吉娜·德罗索斯如何实现Signet的东山再起

Most passersby at the mall don’t realize it, but America’s big, ubiquitous jewelry store chains are designed to serve different needs. Zales, for example, is more focused on fashion and trends and gifts for oneself—the kind of jewelry you might wear to the office, or to a casual party in your neighborhood. If you were looking for something more out of the ordinary, a gift for someone to celebrate a big life event like an anniversary or an engagement, you’d probably be more likely to go to Kay. And if you were going shopping with a substantially bigger budget and dip into quasi-luxury, willing to spend, say, $3,000 or more, you might leave the mall and go to a nearby Jared, which tracks higher-end.

Another thing most shoppers don’t realize is that all three of those chains—each a national brand with hundreds of stores—are owned by the same company: Signet Jewelers, a jewelry-retail behemoth headquartered in Ohio and incorporated in Bermuda. It’s a company celebrating a resurgence, thanks in no small part to Gina Drosos, a longtime Signet board member and consumer-goods veteran who became CEO in 2017.

And for the record, the jewelry Drosos is wearing—on a Zoom call with a reporter—is Zales all the way. “I really enjoy the idea of jewelry as a fashion item, and how you stack and layer different pieces,” Drosos says, her voice revealing a slight Southern drawl. She runs her fingers across her set of three gold necklaces and explains that a Zales consultant gave her pointers on how to get the look she wanted—trendy, but still professional.

The Signet empire may not always be trendy, but it has considerably 1more momentum these days than it did when Drosos, the company’s first female CEO, took the helm. Not so long ago, it was not nearly as clear-cut what purpose each of Signet’s three biggest chains were most suitable for. Indeed, as Signet fell into a rut during the 2010s, its biggest banners cannibalized each other and started to become almost indistinguishable. Drosos recalls a time when any sales event at Zales would mean a corresponding drop in business at Kay, a problem made all the worse given that the chains often operated rival stores within yards of each other at the same tired malls. “We had all of our banners pretty much on top of each other in the middle tier,” says Drosos.

A clearer delineation between Signet’s top three brands, which together generate 77% of company sales, was just one item on the CEO’s long to-do list. Despite being the single largest jeweler in the country, Signet was dealing with a litany of major problems when Drosos took over. Zales, which Signet had acquired in 2014, turned out to be booby-trapped—a debt-laden retailer with too many terrible stores, losing favor with both customers and suppliers. Signet’s balance sheet was being dragged down by its store credit-card business; and it had all but ignored e-commerce. Overlaid on all that was the fallout from massive sexual discrimination and sexual harassment cases that culminated with the departure of Drosos’s predecessor.

So far, Drosos’s plan to reinvent Signet—a strategy shaped by her decades of experience at Procter & Gamble, as well as by a stint as CEO of a genetic-testing startup—has registered some big successes. Signet has shed hundreds of weak stores in the Kay and Zales chains and reduced its reliance on discounting. It sold off that credit-card business. And it has finally adapted to the e-commerce era, thanks to deals such as its recent acquisitions of retail site Blue Nile and the rental service Rocksbox. Drosos has also begun to change Signet’s culture—by making sure shell-shocked employees, primarily women, feel heard and included and are willing to buy into management’s vision, and by dramatically overhauling the board.

Signet sales hit $7.8 billion in 2021—up 22% from Drosos’s first year in the corner office, and up 50% from their pandemic lows—to reach a new record. In mid-December 2022, Signet reported better than expected sales and profits results for its third quarter, bolstering Drosos’s claims of success.

At the same time, there has been no shortage of reminders of Signet’s challenges. Sales have been hit by inflation as customers have pared back on jewelry, a discretionary category if ever there was one. Kay, Zales, and even Jared shoppers are not Tiffany shoppers, let alone Cartier, after all—they’re not the kinds of people likely to spend big on jewelry when times get tight. The mid- and lower tiers of the U.S. jewelry market are under enormous pressure, says Wendy Liebmann, CEO of WSL Strategic Retail: “We have come out of the pandemic and into inflation, where people are saying, ‘Do I really need it?’”

This holiday season could provide an early answer to that question: Signet typically gets 30% of annual sales in November and December. But whether jewelry shoppers show themselves to be skittish, bullish, or somewhere in between, there’s much work left to be done, all the more given that Wall Street is expecting hardly any sales growth in the next two years for Signet.

Drosos’s game plan will have to be about winning more market share by outdoing its rivals; further diversifying its businesses; and staying committed to e-commerce, lest it fall back into stagnation. “We were running an old playbook that had worked for the previous decade,” says Drosos. “We were much more about the merchandise, and working with vendors, than we were about listening to consumers.” The question is whether a new playbook and a new culture will keep Signet on an even keel in choppier waters.

