked about, which we have very healthy inventory. And so we're...

We also have put increasingly more analytics against what we call strategic revenue management. So how we manage the combination of pricing promotion discounting and assortment levels at different price points and that work is really helping the margin and then finally.

It's what Joe talked about which we have very healthy inventory and so we are.

Speaker 4: We're taking marks earlier and not rolling as many things through to clearance, which is a great story, says that that's really helped. So in terms of the material cost, we think we're well positioned to kind of continue on the path that we've been on and deliver the strong margins that we've committed to.

We're taking marks earlier and not rolling as many things to read a clearance.

Which is a great story.

That's really helped so in terms of the material costs, we think we're well positioned to kind of continue on the path that we've been on.

Lorraine Hutchinson: Your next question comes from the line of Lorraine Hutchinson from Bank of America. Please go ahead. Thank you, good morning.

And deliver those strong margins that we've committed to.

Joan Hilson: Can you talk to the factors driving the improved 4Q sales and maybe just give us some more clarity on how much benefit you've included from the expected recovery engagements, the lapping of the issues in the UK and any other considerations? Sure, hi, Lorraine. Let me start on that and then Joan, feel free to jump in. Let me go through a little bit what's included in our guidance and what's not included in our guidance.

Great. Thank you.

Good luck.

Thank you.

Speaker 1: Thank you. Your next question comes from the line of Mauricio Sona from UBS. Please go ahead. Great. Good morning. Thanks for attending my question. I guess I just wanted to ask first of all the Q3 sales guidance. Does that imply any type of divergence in performances if we think about the banners segmented according to price points, the low to mid-tier versus the low to mid-tier?

Thank you. Your next question comes from the line of Mauricio Serna from UBS. Please go ahead.

Yeah.

Great. Good morning, Thanks for taking my question I guess I would just wanted to ask first of all the Q3 sales guidance.

Does that imply any type of diverged.

Divergent and performance of <unk>.

Think about the banners.

Joan Hilson: So what is included is an assumption that the overall consumer environment stays the same or even worsens modestly. The cost savings that Joan talked about in her remarks of $225 to $250 million, which is largely backended, engagement decline. So we are expecting the that engagements will begin to improve. They trough in Q3 and will begin to come up in Q4, but it is a multi-year recovery. So we have assumptions in that engagements will still be below year ago in the fourth quarter and we are assuming that the UK cycles the shutdowns that were in fourth quarter last year.

<unk> According to price points now the low to mid tier versus.

Speaker 7: The higher the higher end and then maybe you could talk about thinking about the Q4 implied operating income guidance. I think it implies a modest.

The higher the higher end and then maybe you could talk about.

Thinking about the Q4 implied.

Operating income guidance I think.

It implies a modest.

Speaker 7: Operating margin expansion, roughly 30 basis points. Just want to understand if that's coming both from.

Operating margin expansion roughly 30 basis points. So just wanted to understand if thats like coming both from.

Speaker 7: Gross margin improvement and also as as DNA. As I present to you, I'll thank you.

Gross margin improvement and also SG&A.

As a percentage of sales thank you.

Speaker 4: Hey, Mauricio. Let me start first with some of the consumer dynamics that we're seeing and then, John , maybe you can get into the guidance aspect. But from a consumer dynamic, there are really three strategies that we have to address our holiday shoppers this year. There is always an early savvy shopper, typically a woman typically buying at lower price points.

Hey, Mauricio let me start first with some of the consumer dynamics that we're seeing and then.

John maybe you can get into the guidance aspect, but from a consumer dynamic there are really three strategies that we have to address our holiday shoppers. This year. There is always an early savvy shopper typically a woman typically buying at lower price points typically comes into the category of September October .

Joan Hilson: So set a different way of what's not in is we're not assuming improvements in macro trends. We're not assuming weather improvements and we're not assuming any change in the normal flow through from sales. I was just going to add on the low end of guidance. You know, it allows for softening trends as a softer macroeconomy or slower recovery engagements might occur and modest higher student loan repayment impacts. So just a little bit of modest impact related to that in the low end of guidance. Sorry, but I'm going to go ahead with your next question. Thank you.

Speaker 4: Typically comes into the category September , October , and is done with her shopping by Black Friday. We expect that shopper to shop a bit later this year, and we've really structured our marketing, our promotions, our assortment to draw her in early, but also cater to her natural cautious.

<unk> has done with her shopping by Black Friday, we expect that shopper to shop a bit later this year and we've really structured our marketing our promotions our assortment too.

