Signet Jewelers(SIG -0.71%) reported second quarter fiscal 2026 results on September 2, 2025, with revenue exceeding $1.5 billion, same-store sales (comparable sales or "comps") up 2% year-over-year, and adjusted EPS of $1.61, reflecting 29% year-over-year growth in adjusted EPS. Management raised full-year guidance for total sales to $6.67 billion to $6.82 billion, adjusted operating income to $445 million to $515 million, and adjusted EPS to $8.04 to $9.57, while explicitly noting tariff risks and variability by quarter ahead of the holiday season.
Signet accelerates brand-focused strategy, driving core comps
Comps at the three largest banners (Kay, Zales, and Jared) rose approximately 5% in back-to-back quarters, materially outpacing overall company comp growth and underlining the ongoing strategic shift to prioritize these brands. Lab-grown diamond (LGD) fashion jewelry reached 14% penetration of fashion sales, doubling year-over-year and signifying rapid acceptance of this key product category.
"We delivered same-store sales of 2%, ahead of our expectations driven by our early prioritization of the three largest brands: Kay, Zales, and Jared, which delivered a combined same-store sales growth of approximately 5% in back-to-back quarters. At the category level, our early efforts to focus on fashion drove a 2% comp growth. Additionally, services continue to deliver, posting a high single-digit comp growth this quarter. Fashion is important to us, both due to the size of the category as well as building customer relevance across categories."
-- J.K. Symancyk, Chief Executive Officer
The outsized growth in core brands and LGD adoption demonstrates strong execution of the brand-love strategy, positioning Signet for continued outperformance in modern jewelry trends and driving comp sustainability.
Margin expansion achieved despite inflation and tariff headwinds
Gross margin rate improved by 60 basis points year-over-year, including 30 basis points of gross merchandise margin expansion, even as increased gold costs, up over 30% compared to last year and an incremental 25% Russia-related penalty raised key India import tariffs from 10% to 50% on roughly half of finished merchandise purchases. Adjusted operating income grew more than 20% compared to last year to $85 million.
"We delivered a rate expansion of 60 basis points to last year, which included gross merchandise margin expansion of 30 basis points. This reflects continued progress of our refined promotional and assortment architecture strategies, which added approximately 80 basis points of expansion. Growth in services also added roughly 20 basis points of expansion. The expansion in merchandise margin rate was partially offset by a 70 basis point negative impact from an increase in the wholesaling of loose stones and the write-down of some discontinued product based on a comprehensive assessment of items below cost. As a reminder, wholesaling of loose stones carries a lower margin but is important to our inventory turn and newness capacity. We also saw 30 basis points of gross margin leverage on fixed costs from a 2% comp. Our SG&A rate improved 50 basis points to last year, driven by reorganization cost savings and disciplined expense management."
-- Joan Hilson, Chief Operating Officer and Financial Officer
Margin expansion, despite severe commodity and tariff pressures, highlights the effectiveness of strategic pricing, promotion control, and operational discipline, underscoring Signet’s resilience and ability to defend profitability under volatile input environments.
Capital allocation underscores balance sheet strength and growth focus
Inventory finished roughly flat year-over-year at $2 billion despite gold costs surging more than 30% compared to last year, as Signet leveraged supply chain agility and vendor partnerships to mitigate tariff costs and maintain balanced inventory. Year-to-date share repurchases totaled $150 million, representing 6% of shares outstanding, while available liquidity remained robust at $1.4 billion.
"Inventory ended the quarter at $2 billion, nearly flat to last year, despite a more than 30% increase in gold cost. Cash ended the quarter at $281 million with total liquidity of more than $1.4 billion. Free cash flow for the quarter of more than $60 million improved by nearly $50 million over the prior year and improved by more than $15 million year to date. We repurchased approximately $32 million shares in the quarter, or nearly 0.5 million shares, bringing our year-to-date repurchases to roughly $150 million or 6% of shares outstanding."
-- Joan Hilson, Chief Operating Officer and Financial Officer
The company’s prudent inventory management and ongoing capital returns, even amid macro headwinds and inflationary pressures, reinforce financial flexibility for both organic growth investments and shareholder distributions.
Looking Ahead
Management raised annual guidance for sales and adjusted operating income, expecting full-year sales of $6.67 billion to $6.82 billion, same-store sales of (0.75%) to 1.75%, and adjusted operating income of $445 million to $515 million. Adjusted EPS guidance increased to $8.04 to $9.57 per share; the upper half of the range is contingent on the removal of certain India import tariff penalties. Q3 sales are guided to $1.34 billion to $1.38 billion, with gross margin is expected to be modestly higher year-over-year but offset by SG&A deleverage from incentive compensation resets and change management costs.
