Q1 2026 Signet Jewelers Ltd Earnings Call
Good morning, and welcome to the Signet Jewelers first quarter fiscal 'twenty 26 earnings call.
Please note that this event is being recorded.
Speaker Change: Joining us today on the call are Rob Blue Senior Vice President Investor Relations and capital markets J P. T Man Se, Chief Executive Officer, and Joan Hilson, Chief financial and operations Officer.
Speaker Change: At this time I would like to turn to I think Richard we're all good.
Speaker Change: Welcome to Signet Jewelers first quarter of fiscal 'twenty six earnings conference call.
Speaker Change: During today's discussion we will make certain forward looking statements any statements that are not historical facts are subject to a number of risks and uncertainties.
Speaker Change: Actual results may differ materially 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 Change: 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.
Speaker Change: During the call, we'll discuss certain non-GAAP financial measures.
Speaker Change: Further discussion of the non-GAAP financial measures as well as reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures investors should review the news release, we posted on our website at IR Dot Signet jewelers dot com with that I'll turn the call over to JK.
JK: Thanks, Rob and good morning, everyone I'd like to open my remarks today with a thanks to our team.
JK: Dedication is delivering results, including both same store sales and operating income growth above our guidance range.
JK: I recently had the chance to spend extended time with our top sales associates in the organization and your passion and commitment to executing on our strategy is inspiring.
Speaker Change: For all your hard work.
Speaker Change: There are three key takeaways I'd like to leave you with today.
Speaker Change: First our quick actions delivered results ahead of our first quarter expectations with both same store sales and adjusted operating income growth.
Speaker Change: Our girl brand Love strategy is in the early innings of delivering long term sustainable growth by better aligning our brands to their unique customer expectations as well as balancing assortment architecture in both bridal and fashion all supported by our realigned organization.
Speaker Change: And third we're confident in our ability to manage the levers under our control to execute in a dynamic macro landscape.
Speaker Change: Turning to the quarter. The actions we took in response to holiday and our early work on grow brand Love led to the outperformance I just mentioned with balanced growth across all categories.
Speaker Change: Fashion same store sales sequentially improved roughly four points to the fourth quarter led by improvement in the key gifting price point range of 250 to $500.
Speaker Change: We also drove improvement in bridal by filling assortment gaps, particularly within our largest brands.
Speaker Change: Italy, we're gaining traction on our centralized marketing efforts with a more than 30% increase in impressions at our three largest brands on a low single digit increase in AD spend to last year will cover our performance in more detail as we discuss our early progress on our grow brand love strategy.
Speaker Change: You'll recall that strategy addresses three imperatives, we believe will drive shareholder value.
Speaker Change: Those three are shifting to a brand mindset growing our core and expanding into adjacent categories, while aligning our organization to support the first two imperatives with that let's jump in.
Speaker Change: First talking through our shift to a brand mindset. We have developed a go to market strategy unique to each of our largest brands Kay zales and Jared.
Speaker Change: We're aligning marketing product assortment and experience in accordance with the right target audience for each brand. This early stage focus is the most effective way to build value for the company.
Speaker Change: For example, one point of comp growth in these three brands has the same impact to Cigna is six points of growth for the remaining brands.
Speaker Change: Results for those three brands is already delivering a combined 4% comp sales in the first quarter with continued trend in may further we delivered that sales growth, while increasing AUR in both bridal and fashion, while expanding merchandize margin.
Speaker Change: Our actions to build brand equity are fundamental to this work for example at Zales, We recently unveiled our own. It campaign. This campaign is targeting self expression at every occasion, including the most common occasion everyday where sales is one of the best.
Speaker Change: <unk> brands to target self purchase and we're leaning into it with the launch of this campaign.
Speaker Change: We own it campaign collections like stellar allure in Wembley, our targeting affordable price points and relevant designs that accommodate the trend of stacking.
Speaker Change: Alongside this the brand is testing store formats that provide re imagined jewelry shopping experiences as well as marketing across new media channels like mobile gaming and interactive social formats.
Jared: Hey, Jared this week, we'll be launching our new fashion campaign that distinguishes itself within our portfolio as the aspirational luxury brand.
Jared: This campaign will build on the product assortment and experience work that has been completed to date, while highlighting the expansion of successful collections like unspoken to drive both customer acquisition and retention our ability to leverage branded collections allows us to reduce promotional discounting ever.
Jared: <unk> by more than 20% reduction in discounting at Jared compared to Q1 of last year.