Draw her in early but also cater to her natural cautious.

Speaker 4: outlook on the economy right now and her desire to get the best deal. Then as we move into the fourth quarter we see more romantic gifting happen tends to be at higher price points.

Outlook on the economy right now in her desire to get the best deal then as we move into the fourth quarter, we see more.

Romantic gifting happened tends to be at higher price points, we see bridal beginning its three year recovery and so I think.

Speaker 4: We see bridal beginning its three-year recovery. And so I think those are some of the consumer trends that we consistently look at and manage our marketing inventory, store labor, all of those to meet the consumer where they are during shopping.

Joan Hilson: Yeah, Joan, I was just hoping you could talk us through your priorities for cash flows. You enter the back half. So as you know, cash flow in the back half, we've talked about the strategic investments that we're making and you know, there's roughly 75 million of those throughout the year, but we're committed to advancing our strategic priorities. Our intention is to continue with returning capital to share holders. We announced today, you know, our dividend, which is 15% higher than last year this time.

Or some of the consumer trends that we consistently look at and manage our marketing inventory store labor all of those to meet the consumer where they are during shopping.

Speaker 3: And then with respect to the guidance in Q3, we were pleased with what we saw in June and July . We were pleased with the...

And then with respect to the guidance in Q3, we were pleased with what we saw in June and July we were pleased with.

Yeah.

Speaker 3: selling under a thousand. We saw that pick up, particularly in fashion. So we have, you know, translated that into our Q3, Q4 guidance as well, Mauricio. So that's a bit underneath the covers from a folio perspective. And we're assuming consistent trends with, you know, the first half of the year in Q3. And then, as I said, you know, the cycling of UK shutdowns and.

Selling under a thousand we saw that pick up particularly in fashion. So we have.

Sure.

Translated that into our Q3 Q4 guidance as well our ECL. So that's that's a bit underneath the covers from a folio perspective, and we're assuming consistent trends with.

Joan Hilson: And we'll continue to manage our inventories consistent with the advancements that we've made with digital analytics, with our analytics capabilities. And what's really important about the inventory management is when you in Mari Marx and we're 4% down to last year, 8% down, excluding acquisitions, our inventory is healthy. And it's a true strength for us. And so when we look at we look at this Lorraine to previous pre-pandemic levels, we're 20% down overall, but 50% down in clearance.

The first half of the year in Q3, and then as I said the cycling of UK shutdowns end.

Speaker 3: the beginning of the bridal recovery in Q4 is what's driving some of that increase in the fourth quarter. And then when you think about the front half back half with respect to the operating margin, as I said in the first half, we had a point of impact from Blue Nile, a point from strategic investments, and two points from the delivery of fixed-

The beginning of the bridal recovery in Q4 is what's driving some of that increase in the fourth quarter and then when you think about the front half back half with respect to the operating margin.

As I've said in the first half we had a point of impact from vote Blue Nile appoint from strategic investments and two points from the deleverage of fixed costs. So when you look into the back half of the year and particularly in the fourth quarter on stronger seasonal selling in the fourth quarter.

Joan Hilson: Why that's important to our cash flow is that it's enabling us to bring in newness that we're excited about. And I mentioned a number of those ideas within her prepared remarks, so continuing to manage inventory diligently, leveraging analytics, inventory right place, right time and continuing to manage, you know, turn effectively. Thank you.

Speaker 3: So when you look into the back half of the year and particularly in the fourth quarter, on stronger seasonal styling in the fourth quarter, the de-leverage impact.

Deleverage impact Abates, we are also seeing that the pressure coming from Blue Nile acquisition begin to abate in the back half Gina mentioned in her prepared remarks that we've completed.

Speaker 3: We are also seeing the pressure coming from Blue Nile acquisition, you know, begin to abate in the back half. Jenna mentioned in her prepared remarks that we've completed.

Brandon Cheatham: Your next question comes from the line of Paul Lijue from City. Please go ahead. Hey everyone, Brandon, treat him on for Paul. I just want to circle back on like the credit question. You know, are you seeing any difference in approval rates? I understand that you probably haven't agreement that a certain FICO score has to get approved, but you know, are you seeing differences in like the customers that are purchasing on credit?

Speaker 3: the re-platforming for Blue Nile James Allen, and that was a critical element of us deriving the synergies from that acquisition. That went very well. The team worked very hard to bring that.

The re platforming for Blue Nile, James Allen and that was a critical element of us driving the synergies from that acquisition and that went very well the team worked very hard to bring that.

