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Signet Jewelers (SIG), the world's largest retailer of diamond jewelry, is losing some of its luster after reporting mixed Q1 results that failed to convince investors that the long-awaited recovery in demand picked up steam this quarter. The main issue is that same store sales decreased by 8.9%, slightly missing expectations, driven by a lower number of transactions and a 1.6% decline in average transaction value.

• Consumers have simply been avoiding making big-ticket purchases -- especially those that require financing -- putting a ding in SIG's sales. Additionally, the rebound in the bridal market has been gradual and hasn't been strong enough to offset the broader weakness across SIG's business.
• Making matters worse, the company has struggled through some digital banner issues. In Q4, its same store sales were negatively impacted by 1% due to integration issues with the Blue Nile and James Allen digital banners, creating fulfillment problems. For this quarter, digital banner issues were a 2-point negative headwind.

The good news is the worst may now be in the rearview mirror for SIG.

• In the earnings press release, CEO Virginia Drosos noted that SIG increased its North America engagement unit sales by 400 bps, excluding digital banners, in Q1. She added that after a sluggish February, business strengthened during the quarter, with May coming in even stronger. SIG expects this momentum to continue in Q2, leading to a "positive same store sales inflection in 2H25."
• However, we believe that the stock isn't reacting positively to those encouraging comments because SIG kept its FY25 guidance unchanged. Specifically, the company is still forecasting revenue of $6.66-$7.02 bln, same store sales of -4.5% to +0.5%, and EPS of $9.90-$11.52, even though it comfortably topped EPS estimates in Q1.
• With shares trading higher by about 20% since its Q4 report on March 20 (prior to today's losses), the stock appeared to be pricing in a second half recovery. The fact that SIG didn't bump its FY25 outlook higher is creating some uncertainty regarding the strength of that rebound.

The main takeaway is that business conditions remained unfavorable in Q1, while a self-inflicted wound in the form of digital banner integration issues exacerbated the topline pressures. SIG remains optimistic about a turnaround in 2H25, but investors were hoping to see that optimism expressed through an improved financial outlook that wasn't to be.