Jared: <unk> brand position as the romantic and milestone gifting destination is one of the strongest in our portfolio.
Jared: That said, we're introducing new fashion product here as well for both her and forehead. One of the most important areas of focus for brand health at Kay is reducing our reliance on promotion, while attracting customers with new product and refreshed experience, both digital and in store.
Jared: In May we've seen traction on these changes driving unit and margin improvement signaling a positive response to our actions.
Jared: As you can see we're driving brand distinction through a holistic go to market strategy. So while we're in early innings, we're driving progress with work still ahead of US we expect to update you on further progress throughout the year.
Jared: Moving onto the next imperative of growing our core and expanding into adjacent categories.
Jared: We're already driving some important proof points here.
Jared: We've gained traction in core product now with a healthy bridal offerings at key price points and product types. This action delivered unit growth and engagements modestly increased AUR and expanded category margins all while managing the balance within our architecture between lab grown and natural.
Jared: Diamonds.
Jared: Our leadership position in bridal gives us the right to expand into adjacent categories like fashion, which is important to the long term and sustainable growth of Cigna.
Jared: Fashions total addressable market is multiple times larger than bridal and it's an area, where we can create and capture demand through assortment strategy and brand equity.
Jared: We've introduced new collections within fashion, leading to positive comp category performance and overall sales growth for Valentine's day in the quarter.
Jared: This was led by growth in the key gifting prices below $500, a marked sequential improvement while continuing to lift category AUR.
Jared: Lab grown diamonds or LGD fashion growth of 60%. This quarter was supported by the introduction of new product, which led to notable AUR improvement. We continue to see significant runway for LGD fashion growth, our new Wembley offering of jails, which I referenced a moment.
Jared: Go target's value and everyday wear with pieces that include metals gemstones and lab grown diamonds. This represents one of the pathways to building customer credibility and ultimately brand equity over time.
Jared: A critical imperative in support of our Girl brand Love strategy is the alignment of our organization to drive growth.
Jared: Our reorganization is now substantially complete we are also actively recruiting for key leadership roles with our new Chief marketing officer expected to be announced later this quarter.
Jared: In the past couple of months, we've integrated digital and technology into a single centralized function.
Jared: These changes provide more efficient decision, making alongside clearer accountability.
Jared: Leaders across our company have carried out this reorganization balancing the focus on creating value for tomorrow, while delivering at the results for today.
Jared: So before handing things over to Joan I'd also like to address tariffs while the final outcome has yet to be determined on this topic, we've taken action and positioned ourselves for agility.
Jared: Most of what Sigma itself is imported and most of it is finished goods.
Jared: Our international sourcing comes from a variety of countries with India, representing about half of our airports and China only high single digits.
Jared: The team has taken several actions since April to minimize potential cost impacts and safeguard against supply chain disruption.
Jared: All while continuing to protect the value proposition, we deliver to our customers.
Jared: We're working with our vendors to optimize production and receipt schedules as well as evaluating sources of origin. We believe we will be able to move most of our Chinese manufacturing to other areas or bring in alternatives from other countries ahead of the important holiday season.
Jared: We believe that we can navigate tariffs as they stand today within our full year guidance through a combination of vendor negotiations value engineering of new and existing styles as well as promotion and lifecycle management.
Jared: The situation, obviously remains fluid and we will provide updates as appropriate.
Jared: In summary, my key takeaways today are first quick actions delivered results ahead of our first quarter expectations second.
Jared: Our grow brand love strategy is in the early innings of delivering long term sustainable growth and third.
Jared: We're confident in our ability to manage the levers under our control to execute in a dynamic macro landscape with that I'd like to turn it over to Joan.
Joan: Thanks, Jackie and good morning, everyone.
Joan: The activation of our growth brand love strategy is intentionally focused on driving sustainable growth with disciplined execution and accountability across the company.
Joan: We have aligned our organization to our strategy and are beginning to maximize our scale advantages through our centers of excellence that drive enterprise wide impact.
Joan: Concentrating on our three largest brands creates the most meaningful impact on growth.
Jared: Immediately through assortment architecture promotion management and maximizing the investments in our E Commerce channel.
Jared: In parallel we are fully engaged on longer term initiatives, including delivering on our real estate plan expanding services offerings and building brand equity, particularly in fashion.
Jared: Turning to the quarter revenue was $1 $5 billion with same store sales growth of two 5%.
Jared: With growth across every major category, including services further.
Jared: Other Kay Zales, and Jared delivered double digit e-commerce sales growth, while expanding their sales per square foot by nearly 5% to the prior year.