Speaker 3: you know to be with so we could start the back half off.

To be with so we could start the back half off onto the new platform and be able to really harvest those synergies.

Speaker 3: on the new platform and be able to really harvest those synergies.

Speaker 3: And then, you know, there is some deliverage from, or some impact related to this strategic investments as well. So overall, that's the dynamic between front-half back-ass and the improvement that we're seeing in our bank rate.

And then there is some deleverage from.

Or some impact related to the strategic investments as well. So overall, that's the dynamic between front half back half and the improvement that we're seeing in Op Inc.

Brandon Cheatham: Is there any kind of difference in like, you know, the FICO score that they have? And then, you know, the amount of customers that are using credit to make purchases, you know, can you give us any details for that is now compared to pre-pandemic. I think during the pandemic that came down, but are you seeing that starting to normalize? Thanks, Brandon. With respect to the private label credit card program, as I mentioned, our penetration rate is 39% and it's really relatively consistent to the prior year.

Okay.

Speaker 7: Got very helpful and then just very quickly just one clarification on the Q3 guide. I think you mentioned that this quarter to two three blue Nile is like already uncomfortable, but I think I thought like the you started like consolidating blue Nile in September , so I thought we would still get like one month contribution just want to clarify that point.

Got it very helpful. And then just very quickly just one clarification on the Q3 guide I think you mentioned that this quarter Q3 Blue Nile is like.

Although you are not comparable but I think I felt like you sounded like consolidating blue Nile in September so I thought that we would still get like one month contribution just want to clarify that point.

Speaker 3: Yes, we acquired the Buneil on August 18th. So there's a couple of weeks of non-comp. Okay, okay, perfect. Thank you. Thank you.

Yes.

Brandon Cheatham: Lower than pre-pandemic, we saw a shift in cost re-usage pre-pandemic. It was above 50%. And so we've seen that shift, but that's been relatively consistent, you know, over the last couple of years. What we are seeing is that approval rates are consistent in-store, but down related to the ability to apply for credit online. So it's really just a shift in channel, but our core, you know, 80% of our business in-store is relatively consistent with respect to approval rates.

We acquired the Blue Nile on August 18th So there is a couple of weeks of non comp okay. Okay. Perfect. Thank you. Thank you. Thank you.

Yes.

Speaker 1: Thank you. Your next question comes from the line of Jim Sanderson from NOSCO's Excuse me, in case this is you final wore. Thank you for your beforehand question.

Thank you.

Our next question comes from the line of Jim Sanderson Northcoast Research. Please go ahead.

Speaker 8: Hey, good morning. Thanks for the question. Just wanted to follow up on the credit concerns we've heard in the marketplace. I think you had mentioned that your percentage of sales on credit had maintained at 44% in the quarter. Is that correct?

Hey, good morning, Thanks for the question.

Just wanted to follow up on the credit concerns we've heard in the marketplace. I think you had mentioned that your percentage of sales on credit.

Maintained at 44% in the quarter is that correct.

That is correct.

Brandon Cheatham: What we are also seeing is that the average amount of finance is increased to last year, which really is in sync with our average transaction value, including our Blue Nile acquisition, you know, is up, you know, over, you know, the prior year. So amount of finance is, you know, continues to be strong for us. So we're very pleased with the credit portfolio and the work that we're doing to continue to offer a wide variety of options for our customers.

Speaker 8: Is that, I think that's a little bit weaker than prior quarters. How should we look at that slight shift in?

Is that.

That's a little bit weaker than prior quarters, how should we look at that.

A slight shift in the.

Speaker 3: It's roughly the same, Jim, from quarter to quarter. So we've been very pleased with the penetration. And as I mentioned earlier, the amount of finance has increased. We've been able to offer credit online to our customers. And while the approval rate online is not as high in store, we're very pleased with the response to that advancement.

Okay.

It's roughly the same gem from quarter to quarter. So we've been very pleased with.

The penetration and as I mentioned earlier.

Finance has increased and we've been able to offer credit online to our customers.

And while the approval rate online is not as high in store, where we're very pleased with the response to that advancement.

Speaker 8: All right, and I just had a question about the evit margin. I think at the IR day, you would guide it to a midterm goal of about 11%. If we take out the incremental investments made this year in some technology, is that a good run rate for the type of evit margin we could achieve? A sign that could achieve next year?

Alright, and then just had a question about the.

Jim: Yes, the only thing I'd add is that we do have two financing alternatives that are not FICO-dependent. That's progressive leasing and our installment loans kind of pay later split pay with a firm. And those are really catching hold. So I think the way that Gen's team has built this cascade of financing alternatives is working in our favor. Okay, it was very helpful.

