Lab-Grown Diamond Jewelry Lifts Kay, Zales And Jared Sales By 6%

“Lab-grown diamonds have flipped from a headwind to a tailwind for Signet, igniting an inflection in growth and earnings,” wrote Jefferies Randal Konik.

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Signet Jewelers is entering its vital fourth quarter with spring in its step, as it modestly elevated year-end guidance to between $6.7 and $6.83 billion in sales and adjusted operating income from $465 to $515 million. Last year, net sales were $6.7 million and operating income was $498 million.

Building Signet’s confidence is strong 6% same-store sales growth in the third quarter for its three largest brands—Kay Jewelers, Zales, and Jared—and growing customer demand to trade up to fashion jewelry set with lab-grown diamond stones, replacing lower-priced, non-stone selections.

With lab-grown diamonds and their attractive pricing relative to natural diamonds already commanding about 40% of Signet’s bridal jewelry sales, it sees tremendous upside potential for fashion jewelry set with LGDs in key gifting price points under $500 and under $1,000 this holiday season. Holiday sales peak for Signet in the last ten days before Christmas.

“Our balanced diamond assortment strategy, alongside ongoing stabilization in diamond retail prices, is driving growth and expanded average retails in both bridal and fashion,” CEO J.K. Symanck said in a statement. “Looking forward, we believe we are well positioned for the holiday season with a focused assortment in key categories and price points.”

Three Quarters Of Growth

Coming off a challenging fourth quarter last year with net sales down nearly 6%—performance was hampered by the extra 53rd week comparative and inventory shortages in key gifting price points—Signet has enjoyed three consecutive quarters of positive growth this year. Third quarter sales of $1.4 billion were up 3.1% over previous year, following a 2% increase first quarter and 3% in the second. Third quarter fiscal 2026 ended on November 1.

Overall, third quarter same-store sales grew 3% across the company’s 2,600 stores, led by Kay (37% of consolidated sales in fiscal 2025), Zales (18%) and Jared (16%). Banter by Piercing Pagoda and Diamonds Direct are its other prominent store-based U.S. brands, as well as direct-to-consumer Blue Nile and James Allen (18%).

Speaking to the modest upwards revenue guidance for the year, Symanck shared that November sales got off to a slower start than hoped and that the Thanksgiving weekend through Cyber Monday was relatively weak.

However, for Signet, December historically is far more important than November, so it’s better for the company to under promise and overdeliver.

“December is a critically important month, and it is particularly important because that’s when customers who shop our category really do come more into the mindset of making a purchase. We are a great last-minute option, whether that’s because people save for it or because it’s a simple solution at the end,” he said in the earnings call.

Lab-Grown Diamonds Put Wind In Signet’s Sails

For this year’s holiday and long term, LGD could prove a growth engine. LGD jewelry generated 12% of merchandise sales in fiscal 2024 and rose to 17% in 2025. Jefferies investment analyst Randal Konik expects it to reach 23% this year.

“Signet’s strategic shift toward lab-grown diamonds (LGDs) has fundamentally transformed its business model, turning a deflationary industry trend into a lever for growth,” he wrote in a research note.

Specifically, the price gap is minimal between a one-carat LGD ($886) and a two-carat stone ($1,025), encouraging customers to trade up to a larger stone. In addition, the retail prices for LGDs have proven resilient for Signet, even as the wholesale costs have continued to decline.

“With minimal retail price differences between 1ct and 2ct LGDs, consumers are incentivized to purchase larger stones, boosting both perceived value and actual spend,” he observed. “As a result, SIG has been able to maintain premium pricing and drive AURs higher, even as LGD input costs have declined by ~90% since 2019.”

This upward shift in high average unit retail sales benefits Signet in its bridal business, which accounted for 49% of its $6.3 billion North America sales last year, but most especially in fashion jewelry, which generated 47% of sales in the region.

While about 40% of Signet’s bridal sales are in LGDs—Jefferies notes that bridal customers with budgets over $5,000 tend to choose natural diamonds— and that share has remained stable over the last few years, LGD penetration in fashion jewelry more than doubled in the third quarter, from 7% last year to 15% this year and drove a 12% lift in average unit retail sales in the LGD fashion jewelry category.

Overall, AUR was up 6% in bridal and 8% in fashion jewelry in the third quarter. While the AUR for fashion jewelry is just a shade over $200, fashion pieces set with LGDs average well over twice that amount.

“The impact of Signet shifting the mix toward LGD-driven assortment strategy is visible in the company’s AUR trajectory,” Konik wrote. “The emphasis on higher-priced LGD fashion items has been instrumental in fueling a top-line turnaround, particularly within the North American business. By focusing on products that deliver both perceived and real value to consumers, Signet is sustaining AUR growth through premiumization.”

Market Share Gains

Signet remains cautious about the fourth quarter given declining consumer confidence, which may weaken results for its brands more exposed to lower- and middle-income consumers. Yet, no matter with the holidays hold, Signet’s expanded LGD offerings positions the company well for long-term market share gains, particularly in the fashion jewelry market.

Jefferies estimates that Signet commands only a 6% share of the $53 billion fashion jewelry market, compared with 28% share of the $10 billion bridal jewelry market. It has room to grow in bridal as U.S. marriage rates are beginning to recover from historic lows and Signet is coming off three consecutive quarters of rising AUR in bridal.

However, it’s in fashion jewelry where Signet can make its mark. Konik sees fashion jewelry as a “significant growth runway,” highlighting that the much larger fashion jewelry market offers higher purchasing frequency than bridal.

“In our view, expanding share in fashion could be a key driver of incremental sales and margin expansion over the next several years,” he added, as he expects Signet to reach $7.15 billion in fiscal 2028 as it outpaces the jewelry category’s 2% growth rate.

Konik concludes, “LGDs have flipped from a headwind to a tailwind for Signet, igniting an inflection in growth and earnings. LGDs are the catalyst enabling Signet to expand assortments, drive higher AURs through trade-up behavior, and accelerate fashion jewelry sales, positioning SIG to outpace category growth. This is a top pick with a setup for upside surprise and momentum through fiscal 2028.”