Jared: The leading factor in this growth is the strength of our new product offering across all categories, which delivered a sales penetration increase of new product by eight points, while roughly maintaining inventory levels.
Jared: These results reflected growth across all channels, including mall off mall and E Commerce.
Jared: Blue Nile was in line with the company's comp sales growth James Allen created 140 basis points of pressure to comps.
Jared: Touch more on this topic shortly from.
Jared: From a product perspective, merchandize, AUR grill, approximately 8% with fashion up 10% and bridal AUR up slightly.
Jared: The fashion AUR improvement was primarily driven by a 60% increase in LGD fashion sales.
Jared: Which curious in more than two times AUR premium category, AUR and higher gold prices.
Jared: As J J mentioned, we saw also significant improvement in fashion price point between 250 to $500.
Jared: In bridal, we continue to maintain a slight increase in AUR, while managing assortment to meet consumer demand through our brand portfolio.
Jared: Moving onto gross margin, we delivered a rate expansion of 100 basis points to last year.
Jared: This reflects a refined your promotional strategy.
Jared: Inventory management and leverage on fixed costs such as occupancy.
Jared: Our SG&A rate was flat to last year for the quarter and was better than our expectations driven by earlier than anticipated cost out actions from our reorganization and continued spend discipline.
Jared: Adjusted operating income exceeded expectations at $70 million for the quarter up more than 20% to last year.
Jared: Adjusted EPS was $1 18, which was above last year and higher income and a lower share count.
Jared: Partially offset by a higher effective tax rate and items related to non operating investments some of which we expect to recapture over the year.
Jared: Turning to the balance sheet inventory ended the quarter at $2 billion up approximately 1% lower than the 2% growth in revenue.
Jared: The health of our inventory provides flexibility within merchandise margin, including pre tariff product the ability to further improve lifecycle management and strategic promotion management.
Jared: Cash ended the quarter at $264 million with total liquidity of $1 4 billion.
Jared: Our liquidity position enabled us to take advantage of the pullback in share price. This year by more aggressively repurchasing shares with approximately $2 3 million shares repurchased year to date or over 5% of shares outstanding.
Jared: We have approximately 600 million of authorization remaining.
Jared: As a reminder, our top priority for cash remains organic growth followed by returning capital to shareholders and maintaining a conservative leverage ratio in fact, Fitch recently upgraded our credit rating to investment grade.
Jared: In the quarter, we've made progress on our real estate plan.
Jared: Designed to create an experience aligned with each brand's identity.
Jared: As a reminder, we have a four pronged strategy.
Jared: First close up to 150 underperforming doors over the next two years.
Jared: Well optimize sales transference following closures by shifting sales to remaining doors and to our E Commerce channel.
Jared: Third repositioned nearly 200 healthy doors and declining venues and lastly continue to refresh our existing fleet.
Jared: Progress this quarter includes renovating approximately 40 stores with an additional 160 locations planned for the balance of the year.
Jared: We closed 14 stores in the quarter and expect to close just under 100 stores within this fiscal year.
Jared: As a reminder, these closures are concentrated in underperforming mall locations with lease terms expiring towards the end of the year.
Jared: We continue to identify opportunities to reposition high value stores and declining venues with approximately 10 plans for this year and up to 200 in the next three years.
Jared: Reposition strategy and closures reflect our continued shift away from traditional mall locations as we align our footprint to support unique brand strategies.
Jared: Over the last year, we've reduced our north American mall revenue penetration to approximately 35%.
Jared: And we continue to expect progress towards reducing this penetration to 30% in the next few years, we do not expect a material increase in our normal level of investment to drive this strategy forward.
Jared: Now returning to our digital brands.
Jared: The technical challenges are behind us and we have since seen a consistent positive comp performance and Blue Nile.
Speaker Change: <unk> said, James Allen continues to underperform, reflecting lower brand awareness and its current positioning in the value space for custom engagement rings.
Speaker Change: We are taking aggressive action to improve performance, including a refined marketing strategy and significantly higher levels of finished product to better meet the timing requirements of customers. While we continue to take a deeper look at the brand.
Speaker Change: Turning to guidance, we expect total sales for the second quarter in the range of $1 four $7 billion to $151 billion with same store sales in the range of down one 5% to up 1%.
Speaker Change: Our sales expectations for the second quarter include quarter to date performance near or above the high end of the range.
Speaker Change: Selecting continued improvement in our two year stack.
Speaker Change: This includes a positive low single digit mother's day performance.
Speaker Change: A trend which has continued since.