<unk> margin I think.

You would.

Guided to a mid to long mid term goal of about 11% if we.

The incremental investments made this year and some technology is that a good run rate for the type of EBITDA margin, we could achieve cigna could achieve next year.

Speaker 3: So just thinking about the investor day, that was a midterm goal, which is really three to five years is the dynamic that we wrapped around our goal. What we are doing to drive.

So just thinking about the Investor day that was a mid term goal, which is really three years to five years is that a dynamic that we wrapped around our goal what we're doing to.

Jim: And then I was wondering if you could talk about like how material costs are trending. I think I've seen diamond prices have started to come down. You know, does that end up helping your margins and anything that you can talk about on that? There are a couple of things that are helping our margins. That was a good story in the quarter one is the strategic sourcing efforts that we've put in place.

Drive those increase was really related to something that I. Just mentioned was strategic revenue management as a key lever for us and really.

Speaker 3: those increases really relate to something Jenna just mentioned was strategic revenue management is a key lever for us and really through analytic understanding the elasticity of pricing and promotion. And then also strategic sourcing initiatives that we talked about.

Through analytics understanding the elasticity of pricing and promotion and then also strategic sourcing initiatives that we've talked about.

Jim: So we work with our vendors far in advance to make sure that we can get the best pricing on our product and then that can be passed through to our customers in great value to drive top line as well as have a bottom line benefit. So that's an ongoing effort for us. We also have put increasingly more analytics against what we call strategic revenue management. So how we manage the combination of pricing, promotion, discounting and assortment levels at different price points and that work is really helping the margin.

Speaker 3: at the investor day where we engage in things with our vendors, really driving joint business planning so that we're...

At the Investor day, where we engage in things with our vendors really driving joint business planning so that we were.

Speaker 3: driving inventories into our business or receipts into our business just in time and you know with cost transparency so we're able to optimize our margins that's a critical lever for us.

Driving inventories into our business or receipts onto our business just in time and with cost transparency. So we're able to optimize our margins. That's a critical lever for us and that growth in that margin expansion as well as continuing Wes.

Speaker 3: In that growth in that margin expansion as well as continuing with the analytics around are very healthy inventories and continuing to drive further productivity there. And then with respect to cost savings and expansion we will continue to optimize our fleet and assess.

The analytics around our very healthy inventories and continuing to drive further productivity, there and then with respect to cost savings and expansion.

Jim: And then finally, it's what Joan talked about, which we have very healthy inventory. And so we're we're taking marks earlier and not rolling as many things through the clearance, which is a great story says that that's really helped. So in terms of the material costs, we think we're well positioned to kind of continue on the path that we've been on and deliver the strong margins that we've committed to.

We will continue to optimize our fleet and SaaS.

Jim: Great, thank you. Good luck. Thank you.

Speaker 3: the right balance of e-commerce and store and really bringing even more to life to connect the commerce experience for our customer.

The right balance of e-commerce, and store and really bringing even more to life. The connected commerce experience for our customer. So we're excited about the opportunity to drive into these initiatives over the next several years.

Speaker 5: So we're excited about the opportunity to drive into these initiatives over the next several years.

Speaker 8: Okay, okay, understood. And just the long last question on the store closures in new unit openings. I think you mentioned potentially a, was it a 4% drag on same store sales related closures, but offset by the incremental revenue from the new store openings for the next 12 months? Is that the right way to look at that balance between openings and closures?

Okay, Okay understood and just one.

One last question on the store closures and new unit openings I think you mentioned potentially was it a 4% drag on same store sales related to closures offset by the incremental revenue from the new store openings for the next 12 months is that the right way to look at that balance between openings and closings.

Mauricio Sonia: Your next question comes from the line of Mauricio Sonia from UBS. Please go ahead. Great. Good morning. Thanks for taking my question. I guess I just wanted to ask first of all the Q3 guys sales guidance. Does that like imply any type of divergence and performances if we think about, you know, the banners, you know, segmented, you know, according to price points, you know, the low to mid tier versus the higher the higher end.

Speaker 3: Yeah, what we said is that the openings, Jim, relate to larger stores and higher volume stores. So that's helping us with the top line. And then the larger stores is what keeps, even though we're closing up to 150 and opening 30 to 35, they're larger stores. So therefore, our square footage remains similar to the prior year. Understood. Thanks.

What we said is that the openings Jim relate.

