Sunday, July 7, 2024

Signet Jewelers Focuses on Fashion Jewelry for Synthetic Diamonds

Signet Jewelers is targeting fashion jewelry as the primary growth area for synthetic diamonds, according to CEO Gina Drosos. On the retailer’s investor call following its fiscal first-quarter earnings, Drosos highlighted the significant potential in this category.

“Fashion is the real interesting story here,” Drosos said, noting that revenue from fashion jewelry featuring synthetic diamonds rose by 14% year-on-year in the first fiscal quarter. This increase comes as the company expands its synthetic diamond offerings, even as total fashion jewelry sales declined by 6%, totaling $552 million, according to Signet’s quarterly report (form-10Q).

Drosos explained that advancements in synthetic diamond production over the past five years have lowered costs, making these diamonds an attractive option for price-conscious customers seeking larger carat sizes that would be unaffordable in natural diamonds. The company has maintained its average transaction value (ATV) for synthetic diamonds, while natural diamonds continue to attract those looking for long-term value.

“In fashion, however, we see meaningful runway for LCD [lab-created diamond] expansion in the segment of the industry that has traditionally seen lower overall penetration of natural-diamond assortment,” Drosos commented. She sees synthetic-diamond fashion pieces as a “trade-up opportunity,” with these items achieving more than twice the ATV of other fashion jewelry, yielding attractive margins for Signet.

While natural diamonds remain the top choice for engagement jewelry, synthetic diamonds provide a viable option for budget-conscious customers. “It has been a good innovation for people who can’t afford the size and clarity of natural diamonds they desire,” Drosos added, emphasizing the value of offering both finished products and loose synthetic diamonds.

Drosos also pointed out that the inclusion of lab-created diamonds in fashion products allows Signet to enhance these pieces affordably, helping consumers upgrade to more expensive and often more beautiful items, all while maintaining healthy margins.

Both natural and synthetic diamond prices have decreased, with Drosos expecting lab-created diamond prices to continue declining due to significant availability. Retail prices, while falling more slowly, are also under pressure.

These insights were shared after Signet collaborated with De Beers on a marketing campaign promoting natural diamonds. Signet’s store chains now include a disclaimer on their websites about synthetic diamonds, stating: “Their relative abundance may not ensure that the value will hold over time.”

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