Speaker Change: We expect gross margin rate to be flat to up modestly in the second quarter I continued merchandise margin expansion and modest deleverage in SG&A we.
Speaker Change: We expect adjusted operating income between 53% to $73 million in the quarter.
Speaker Change: The year, we are increasing the low end, while maintaining the high end of our fiscal 'twenty six operating guidance.
Speaker Change: And now expect total sales in the range of $657 billion to $6.8 billion with same store sales in the range of down 2% to up one 5%.
Speaker Change: The lower half of our guide continues to provide flexibility in the back half of the year for a measured consumer environment and reflects at the low end a two year stack consistent with the second quarter.
Speaker Change: We continue to expect gross merchandise margin expansion for the year as our product and promotional strategies should more than offset current tariffs.
Speaker Change: We continue to expect SG&A as a percentage of sales to be slightly higher year over year at our high guide.
Speaker Change: We call that our outlook also includes an incentive compensation reset within SG&A that is largely offset by cost savings related to this year's reorganization along with normal levels of inflation.
Speaker Change: One time cost related to the reorganization of $30 million to $45 million are expected largely in the first half of the year and nearly all will be excluded from adjusted results.
Speaker Change: Reflective of our updated operating guidance and share repurchases to date, we are increasing our expected adjusted EPS by approximately 4% at the midpoint to a range of $7.70 to.
Speaker Change: Two $9.38 per diluted share.
Speaker Change: Continue to expect capital expenditures of $145 million to $160 million.
Speaker Change: Before we turn to Q&A I'd like to personally thank our signet team for their commitment to our growth brand love strategy and delivering early wins all in the spirit of our purpose inspiring love.
Speaker Change: Operator, let's now go to questions.
Speaker Change: Thank you and ladies and gentlemen, who are allowed to get the question and answer session to ask a question you May press star followed by the number one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing any keys.
Speaker Change: Your question. Please press star followed by that I'm breakthrough with that our first question comes from the line of Polish way with Citigroup. Please go ahead.
Polish Way: Hey, Thanks, guys I'm curious if you could quantify your unmitigated tariff pressure and then maybe if you could size the pieces in terms of the actions that you're taking to mitigate.
Speaker Change: Those pressures.
Speaker Change: And then second I'm curious if you could talk about pricing.
Speaker Change: Pricing in both our lab and natural.
Speaker Change: Curious how each of them are trending within the bridal and fashion categories, and how you're thinking about that for the rest of the year.
Speaker Change: Yeah, Paul as far as as far as tariffs are concerned I think the.
Speaker Change: Yes, Theres really a couple of levers that we're leaning into to take advantage of that and it's.
Speaker Change: It's not so much about cost impact is thinking about what are the things that we need to do to continue to hit the right price points and maintain margin structure within the business. So that becomes as much of an exercise and design and assortment architecture to to really make sure that.
Speaker Change: That we can still hit those key price points.
Speaker Change: If you think about the landscape today I mean, there's an incremental 10% tariff on on India, primarily obviously you know that.
Speaker Change: That ball is moving around a little bit and that's why I think agility is really important for us as we think through it.
Speaker Change: We do have a little bit of an advantage in the sense that our business has a longer lead time business and so.
Speaker Change: It means we've got to stay out in front of it but it also means we've got a great inventory position going into it where we have the flexibility to really adjust our assortments as we as we hit these key these key holiday time periods.
Speaker Change: I would also point out I mean, it's not stopped part of your question, but Theres a couple of other levers here I mean, what you know what's happening with with commodity prices is one of them and of course part of that is gold. So all of it kind of goes into the mix as we think about sourcing strategy and assortment architecture.
Speaker Change: As we shared on the call. It's it's baked into our guide. So we feel we feel confident about how we've accounted for it based on what we know today.
Speaker Change: But those three biggest levers I would say the largest of them is really how do we think more.
Speaker Change: Maybe differently about assortment architecture to deliver second would be ultimately.
Speaker Change: The country of origin sourcing opportunities and where we feel like the best place to place goods are how we're working with our suppliers to best leverage that and then the third.
Speaker Change: Is it was really more about.
Speaker Change: Looking at any sort of.
Speaker Change: Shifts in placement, particularly as it relates to timing you know how do we how do we think about timing of receipts to be able to make sure we're safe guarding the fourth quarter.
Speaker Change: From a from a cost standpoint.
Speaker Change: Thank you.
Speaker Change: We've seen a pretty consistent set.
Speaker Change: Set of actions going on particularly as it relates to lab versus natural natural has.
