Middle-of-the-road jewelry is the very definition of discretionary spending. Who needs to spend $300 on a necklace when unemployment is high, especially when such trinkets aren’t really seen as investments that will keep their value over time and have no prospects of living on as family heirlooms?
So the holiday quarterly results from Signet Jewelers (SIG), which operates the mall-based Kay Jewelers and Zales chains, as well as their higher end sister chain, Jared, show just how far the U.S. consumer has come since the recovery kicked into high gear.
Signet said on Thursday that comparable sales at those three jewelry chains rose 3.7% during the quarter that ended Jan. 31 (with Kay, the largest of the three, performing the best).
Perhaps most encouraging for the company — and those who see jewelry spending as a barometer for broader consumer behavior — the rise was led by bridal and pricier fashion diamond collections. On the whole, the average transaction price at Kay and Jared rose 4.5%, showing that customers are no longer hesitant to open their wallets on indulgences such as jewelry, or run in the other direction because of price hikes.
Tiffany (TIF) reported poor sales of its lower-priced jewelry last week. But that had a lot to do with drab fashions and people trading up to more expensive stuff.
What’s more, Signet expects to see growth continue this year, and forecasted comparable sales companywide (including the two British retailers it owns, H.Samuel, Ernest Jones, which are also reporting big sales gains after years of up-and-down performances) will rise between 3 and 4%. It also plans to keep expanding its U.S. stores, adding 30-35 Jared and Kay stores.
The one weak point was its lower gross margin, dragged down by the Zales division that the well-run Signet company bought in 2014, betting it could make it more profitable. The company predicted those improvements would keep coming as Signet continues to integrate Zales.
“Our integration efforts are expected to allow us to unlock the value of this strong, well-known national brand. We are well-positioned to meet our goal of $150 million to $175 million in cumulative 3-year synergies by the end of January 2018,” said CEO Mark Light.