Signet Jewelers sees fashion jewelry as the main opportunity for the synthetic-diamond category, said CEO Gina Drosos.
“I think fashion is the real interesting story here,” the executive said Thursday on the retailer’s investor call following its fiscal first-quarter earnings.
Revenue from fashion jewelry featuring synthetic diamonds rose 14% year on year in the first fiscal quarter as the company increased its offerings in the category, the CEO revealed. That compares with a 6% decline in total sales of fashion jewelry, which came to $552 million, according to Signet’s full quarterly report, known as a form-10Q.
Production of synthetic diamonds has become more efficient over the past five years, bringing down costs, Drosos explained. This has provided “attractive options for many price-conscious customers that are looking for larger carat options than they can afford in the natural-diamond engagement ring,” she added.
The company has “largely” managed to maintain its average transaction value (ATV) for synthetics. Natural diamonds have continued to attract consumers seeking long-term value, Drosos said.
“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,” she commented. “It’s a trade-up opportunity.”
Synthetic-diamond fashion pieces have more than twice the ATV of other fashion jewelry, “at attractive margins for Signet,” she explained.
Engagement-jewelry customers are “far and away” opting for natural diamonds, while synthetics have been a “good choice for more price-conscious customers,” she said.
“It has been a good innovation in that context for people who can’t afford to get the size and clarity of stone they’d like in natural. And so we continue to offer that choice to customers, both in our finished product and in our loose diamonds,” Drosos added.
“At the general price points that we’re selling, it’s very expensive to have natural diamonds in fashion product, but LCD gives us an opportunity to add bling to those fashion pieces and then help consumers trade up into a more expensive and sometimes a more beautiful piece, obviously…at a very healthy margin also for Signet,” she continued.
Drosos said prices of natural and synthetic diamonds had fallen. “It’s our expectation that the pricing on lab-created [will continue] to decline. There is significant availability,” she explained.
Retail prices “have come down at a slower rate, but still are pressured,” she noted.
The comments came after Signet collaborated with De Beers on a marketing campaign promoting natural diamonds. The retailer’s store chains also began including a disclaimer about synthetics on its websites, stating: “Their relative abundance may not ensure that the value will hold over time.”
Image: A Jared store interior. (Signet Jewelers)