Speaker Change: As a stabilized of late that's you know that's actually been reported beyond our business it's out there publicly.
Speaker Change: You know that there is some continued deflation within lab, but the phenomena you see playing out in our numbers is it's actually continued to be a source of expansion for AUR for us partly because of how consumers have traded up in some categories and then the expansion of lab and fashion.
Speaker Change: And really that that lower cost is part of what enables the growth of lab as part of our.
Speaker Change: An entrant into a category, where it would've been underpenetrated before so that that lab growth in fashion.
Speaker Change: As I would dimensionalize totally different it really is an accretive opportunity just because it's expanding the utilization of diamonds in the fashion space. The only thing I'd add onto that Paul is that lab from a lab diamond perspective, it's decreasing but at a slower pace than we've seen in the past and then with respect to.
Speaker Change: Quantifying what we've said is that our guidance includes our view of the impact of tariffs on our business as we know it today.
Speaker Change: And it doesn't it doesn't include anything unknown or new that may come forward, but we believe that at the low end of our guidance. We've provided for some flexibility are.
Speaker Change: Related to that and we're very pleased with the work that the team has done around promotional promotion management and JK cited in his prepared remarks that Jared on its own had reduced discounting by 20% and we've seen.
Speaker Change: The 10-Q is filed you'll see that the increase in Jared and you know as we noted those three the three big brands were up you know positive comps are very important to our business. Overall, so pleased with the execution of our promotional planning and refinement of that strategy to help us.
Speaker Change: As you know work through some of these other factors that.
Speaker Change: We can navigate through sourcing and say hey, I've been through.
Speaker Change: Assortment architecture.
Speaker Change: Got it. Thank you guys. Good luck.
Speaker Change: Yeah. Thank you I appreciate it.
Speaker Change: Okay great.
Speaker Change: And your next question comes from the line of Ike.
Ike: Where's childhood Wells Fargo. Please go ahead.
Speaker Change: Hi, Good morning, this is giuliano do cancer.
Ike: To take home may be a couple of questions. If you could compare the performance of passion and the ongoing recovery of vital and maybe skipping one.
Ike: Specifically on any progress on taking market share position within each of these kill them.
Ike: Additionally, on that you mentioned last quarter that lab presented a new customer opportunity have you guys seen a ramp up in that new customer in Q1.
Ike: And then I think that's it thank you.
Julianna: Okay, Yeah. Thanks Julianna.
Brian: I think I got it but if I Miss something please please let me know so on fashion versus Brian I mean, obviously, we we talked a lot about bridal trend I think I've been pretty clear that you know what.
Brian: Well I I don't necessarily know that there is a level of precision that maybe we've articulated in the past the directional movement of it.
Brian: Up into the right has continued and we see that playing out in this quarter on the fashion side. I mean, you know this is where I'll I'll I'll kind of come back to what I pointed to in the first part of it.
Brian: Long lead time business also means it takes a little time to adjust our assortment, but we've taken.
Brian: Very clear actions around where we felt like there were holes in our assortment or maybe where we lack the depth at key price points.
Brian: And then I think a little more deliberate around where there's opportunities for newness that led to a same store sales sequential improvement of four points and moved fashion.
Brian: So positive, which I think is an important first step for us, but you know.
Brian: I think there's more to go we've got a you know it does take time to reset and assortment. It also takes time to really build that credibility.
Brian: With customers and and I think you're now doing that on a consistent basis as we certainly were doing the work to put ourselves in a position I believe that's what will will deliver but I'm I'm.
Brian: I'm pleased with the progress in the in the first quarter and I would say.
Brian: The star of that show really has been our work around that sub $500 price point to make sure we were shoring up.
Brian: The the misses an assortment that we had I think that's critical for US both for every day.
Brian: As well as for.
Brian: You know for some of those key gifting periods.
Brian: Then.
Brian: There are real highlights in you know a brand like sales were stellar stellar allure in Wembley are better.
Brian: Better positioned in building as it relates to trends like stacking.
Brian: And our sales business as well as sales essentials, which which is a wider price point range, but I think really focuses on traditional and non.
Brian: Not traditional but maybe foundational pieces that are going to be a little more timeless and really the kind of.
Brian: Foundational elements that.
Brian: We will survive from trend the trend I think those are really important drivers in a brand like sales.
Speaker Change: Jared we've talked about on spoken a lot, which I think is great because it does show.
Speaker Change: There is a there is a growth opportunity as it relates to great design and a natural diamond focused set of fashion pieces.