Two you have larger stores and higher volume stores. So that's helping us with the top line and then the larger stores is what keeps even though we're closing up to 150 and opening 30 to 35 their larger stores. So therefore, our square footage.

Mauricio Sonia: And then maybe you could talk about thinking about the Q4 implied operating income guidance. I think it implies modest. Just operating margin expansion roughly 30 basis points. Just want to understand if that's like coming both from, you know, girls margin improvement and also as as you know, as a percentage of sales. Thank you.

<unk> similar to the prior year.

Understood. Thank you very much.

Youre welcome.

Speaker 1: Thank you. Your next question comes from the line of Dana Telsey from Telsey Group. Please go ahead.

Thank you. Your next question comes from the line of Dana Telsey Telsey Group. Please go ahead.

Speaker 5: Hi, good morning everyone. It was encouraging to see that the ATV increased 4% and Blue Nile obviously being a contributor to that. If you X out Blue Nile, what did you see throughout the banners and obviously lower price point fashion is a big mention. What are you seeing there across the banners? How's the margin profile on that, especially given the strength in the gross margin that we saw this quarter, the opportunity for that to continue? Thank you..

Hi, Good morning, everyone. It was encouraging to see that the ATV increased 4% in Blue Nile, obviously being a contributor to that if you ex out Blue Nile what did you see throughout the banners and obviously lower price point fashion with is is a big mentioned what are you seeing there across the banners how's the market.

Jim: Let me Hey Mauricio, let me start first with some of the consumer dynamics that we're seeing and then. John, maybe you can get into the guidance aspect, but from a consumer dynamic, there are really three strategies that we have to address our holiday shoppers this year. There is always an early savvy shopper typically a woman typically buying at lower price points typically comes into the category September October and is done with her shopping by Black Friday.

Profile on that especially given the strength in the gross margin that we saw this quarter the opportunity for that to continue thank you.

Speaker 3: Thanks, Dana. So, you know, excellent blue Nile. We saw, you know, relatively consistent ATV performance to the prior quarter down slightly, relatively flat down slightly as the way I picture that for you. And what contributed to that was we saw consistent, you know, performance.

Thanks, Dana so excellent Blue Nile, Yes, we saw relatively consistent ATV performance to the.

Jim: We expect that shopper to shop a bit later this year and we've really structured our marketing our promotions are assortment to draw her in early, but also cater to her natural cautious. Outlook on the economy right now and her desire to get the best deal. Then, as we move into the fourth quarter, we see more romantic gifting happen, tends to be at higher price points. We see bridal beginning its three-year recovery.

Prior quarter down slightly they are relatively flat down slightly is the way I'd.

Picture of that for you.

And what contributed to that was we saw consistent performance.

Speaker 3: in some bucket, some price points, but what we were very pleased with was the improvement in the price points under 1000 and you know, specific bands over a thousand were also strong and we saw that happen more so in June .

In some buckets some price points, but what we were very pleased with was the improvement in the price points under 1000 and specific bands.

Over 1000 were also strong and we saw that happen.

More so in June and July so as we think about that leaning into the holiday season, we were.

Speaker 3: So as we think about that leaning into the holiday season, we were very encouraged by that and the response to the fashion assortment that we have. Fridal in and of itself was relatively consistent throughout the quarter as we in line with our expectations.

Jim: And so I think, you know, those are some of the consumer trends that we consistently look at and manage our marketing, inventory, store labor, all of those to meet the consumer where they are during shopping. And then, with respect to the guidance in Q3, we were pleased with what we saw in June and July. We were pleased with the selling under a thousand. We saw that pick up, particularly in fashion. So we have translated that into our Q3, Q4 guidance as well, Mauricio.

We're encouraged by that and the response to the fashion assortment that we have bridal is in and of itself was relatively consistent throughout the quarter as we in line with our expectations and so as we.

Speaker 3: And so as we, and as you know, we're at 50%, roughly 50%

And as you know we were at 50% roughly 50%.

Speaker 3: penetration and bridal in our business. So as we lean into the recovery of bridal or engagements in the fourth quarter, we would expect to see ATV have that have a positive impact on ATV.

Penetration in bridal and our business so as we lean into the recovery of.

Bridle, our engagements in the fourth quarter, we would expect to see ATV have that have a positive impact on HCV.

Jim: So that's a bit underneath the covers from a folio perspective. And we're assuming consistent trends with the first half the year in Q3. And then, as I said, the cycling of UK shutdowns and the beginning of the bridal recovery in Q4 is what's driving some of that increase in the fourth quarter. And then, when you think about the front half, back half with respect to the operating margin, as I said in the first half, we had a point of impact from blue and aisle, a point from strategic investments and two points from the delivery of fixed costs.