The biggest jeweler, but with room to grow

Signet competes in a highly fragmented industry, where small regional chains and independent stores dominate. While it’s America’s biggest jeweler, it controls only 9.3% of a $76 billion market. It owes its size to 160 years of jewelry M&A.

The company’s portfolio dates back to the founding in 1862 of British jeweler H. Samuel. H. Samuel was absorbed in the 1980s by Ratner Jewelers, a conglomerate of U.K. and U.S. regional chains, that around the same time also absorbed Sterling Jewelers. Ratner changed its name to Signet in 1993. Today, Kay, a former anchor of the Sterling empire, generates 38% of Signet sales, while Zales accounts for 22%, and Jared 17%. Signet also owns Banter by Piercing Pagoda, the mall kiosk fixture where countless Americans had their earlobes punctured for the first time. Signet gets about 6% of sales in Britain and Ireland, 3% in Canada, and the rest in the States.

Signet’s size made it dominant for decades—but like many industry leaders, it became sclerotic. The 2014 acquisition of Zale Corp., at the time Signet’s main rival, looks in hindsight like a classic example of a company buying the growth that it couldn’t capture organically. The deal saddled Signet with more debt, along with a chain of stores that needed a big physical fix-up job, and had massive geographic and stylistic overlap with Kay. The strategic problem soon showed in the top line: Signet’s total sales peaked at $6.55 billion in the fiscal year ended in early 2016, then declined for the next five years, taking operating profitability down in the process.

That was the point at which Drosos stepped up. Drosos, a Signet director since 2012, had spent 25 years at P&G, rising to head of its beauty business. She had then detoured into biotech startup territory, becoming CEO at Assurex Health, a genetic testing company, and guiding it for four years until it got acquired. There, she says, she deepened her understanding of the power of data in decision-making—a knowledge that would prove pivotal in her new role.

Among the first obvious fixes on her plate was the need to cut stores in the Kay and Zales chains. Drosos ended up closing 1,250 stores across the company while opening 400 in better locations, with much of that change in the two biggest banners. All told, she closed 20% of Signet’s physical locations, which now number 2,500 stores in the U.S.

Drosos also turned to deeper customer research to guide her reforms. One of the things consumers were telling Signet but that management hadn’t really heard was that they were ready to shop online. Jewelry shopping was one of the last ramparts in retail to resist e-commerce, and it was an opportunity Signet had previously seemed to yawn at. (Tiffany was also late to e-commerce; LVMH, which bought Tiffany two years ago, has made turning the luxury jeweler into an e-commerce powerhouse a top priority.)

The new CEO realized that e-commerce wasn’t just about having a site that facilitates transactions, but about enabling people to conduct research before setting foot in stores. In one of her first moves as CEO, Drosos in 2017 bought JamesAllen.com—not because the site was a big business, but because it had tech that would upend the diamond industry. Its technology generates a 360-degree, high-definition image of every stone sold on the site, creating a virtual showroom in which buyers can choose from tens of thousands of diamonds. And that tech can now be used by the websites of Jared and Kay, too. “People can now see a diamond on our website better than they can see it in person, because we can blow it up and show it to them in HD,” boasts Drosos.

Tech has also been helpful in nerdy ways, specifically inventory management. If a ring is sitting unsold in a store in Fort Lauderdale, a salesperson in Minneapolis can access it for a customer. All this has meant a faster turnover of goods, meaning more fresh inventory in stores, and “newness” to draw in customers and protect profit margins.

Making e-commerce a priority turned out to be fortuitous, given the massive threat that would come from the COVID-19 pandemic. By mid-2020, Signet was dealing with the fallout of having stores closed for weeks on end in the spring—after all, Zales, Kay, and Jared were anything but essential retailers. Desperate to make sure revenue didn’t crater, the company sped the adoption of options like virtual selling and curbside pickup to accommodate shoppers wary of being in close quarters with others. Overall sales fell 15% in 2020, but the experience gave Signet some valuable new muscles. In 2017, some 5% of Signet’s sales were online; that rate now stands at 23%.

The James Allen deal also reflected a shift in Signet’s M&A strategy. The company had long been focused on buying out brick-and-mortar rivals; now, it’s more focused on deals that build up its e-commerce firepower, or at least win new customers. Central to this effort is Joan Hilson, a Victoria’s Secret alum who worked for Signet in the 1980s and whom Drosos hired in 2018 to be her strategy and finance chief.