Speaker Change: Shai collection is another that that is really driving growth. So there there are a lot of.
Brian: Proof points around the businesses that I think are important as we look to build our customer ship overall, both from an acquisition and from a retention standpoint.
Brian: You know that those are longer measures I, you know I I don't want to call a victory one quarter and I think I think when you look at it those things. We were we're pleased with the progress and you know the health of that as something that will mean more.
Brian: Over time.
Brian: From a market share perspective, we really only we get our best views of market share on an annual basis, just given the turn basis of this business and so we really the only we only talk about it then because our data is as best I think the you know the health of our business certainly feel better about them.
Brian: You know when you look at comp sales improvement that we're driving and.
Brian: I believe that if we do these things we do know.
Brian: We shifted to growing our bridal market share I think in particular, given the size of where we are in fashion getting an annual read is it's going to be a heck of a lot more valuable for us but.
Brian: We're moving in the right direction in that regard and happy to see both levers working within the business.
Brian: Great. Thank you.
Brian: Yeah. Thanks for the question.
Speaker Change: And your next question comes from the line of Dana Telsey with Telsey Group. Please go ahead.
Dana Telsey: Hi, nice to see the progress.
Dana Telsey: Do you think about the health of the consumer what are you staying on the different brands is it deferring and what are you seeing in terms of price point ranges given the AUR went up to 8% I believe from 7% last quarter.
Speaker Change: That trend, where do you see it coming from and progressing and then just lastly, how do you think.
Dana Telsey: About the upcoming holiday season marketing new product launches how are you thinking about that in the midst of it.
Dana Telsey: Environment of tariffs and a potentially more pressured consumer thank you.
Brian: Hey, Hey, Dana can you repeat the first part of that question for US. If you don't mind I think you were asking about health of consumer, but I don't want to guess at it and you you cut out for just a second.
Brian: No problem. It was about AUR growth increased from two 8% from 7%, whereas that AUR increases coming from how do you see that developing going forward.
Speaker Change: Yeah, I mean, the you know.
Speaker Change: You are growth really has been across the business and I think the you know the.
Speaker Change: The fact of the matter is there's two different dynamics. There are you know they are and <unk>.
Speaker Change: In bridal I think it's consistent with what we've talked about the stability of cost and price and really.
Speaker Change: To the degree there is a decision that customers are making relative to natural versus you know versus LGD. They continue to trade up in size and LGD and in that.
Speaker Change: That hasn't really changed I think we've we've pointed to a little more predictability and stability to that but that trend is.
Speaker Change: As a pretty clean on the on the fashion side, even though we are talking a lot about 250 to $500 price point being a key driver of that business.
Speaker Change: You know it may sound repetitive, but LGD is is an expansion of the use case of diamonds into fashion and really does create a trade.
Speaker Change: A trade up opportunity in spend that.
Speaker Change: That you know.
Speaker Change: And I hesitate to say trade up because you know that that choice is a little more discretionary and but it really is opening up a new avenue of merchandise and that's helping drive AUR for us it's part of where we feel like there is.
Speaker Change: There is an opportunity for growth.
Speaker Change: As far as as far as the consumer.
Speaker Change: I think the we set it there is resiliency there and.
Speaker Change: What we are seeing an AUR increase is more about making sure that we are <unk>.
Speaker Change: Aligning to the right trends and sort of matching design and and you know the need and wants of consumers I think we do that.
Speaker Change: Consumers have shown the resiliency to two to spend on those things that they really want and if if we fall short of that then you know then that's when I think.
Speaker Change: Some of the <unk>.
Speaker Change: Some of the pressures around AUR or promo start to creep in and so.
Speaker Change: We continue to put that focus on the right assortment at the right time at the right value proposition for customers and I think we'll continue to see.
Speaker Change: These kinds of trends.
Speaker Change: The one thing I would call out, though as it relates to the AUR.
Speaker Change: You are.
Speaker Change: I think we expect it to be up but the growth of fashion at a lower price point in aggregate.
Speaker Change: Well moderate AUR in total for us and so I think part of our job is to really dimensionalize that within our business just so that we're not giving a.
Speaker Change: A false read so to speak on what the health of that.
Speaker Change: It looks like within our business overall.
Speaker Change:
Speaker Change: As far as your second question.
Speaker Change:
Speaker Change: You know I think marketing overall.
Speaker Change: For us and we talked about it our cost up slightly but with a 30% increase in impressions.
Speaker Change: That's important for us because it really does help market.
Speaker Change: A new set of customers and expand our world I think it's a.
