The owner of Kay Jewelers and Zales is targeting as much as $10 billion in annual sales within the next five years, projecting a rate of growth that’s faster than Wall Street’s expectations.
(Bloomberg) — The owner of Kay Jewelers and Zales is targeting as much as $10 billion in annual sales within the next five years, projecting a rate of growth that’s faster than Wall Street’s expectations.
It’s a bet by Signet Jewelers Ltd. that US wedding engagements will rebound and that demand for pricier jewelry will remain robust as higher-end shoppers outspend mass-market consumers hit by high inflation.
The company is targeting between $9 billion to $10 billion in annual revenue within three to five years, according to a presentation to investors on Tuesday. The higher end of that range is an increase from the $9 billion that Signet set two years ago as a target to meet in about five years. And it’s a notable jump from the $7.8 billion Signet reported for its most recent fiscal year that ended in January.
“We’re raising our goals for the midterm,” Signet CEO Gina Drosos said in an interview. “We see ourselves as having more growth potential than the market is giving us credit for.”
Analyst projections show a more moderate pace of growth, with the company expected to reach $8.1 billion in revenue in the fiscal period that ends in early 2026. Those estimates compiled by Bloomberg don’t go as far out as the company’s target horizon.
Signet, which has a market capitalization of around $3.4 billion, also raised its forecast for annual operating margin to a range of 11% to 12% within three to five years.
The company set its target for earnings per share, excluding buybacks, at $14 to $16 within five years. That’s than Signet’s fiscal 2024 target of $11.07 to $11.59, and above analysts’ estimates for fiscal 2025.
Signet shares rose 2.3% at 10:09 a.m. in New York trading. The stock has risen 11% this year through Monday’s close, outpacing the 2.4% advance of the Russell 2000 Index.
Engagements Rebound
Revenue gains will be powered by a rebound in engagements and continued growth in Signet’s sales of accessible luxury items, Drosos said.
She expects engagements to accelerate starting in November and December of this year. And between 2024 and 2026, there will be about 500,000 more engagements than there normally would be based on historical trends. Drosos sees Signet as the biggest beneficiary, since engagement and bridal jewelry typically represent around half of the company’s annual sales. “We have two years of tailwinds coming,” she said.
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Investors who are more bearish about Signet’s outlook think the pandemic was a temporary positive blip for Signet because stimulus spending and excess savings went to jewelry and other discretionary items, Drosos said. But the delays that Covid-19 caused to engagements and weddings will end up becoming a boost, Drosos said. “A lot of investors just haven’t caught up with our story.”
Accessible Luxury
Another pillar of Signet’s outlook is growth in accessible luxury, which the company defines as items that cost between $1,000 to $3,000. Sales in that category are expected to reach nearly $3.5 billion from $2.5 billion today. Signet, which also owns higher-end brands Jared, Diamonds Direct, James Allen and Blue Nile, has already seen its accessible luxury revenue grow to 30% of sales in the most recent fiscal year, up from 22% in fiscal 2020.
“We can really grow disproportionately in that price tier just below luxury,” Drosos said. “We’ve been doing it.”
Other drivers of the new revenue target include an expansion in services, including repairs, custom jewelry and benefits from the company’s loyalty programs. Drosos said these will add an additional $500 million to sales, boosting its services segment to a $1.2 billion revenue business.
Digital and data capabilities, such as targeted and personalized marketing, are seen adding another $450 million.
Market Share
The Kay Jewelers owner is also aiming to boost its share of the US jewelry market to 11% to 12% in the next five years. It currently has 9.7% of the market. Signet generates three times as much revenue from jewelry as its single biggest competitor in the US jewelry market, which is the mass-market retailer Walmart Inc.
Smaller, independent jewelry stores are the greatest competition as a whole for Signet because they capture around two-thirds of what Americans spend on the category. The Zales owner has seized on the fragmented US jewelry market to expand its market share, purchasing Diamond Direct and Blue Nile in recent years.
(Updates share trading in eighth paragraph)
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