The owner of Kay Jewelers and Zales is seeing a “steep decline” in demand for items priced under $500, the latest sign that higher costs and economic uncertainty are weighing on lower-income consumers.
The highest inflation in decades, including higher prices for rent and gasoline, is eroding the spending power of less wealthy Americans, Gina Drosos, chief executive officer of Signet Jewelers Ltd., said in an interview.
Last year, stimulus checks and pent-up pandemic savings bolstered discretionary spending — especially for lower-income Americans. Now, Drosos said the demographic is “much more economically challenged and not spending as much.”
Signet shares fell 12 percent at 2:45 p.m. in New York trading after the jewellery retailer forecast weaker-than-expected third-quarter operating income.
Drosos said consumers are also being lured away from buying jewellery because of deep discounts at apparel and electronics chains, which are trying to quickly offload inventory. Many retailers accumulated extra merchandise after they were caught flat-footed by high demand during the pandemic and supply-chain problems made restocking difficult. Now, they’re stuck with too many products as demand has once again shifted.
Signet hasn’t been pulled into the discounting drive, Drosos said. “Our levels of clearance are down,” she said, adding the company hasn’t had supply-chain constraints.
Sales of products below $1,000 also fell in Signet’s most recent quarter, Drosos told analysts during a conference call on Thursday. “Conversely, higher-price-point items are showing more strength,” she said.
As a result, Signet is increasing its offering of higher-end items. She declined to specify what portion of the company’s items cost less than $500.
To attract lower-income consumers, the company is selling more lab-grown diamonds, which are typically less expensive. Also, more shoppers are turning to pay-by-installment programs to fund purchases at Signet. The company reported a 35 percent increase in the most recent quarter of online shoppers using a “buy now, pay later” option.
Drosos said around 60 percent of those customers are from the Gen-Z and millennial groups. Overall, less than half of Signet’s sales use financing, Drosos said during the interview.
By Jeannette Neumann
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