Speaker Change: That's going to be critical for us as we move forward, just because it'll expand our universe and.
Speaker Change: Yes.
Speaker Change: We do think that you know.
Speaker Change: Obviously our guide.
Speaker Change: Sort of allows for a little bit more.
Speaker Change: Dynamic.
Speaker Change: Consumer environment, and we're prepared for it.
Speaker Change: I think it'll it'll be important for us to make sure that we are really targeted and in both our spend and our audience.
Speaker Change: The interesting thing is.
Speaker Change: We continue to see an opportunity to pull back on promotion and I think that's that's going to be.
Speaker Change: Really critical to kind of cut through some of the noise for the holiday and make sure that we're much more focused on what the key drivers are how do we hit key price points and then ultimately how do we leverage those those windows of demand is strike the right balance between a more traditional top of funnel spend but but the.
Speaker Change: Continue to expanded reach and digital that where we're seeing drive the business right now.
Speaker Change: Thank you.
Speaker Change: Yeah. Thanks for the question.
Speaker Change: And your next question comes from the line of Mauricio Serna with UBS. Please go ahead.
Mauricio Serna: Great. Good morning, and thank you for taking my questions.
Speaker Change: I wanted to ask just on maybe on the Markman Diamond business could you remind us how much.
Speaker Change: Of your business is macro diamond now and for.
Speaker Change: For the guide like what's implied it to be by you know by the end of the year in terms of penetration and then just some commentary just confirming some commentary earlier happening quarter to date.
Speaker Change: Comp sales are up low single digits and could you just explain.
Speaker Change: Explain a little bit more of that two year stack comments, you talked about is that on our comps.
Speaker Change: Comps are total sales just want to make sure we got that right and then lastly on gross margin.
Speaker Change: You talked about expansion for the full year does that include any impact from leverage or deleverage in and just on that like what's the leverage point in our business.
Speaker Change: Thank you.
Speaker Change: Thanks, Murray CEO from an LGD penetration perspective.
Speaker Change: Overall penetration is roughly 20 I'm sorry, 20%. This is up about five points to last year and in line with our you know our strategic positioning of our Assortments, So and as we continue to drive.
Speaker Change: This was reflective of our drive of LGD in fashion, particularly.
Speaker Change: As you know carries a two times a higher AUR than other fashion pieces. So we think this is very important to the point in time driving gross margin expansion for us as well. So that is the the positioning on LCD with respect to our comp.
Speaker Change: Let me think of Q2 and fiscal 'twenty six guide I'll address that quarter to date. Our performance is currently near or just above the high end of our comp.
Speaker Change: Comp range for the quarter.
Speaker Change: Both our quarterly and full year guide provides far you know fact flexibility for the measured consumer environment and variability in consumer spending on a two year stack basis. The high guide and the midpoint is a roughly two point improvement on the second quarter.
Speaker Change: The lower half of our guide continues to provide flexibility in the back half of the year for that the measured consumer environment and reflects at the low end a two year stack consistent with the second quarter.
Speaker Change: So it's it's a it's a measured view.
Speaker Change: And believe that we're.
Speaker Change: We're positioning our guidance and in the right.
Speaker Change: In the right place and just as you think about the second quarter and where we are positioned to guide. Our July is it's a tougher comp for us year over year. So we had a better performance last year than we've seen than we saw in the first two months of the second quarter. So we continue to really evaluate them.
Speaker Change: Our assortment architecture, and really enjoying the momentum that we're seeing in assortment that the team has put forward and the breadth of price points that we're able to offer the consumer particularly in the backdrop of of the environment today.
Speaker Change: Then with respect to gross margin.
Speaker Change: Our gross margin performance with a 50 basis points and expansion the <unk> expansion and in the first quarter was 50 basis points and we did see leverage.
Speaker Change: On the positive two 5% comp and occupancy and some other inventory related.
Speaker Change: Our car inventory related items in the quarter and are very pleased with that on a go forward basis, we believe that we can leverage.
Speaker Change: Our gross margin on a slightly positive comp and continue to believe we will see expansion throughout the balance of the year at a similar level and that's what's reflected in our guidance.
Speaker Change: Okay.
Speaker Change: Understood. Thank you so much and congratulations.
Speaker Change: Thanks, Bart issue.
Speaker Change: And your next question comes from the line of Jim Sanderson with Northcoast Research. Please go ahead.
Jim Sanderson: Hey, Thanks for the question and congratulations on a great quarter I wanted to lean it a little bit more to the lab grown of feedback you provided.
