Even with the world rocked by wars, inflation and an up-and-down emergence from the pandemic, the largest jewelry seller in the world still expects people to keep buying diamonds and lots of them.
The parent company of jewelry retailers like Zales and Kay Jewelers, Signet (SIG) has just raised its company guidance for 2023 above analyst expectations.
The Post-Pandemic Wedding Boom Is Very Good For Diamonds
A large reason for the rosy outlook has to do with the rise in weddings.
After the pandemic pushed many to delay their ceremonies, the country will start seeing up to 2.5 million weddings a year, according to Signet's Chief Financial And Strategy Officer Joan Hilson.
With weddings taking up 50% of their business, the boost will help sales of not just engagement rings and wedding bands, but also everything from bridal party jewelry to the small gifts that a bride sometimes gives her bridesmaids.
Kay Jewelers
"There are other members of the bridal party in the family as well as guests attending the wedding but the truly interesting fact is that these celebrations drive future growth," Hilson tells TheStreet. "Dating couples who attend the wedding are the most likely to get engaged shortly afterwards."
Hilson also added that, amid many companies reopening offices and instituting hybrid work models, sales of fashion and non-bridal jewelry is also seeing an uptick.
This could potentially spell good news for Signet brands that, like Zales and Jared, are more tailored for self-purchase.
Signet's Latest Earnings Report Smashes Expectations:
On Thursday, the company released earnings that surpassed analyst expectations.
For the quarter ending on Jan. 29, 2022, the jewelry giant reported revenue of $2.81 billion and adjusted earnings of $5.01 a share. Analysts polled by FactSet had predicted $2.77 billion.
When it comes to guidance, Signet expects revenue of between $1.78 to 1.82 billion in Q1 2023 and between $8.03 billion and $8.25 for all of fiscal 2023. FactSet consensus, meanwhile, is at a respective $1.74 and $7.89 billion.
Signet Jewelers
The company also raised its quarterly cash dividend in the next quarter from 18 to 20 cents a share and is raising its planned capital expenditures to $250 million.
The increased spending room, Hilson said, will allow Signet to continue enhancing both its e-commerce platforms and build out different brands like Kay, Zales and Jared.
After the earnings dropped, Signet shares rose by 6.9% to $83.09. Back in 2018, Signet launched its three-year Path to Brilliance strategy to sustain long-term growth — while shares are down 10.38% from the start of 2022, they are up 7.42% year-over-year.
"We generated a significant amount of cash within our business and we were able to pay down our debt," Hilson said. "The health of our balance sheet is is strong."
The World Is An Uncertain Place. How Do Diamonds Fit In?
Also this week, Signet announced that it would not be buying rough diamonds from Russian miners amid the country's invasion of Ukraine.
As over 90% of the world's diamonds are first processed in India, the move is largely symbolic and not likely to affect sales or production.
Inflation, which was at a 40-year high of 7.9% in February, is also a concern because of the rising cost of production and the possibility that buyers will have less money to spend, and thus hold off on making larger purchases.
But overall, jewelry and diamond sales in particular have been rising fast. According to recent numbers from Bain & Company, jewelry and rough diamond sales fell a respective 14% and 31% in 2020.
But as the country emerged out of the pandemic, diamond revenue was once again back up 29% by 2021.
"We believe we can provide our customers with great value while still protecting and growing our margin," Hilson said. "[...] By building the supply chain and resource opportunities that we have, we believe brands are well-positioned to provide our customers what they need."