Got it thank you.

Speaker 5: Then any more color on the gross margin, Joan, that you would add for the balance of the year into next year? What's sticky? What's not?

Then any more color on the gross margin zone that you would add for the balance of the year into next year, what's sticky what's not.

Speaker 4: Yeah, so what we've said is within our cost savings, you know, roughly half of those of the, you know, 225 to 250 is within gross margin. It's really back-ended for the year and a significant portion of that just proportionally in the fourth quarter. So that's something that will continue to be a positive for us as we progress through the year. I think inventory health is just another very strong management by our team across all banners.

Yeah. So what we've said is within our cost savings roughly half of those.

The $2 25 to $2 50 is within gross margin. It really back ended for the year and a significant portion of that just proportionately in the fourth quarter. So that's something that we'll continue.

To be a positive for us as we progress through the year I think inventory health is just another.

Jim: So when you look into the back half of the year and particularly in the fourth quarter, on stronger seasonal selling in the fourth quarter, the de-leveraged impact of base, we are also seeing the pressure coming from blue and aisle acquisition, you know, begin to abate in the back half. Jenna mentioned in her prepared remarks that we've completed the replatforming for blue and aisle James Allen. And that was a critical element of us driving the synergies from that acquisition.

Strong management by our our team.

Across all banners.

Speaker 3: We have very strong inventory discipline in the analytics to tell us.

We have very strong inventory discipline in the analytics to tell us no.

Speaker 3: No right assortment, right place, right timing. Is, you know, we're really leaning into that and we'll use strategic promotion.

Right assortment right place right timing is.

As you know, we're really leaning into that and we will use strategic promotion.

Speaker 3: as we always do and we have

As we always do and we have.

Speaker 3: I think Jenna mentioned in her prepared remarks that we have items at a price that bring value to our customers, but they've been strategically positioned within our assortment to manage gross margins.

Yes, I think Gina mentioned in her prepared remarks that we have.

Items at a price that bring value to our customers, but they have been strategically positioned within our assortment to manage gross margin.

Jim: And that went very well. The team worked very hard to bring that, you know, to be with, so we could start the back half off, you know, on the new platform and be able to really harvest those synergies. And then, you know, there is some delivery from, or some impact related to the strategic investments as well. So overall, that's the dynamic between front half back half and the improvement that we're seeing in our bank.

Speaker 4: We've talked in the past about value engineering that we do with our vendors where we can use off weight diamonds to construct pieces that offer consumers a better value, but also give us a higher margin. So we have a number of strong value engineered items at a price in this year's holiday assortment.

We've talked in the past you pursue value engineering that we do with our vendors, where we can use off weight diamonds to construct pieces that offer consumers a better value, but also give us a higher margin. So we have a number of strong value value engineered items at a price in this years holiday.

Assortments.

Thank you.

Jim: Great. Got it. Very helpful. And then just very quickly, just one clarification on the Q3 guide. I think you mentioned that this quarter to Q3 blue and aisle is like already uncomfortable. But I think I thought like the, you started like consolidating blue and aisle in September. So I thought we would still get like one month contribution. Just want to clarify that point. Thanks. Yes. We acquired the blue and aisle on August 18th. So there's a couple of weeks of non-comp. Okay. Perfect. Thank you.

Thank you.

Speaker 1: We do have a follow up question coming from Mauricio Serna from UBS. Please go ahead.

We do have a follow up question coming from Mauricio Serna from UBS. Please go ahead.

Speaker 7: Great. Thanks. Just wanted to follow up on, you know, if you have any traditional commentary on, you know, lap-grown diamonds, you know, there's still like concerns about, you know, the impact on pricing, profitability. I think you alluded to has been a benefit to you so far, but maybe what you're seeing across the industry or do you have like any concerns?

Great. Thanks, just wanted to follow up on if you have any additional commentary on lab grown diamonds. There is still like concerns about the impact on pricing and profitability I think you alluded to.

Has been a benefit to us so far but maybe what you're seeing across the industry or do you have like any concerns going into the back half.

Speaker 7: going into the back half, the consumer that's still very constrained on their discretionary spending and whether an increase in sheep to that.

A consumer that's still very constrained on their discretionary spending and whether an increasing shift to that.

