Why Signet Is One of the ‘Best-Positioned’ Retailers This Holiday Season

New York—Supply chain troubles are weighing on some retailers ahead of the holiday season, but Signet Jewelers is all set for a happy holiday, according to Wells Fargo.

On Monday, analysts sat down for a virtual investor meeting with Signet’s management, including CEO Gina Drosos, CFO Joan Hilson, and Vice President of Investor Relations Vinnie Sinisi, to talk about where the jewelry giant stands in the market.

“Signet is one of the few companies in our universe where supply chain disruptions are not having a material impact on the company’s business,” Wells Fargo said in an analyst note shared with National Jeweler.

The company has no exposure to Vietnam, a country hard-hit with supply chain struggles. Its raw material mining happens in India, Russia, Botswana, and Brazil, while its cutting and polishing takes place in India, China, Indonesia, The Philippines, Thailand, Israel, and Belgium.

Signet has a partially vertically integrated supply chain, giving the company more control over delivery times, the note states.

The retailer relies less on cargo ships for product transportation, which means it avoids port delays into the United States from Asia. Most of its products are sent via airfreight.

Signet also placed orders with its vendors early, with more than half of its holiday inventory already on hand.

“Signet is likely one of the best-positioned retailers heading into holiday regarding supply chain headwinds,” said the note.

The analyst note delves into other aspects of Signet’s business, including its service offerings.

There may be big money to be made in its services business, which includes repairs, jewelry care, extended service plans, warranty and insurance, and its customizations services, like through the new Jared Foundry.

The segment could reach $1 billion in revenue over the next few years, a marked difference from the $300 million it generated in the last fiscal year.

Wells Fargo estimates the U.S. jewelry service and repair business to be in the $3 billion range total, though it is “highly fragmented.”

As Signet is the market share leader, the company has the opportunity to gain greater market share by leveraging its size, making the most of its 1,400 “jewelry experts.”

Services also foster customer loyalty, said analysts, keeping shoppers in the Signet ecosystem.

The jewelry giant has also been prioritizing differentiating its banners, tailoring each to cater to a specific set of customers rather than cannibalizing each other.

The change has brought new customers to each banner, said the note, and has also been a winning strategy for retaining customers.

While the note focuses on Signet, it also highlights the strength of the jewelry category overall.

“Jewelry has been a clear COVID category winner,” said the note, highlighting its strong double-digit growth over the last six to eight months.

While the strength of the overall category may have helped to lift Signet, the management team told analysts it intends to continue its growth trajectory, even as spending may shift to experiential purchases.

The company is using its data to better understand its consumers, which is evidently working as store productivity increases and new customers flock to its banners, as per the note.

Signet will also use its e-commerce capabilities to scoop up more market share.

The mid-market jewelry category is worth around $35 billion, with nearly 70 percent of the market share held by less tech-savvy independents, analysts noted.

“As consumers continue to become more comfortable buying jewelry online, Signet is positioned to capitalize on this trend and take share from independents who lack e-commerce capabilities,” said the note.

“The company has numerous competitive advantages that cannot be replicated by its smaller, independent and regional competitors, including robust digital and omnichannel capabilities.” 

However, competition from department stores entering the market and digital-only companies could be an impediment to Signet achieving its goal of a 9 percent market share, up from its current 6 percent.

Wells Fargo maintained its “Overweight” rating on the company with a price target of $100.