Signet Jewelers, the world's largest retailer of diamond jewelry, recently reported its financial results for the fourth quarter and the full fiscal year 2025.
Tough to know for sure since they don’t break it out, but I’d ballpark the operating margin at 60–80% as fulfillment costs are basically nothing. That’s why it’s such a big risk if attachment rates start slipping.
Fantastic point about ESPs Elliot. Thank you for sharing.
I was wondering why LGD was a risk especially when Pandora was flying high while only being in the LGD business. ESP risk seems big as you mentioned.
I gleaned the following from the annual report about their ESP revenue.
Year || Plans sold || Revenue recognized || Deferred Selling Cost Amortization ($M)
FY2023 $522.9M $479.9M $43.7M
FY2022 $528.9M $441.3M $41.7M
FY2021 $337.4M $268.5M $26.3M
FY2020 $405.1M $372.7M $29.5M
FY2019 $395.0M $383.5M
FY2018 $409.3M $398.8M
If we take assume a 75% EBIT margin on these, most of Signet's EBIT evaporates. In your opinion what would be a reasonable margin on the ESP revenue?
Tough to know for sure since they don’t break it out, but I’d ballpark the operating margin at 60–80% as fulfillment costs are basically nothing. That’s why it’s such a big risk if attachment rates start slipping.