Jim Sanderson: Your next question comes from the line of Jim Sanderson from NOSCO's research. Please go ahead. Hey, good morning. Thanks for the question. Just wanted to follow up on the credit concerns before the marketplace. I think you had mentioned that your percentage of sales on credit had maintained at 44% in the quarters. That's correct. So we've been very pleased with the penetration. And as I mentioned earlier, the amount of finance has increased. We've been able to offer credit online to our customers. And while the approval rate online is not as high in store, we're very pleased with the response to that advancement. All right.

Speaker 7: that the lab-run diamonds could affect you at some point. Thank you.

In particular.

That to a micro diamonds could affect you at some point.

Speaker 4: Thanks, Mauricio. So we are seeing consumers gravitate increasingly to lab-created diamonds. They do offer a great value for customers, especially in the kind of macroeconomic environment that we found ourselves in. And so we're seeing that increase.

Thanks Marty.

So we are seeing consumers gravitate increasingly to lab created diamonds, they do offer a great value for customers, especially and the kind of macroeconomic environment that we found ourselves in and so we're seeing that increase they still represent a mid teen percentage.

Speaker 4: they still represent a mid-teen percentage of our mix, so of our diamond mix. So not incredibly significant in that sense, but through our scaled sourcing efforts and the work that we've done on branding, style offering, special cuts.

Our mix so of our diamond backs, so not incredibly significant in that sense, but through our scaled sourcing efforts.

And the work that we've done on branding style offering special cuts our LCD items actually carry both a higher margin and a higher ATV than natural diamonds on average.

Speaker 4: Our LCD items actually carry both a higher margin and a higher ATV than natural diamonds on average.

Joan Hilson: And I just had a question about the event margin. I think at the IR day, you would guide it to a midterm goal of about 11%. If we take out the incremental investments made this year in some technology, is that a good run rate for the type of event margin we could achieve? Signet could achieve next year. So just thinking about the investor day, that was a midterm goal, which is really three to five years, is the dynamics that we wrapped around our goal.

Speaker 4: So we believe that our efforts to strategically brand our assortments are working and that consumers, who often come in with a budget in mind, are actually trading up.

So we believe that our efforts to strategically brand our assortments are working.

And that consumers, who often come in with a budget in mind are actually trading up to higher size or higher quality lab created diamonds, which gives them an even more beautiful look and creates great lifetime relationship potential for us. So our teams have done a terrific job.

Speaker 4: to higher size or higher quality lab created diamonds, which gives them an even more beautiful look and creates great lifetime relationship potential for us. So our teams have done a terrific job making that a higher margin and higher ATV offering for us.

<unk> that are higher margin and higher ATV offering for us.

Joan Hilson: What we are doing to drive those increases really relate to something Jenna just mentioned was strategic revenue management is a key lever for us and really through analytics, understanding the elasticity of pricing and promotion. And then also strategic sourcing initiatives that we talked about at the investor day, where we engage in things with our vendors, really driving joint business planning so that we're driving inventories into our business or we see some to our business just in time.

Great. Thank you so much.

Speaker 1: Thank you. There are no further questions at this time. I'd now like to turn the call back over to Ms. Jenna Joseph, CEL, fine, equal.

Thank you there are no further questions at this time I'd now like to turn the call back over to MS. Janet Joseph CEO for any closing remarks.

Speaker 4: Well, thank you again for joining us today. We continue to navigate this pressured environment and are confident in our capabilities. We're leaning in to widen our competitive advantages to drive market share growth. Thank you.

Well. Thank you again for joining US today, we continue to navigate this pressured environment and are confident in our capabilities. We're leaning in to widen our competitive advantages to drive market share growth. Thank you.

Speaker 1: Thank you, ma'am. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.

Thank you ma'am, ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines have a lovely day.

Joan Hilson: And you know, with cost transparency, so we're able to optimize our margins. That's a critical lever for us in that growth in that margin expansion, as well as continuing with, you know, the analytics around are very healthy inventories and continuing to drive further productivity there. And then with respect to cost savings and expansion, we will continue to optimize our fleet and assess the right balance of e-commerce and and store and really bringing even more to life to connect the commerce experience for our customer. So we're excited about the opportunity to drive into these initiatives over the next several years. Okay. Understood.

Jim Sanderson: And just the one last question on the store closures in new unit openings. I think you mentioned potentially with a 4% drag on same store sales related to closures, but offset by the incremental revenue from the new store openings for the next 12 months is that the right way to look at that balance between openings and closings. Yeah, what we said is that the openings gym relate to larger stores and higher volume stores.