Jim Sanderson: What is your what is your outlook on your ability to achieve the higher end of guidance. If there are increased tariffs coming out of India trying to understand your exposure to that product line and the risk of higher tariffs.
Jim Sanderson: Okay.
Jim Sanderson: Yeah.
Jim Sanderson: Appreciate the question I think the.
Jim Sanderson: The biggest probably takeaway.
Jim Sanderson: As we think about tariffs I mean is.
Jim Sanderson: First it's fluid issue and and as it stands today, we've got a task force that is literally meeting across the business.
Jim Sanderson: You know weekly sometimes daily based off of what the new cycle may be to make sure that Oh.
Jim Sanderson: We're coordinator coordinating our actions I think I do think this is maybe something.
Jim Sanderson: I should have touched on in sort of the first round of question on tariffs.
Jim Sanderson: As the largest player in the space and with the portfolio of brands that we have our ability to.
Jim Sanderson: Leverage our scale thoughtfully as partners is a real advantage you know I think that's something that.
Jim Sanderson: We're also trying to make sure that.
Jim Sanderson: We are coordinating those efforts across our portfolio, so that where we're thinking about not only the health of our business, but the health of the consumer ultimately the health of our partners I think this is.
Jim Sanderson: Yeah.
Jim Sanderson: There was a lot of stakeholders here that that you know are thoughtful around how that's going to play out.
Jim Sanderson: As far as as far as this issue specifically with lab, but I think it's it's less of a pressure point.
Jim Sanderson: You know the the control that you know that we have around those input cost and when I say those input costs.
Jim Sanderson: Beyond tariffs size of stone whats the design that we're building.
Jim Sanderson: How do we how do we flex.
Jim Sanderson: Fabrication is.
Jim Sanderson: As well as timing I mean, all of those are our levers that that I think are actually a little more controllable in the space of lab and unlike maybe some of the other commodity input costs, where we we can.
Jim Sanderson: Our lean into production almost like a manufacturer in and have a little bit more.
Jim Sanderson: Flexibility to make sure that we're engineering the <unk>.
Jim Sanderson: Right product at the right price point.
Jim Sanderson: To really meet and drive demand within the business and so I.
Jim Sanderson: I don't see that as at least based off set of facts. We know today I don't see that as one of the more critical levers relative to any sort of risk to our guide.
Jim Sanderson: Alright. Thank you for that just a quick follow up on the bridal category.
Speaker Change: Where your unit growth in the quarter comparable to industry or did you actually exceed industry trends with respect to engagement rings.
Speaker Change: We believe that yeah, we have look at indicators external sources channel, we believe that we're gaining traction.
Speaker Change: And in that space and ask if you'd look at in your own checks the Google search.
Speaker Change: Related to engagements and so forth is is up too. So we're pleased with what we're seeing happen in the bridal.
Speaker Change: Category of our business.
Speaker Change: Alright, and just one last follow up if you could did you indicate what share of your bridal sales for lab grown in the quarter.
Speaker Change: Basically it is in the mid 30 range parameters.
Speaker Change: And how does that compared to last year.
Speaker Change: It would be up to last year, Jim as you might recall that in our core banner sales and K, particularly we had a lower penetration at some of the lower price points and in and lab for those brands and so we've been able to improve.
Speaker Change: The assortment architecture relative to that and while doing that.
Speaker Change: We're still able to see a bridal your AUR, Inc increase slight increase reflecting the balance of the assortment between natural as well as lab.
Speaker Change: Thank you very much.
Speaker Change: Yes. Thank you.
Speaker Change: Yeah.
Speaker Change: And we have no further questions at this time I would like to turn it back to Jackie semantic brick losing remarks.
Speaker Change: Okay, well in closing today I would really like to thank our team again as well as our other key stakeholders, including our vendors banking partners and the investment community I'm I'm. So proud of our team for striking the right balance between good foundational strategy work and remaining focused.
Speaker Change: On executing to deliver results in a dynamic environment. So that we can deliver on both short and long term goals.
Speaker Change: And I've been encouraged and the extensive time I've spent in recent months alongside our strategic vendors, who are committed to the girl brand Love strategy I'm excited about the commitment of all of our stakeholders as we continue to build momentum on our girl brand Love strategy and I think everyone here for your time today, we really look forward to.
Speaker Change: Putting together and providing additional updates and further progress throughout the year. Thank you.
Speaker Change: Thank you and ladies and gentlemen. This concludes today's conference call. Thank you all for participating you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Yeah.