Jim Sanderson: So that's helping us with the top line. And then the larger stores is what keeps, even though we're closing up to 150 and opening 30 to 35. They're larger stores. So therefore our square footage remains similar to the prior year. Understood, thank you very much. You're welcome. Thank you.

Dana Telsey: Your next question comes from the line of Dana Telsey from Telsey Group. Please go ahead.

Dana Telsey: Hi, good morning everyone. It was encouraging to see that the ATV increased 4% in Blue Nile, obviously being a contributor to that. If you ex-out Blue Nile, what did you see throughout the banners and obviously lower price point fashion is a big mention? What are you seeing there across the banners, how's the margin profile on that, especially given the strength and the gross margin that we saw this quarter, the opportunity for that to continue.

Dana Telsey: Thank you. Thanks, Dana. So, you know, excellent Blue Nile. You know, we saw, you know, relatively consistent ATV performance to the prior quarter down slightly. You're relatively flat down slightly as the way I picture that for you. And what contributed to that was that we saw consistent, you know, performance in some, some price points, but what we were very pleased with was the improvement in the price points under 1000 and, you know, specific bands over 1000 were also strong and we saw that happen more so in June and July.

Dana Telsey: So, as we think about that leaning into the holiday season, we were, you know, very encouraged by that and the response to the fashion assortment that we have. Bridal in another self was relatively no consistent throughout the quarter as we, you know, in line with our expectations. And so, as we, and as you know, we're at 50% roughly 50% penetration in bridal in our business. So, as we lean into the recovery of, you know, bridal or engagements in the fourth quarter, we would expect to see, you know, ATV have that have a positive impact on ATV. Got it. Thank you.

Joan Hilson: And then any more color on the gross margin zone that you would add for the balance of the year into next year? What's sticky? What's not? Yeah, so what we said is within our cost savings, you know, roughly half of those of the, you know, 225 to 250 is within gross margin. It's really back ended for the year and a significant portion of that just, you know, proportionally in the fourth quarter.

Joan Hilson: So, that's something that will continue to be a positive for us as we progress through the year. I think inventory health is just another very strong management by our team. You know, across all banners, you know, we have very strong inventory discipline and the analytics to tell us, you know, right assortment, right place, right timing is, you know, we're really leaning into that and we'll use strategic promotion. As we always do and we have, you know, I think Jenna mentioned in her prepare remarks that we have, you know, items at a price that bring value to our customers, but they've been strategically no positions within our sort into manage gross margin.

Joan Hilson: We've talked in the past about value engineering that we do with our vendors where we can use, you know, off weight diamonds to construct pieces that offer consumers of better value. But also give us a higher margin. So, we have a number of strong value value engineered items at a price in this year's holiday assortment. Thank you.

Mauricio Sonia: We do have a follow-up question coming from Mauricio Sderna from UBS, please go ahead. Great, thanks. Just wanted to follow up on, you know, if you have any additional commentary on, you know, lap-grown diamonds, you know, there's still like concerns about, you know, the impact on pricing, profitability, I think you alluded to, has been a benefit to you so far. But maybe what you're seeing across the industry here, do you have like any concerns going into, you know, the back half, you know, a consumer that's still, you know, very constrained on their discretionary spending and, you know, whether, you know, an increasing shift to that particular lap to lap-grown diamonds could affect you at some point.

Mauricio Sonia: Thank you. Thanks, Mauricio. So we are seeing consumers gravitate increasingly to lap-created diamonds. They do offer a great value for customers, especially in the kind of macroeconomic environment that we found ourselves in. And so we're seeing that increase. They still represent a mid-teen percentage of our mix, so of our diamond mix, so not incredibly significant in that sense. But through our scaled sourcing efforts and the work that we've done on branding, style offering special cuts, our LCD items actually carry both a higher margin and a higher ATV than natural diamonds on average.

Mauricio Sonia: So we believe that our effort to strategically brand our assortments are working and that consumers, you know, who often come in with a budget in mind are actually trading up to higher size or higher quality lab-created diamonds, which gives them an even more beautiful look and creates great lifetime relationship potential for us. So our teams have done a terrific job making that a higher margin and higher ATV offering for us. Great. Thank you so much. Thank you. There are no further questions at this time.

Jenna Joseph: I'd now like to turn the call back over to Miss Jenna Joseph, the ELF, and closing remarks. Well, thank you again for joining us today. We continue to navigate this pressured environment and our confident and our capabilities. We're leaning into widen our competitive advantages to drive market share growth. Thank you. Thank you, ma'am.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely. Thank you.