One of Drosos and Hilson’s big goals was to fix Signet’s balance sheet, which was highly leveraged, and to bolster profitability by taking costs out of Signet’s operating structure. Since 2017, Signet has lowered its long-term debt by 80% to $147 million; and its operating profit margin was 11.6% in 2021, more than twice what it was just three years earlier. That stronger cash flow frees Signet to make bets through acquisitions. “It has generated liquidity for us to go out and grow our company,” says Hilson.

Take Blue Nile, which Drosos had been eyeing for years. Blue Nile created a sensation a decade ago as the first big online-only jewelry retailer. But the brand never truly took off, plateauing at $500 million a year in revenue. Signet bought it in September 2022 for $360 million, all cash, grabbing an e-commerce site with impressive virtual showrooms and an appealing young customer base. Other buys in 2022 include Rocksbox, a rental company; a small, specialized store chain called Diamonds Direct; and companies that help Signet offer services like maintenance and valuations.

The buying spree has made the Signet conglomerate even more sprawling: The company now has 11 retail banners under its umbrella, up from eight in 2017. That raises anew the question of whether Signet can keep the brands growing without confusing shoppers and competing against itself. “That’s an extraordinary accumulation of brands,” says Liebmann, the retail analyst. “There’s a lot of potential for fragmentation and cannibalizing your own business if you’re not careful.” But for now, the three big chains—Kay, Jared, and Zales—are growing simultaneously again, not least because Drosos’s team had the discipline to close the stores that needed to be closed.

Tackling a toxic culture

Drosos would not have been able to effect this turnaround without changing Signet’s culture. Like many retailers, Signet had long been a company with a mostly female workforce, a mostly female clientele, and mostly male leadership. By the time Drosos became CEO, that lineup had created an untenable situation.

The breaking point came after a devastating Washington Post story in February of 2017 that alleged years of systemic, rampant sexual harassment by male supervisors all the way up the chain of command. The story specifically implicated Mark Light, a Signet lifer who became CEO in 2014. Among other allegations, Light reportedly was seen in a pool with “nude and partially undressed female employees” at a corporate retreat. Light and Signet repeatedly denied the allegations. But Light left in the summer of 2017, citing unspecified health issues, and other implicated managers also departed. And in 2022, Signet settled a class action suit alleging gender bias in its hiring and compensation practices, shelling out $175 million to 68,000 current and former employees.

The toxic culture went beyond rampant misbehavior: It also took the form of a quasi-autocratic approach to business in which the bosses, disproportionately men, didn’t listen to what people in the field, the predominantly female frontline Signet workers, were seeing. Drosos, says that as a board member from 2012, she had always pushed for Signet to diversify its workforce and culture. When she became CEO, she says, the board told her to accelerate that effort.

Fixing a culture of fear and risk aversion is a tall order. “It was one of the things that made me the most nervous about taking this job,” Drosos says. Among her first moves: Making diversity and inclusion goals part of every leaders’ evaluation and creating a zero-tolerance policy for sexual harassment. “I’m going to create a clean slate. I’m not going to let history be our future,” she recalls thinking. Today, 42% of Signet employees at the vice-president level or higher are women; at the store level, 76% of assistant managers or higher are female. “Representation at that level sets a vision for all employees of what’s possible,” she said.

Another key fix: giving more autonomy and authority to store-level management. When she started as CEO, Drosos made the rounds of stores, sitting in on team meetings and even listening in on customer service calls to get a sense of what truly needed fixing. “What I realized very quickly was that it was quite a top-down culture of command and control,” she says. “We had brilliance in the organization that we just needed to unleash.” Store managers have a lot more say now in what Signet’s chains will carry. That move, combined with the closures of overlapping stores, has helped make individual stores far more productive: The average Signet store now generates 50% more in annual sales than it did pre-pandemic.

That coup reflects Drosos’s own history: She says she benefited from support from responsive higher-ups in her 25 years at Procter & Gamble. She counts among her mentors A.G. Lafley, the iconic CEO credited with leading a turnaround at the consumer giant in the early 2000s. It was at P&G that Drosos understood the importance of responding quickly to information from the front lines. She put those insights into action, and made her reputation, with her turnaround of famed skin-care brand Olay.

Armed with the in-depth market data for which P&G is famed, Drosos saw a big white space in the skin-care market between fancy, pricey department store brands, and low-price drugstore brands. Olay wasn’t selling a single product over $10 at Walmart or CVS. “There was a big gap,” she recalls. So she created a $25 moisturizer that she argued was on par with Crème de la Mer, a luxury beauty product sold at Neiman Marcus for hundreds of dollars a jar. The gambit took off: A brand that had seen $250 million in annual sales when she took it over had reached $2.5 billion a year by the time she was done with it. “It was really all about consumer understanding, and creating disruptions that would form a competitive advantage for us,” says Drosos.

A choppy economy ahead

For all of Signet’s recent success, the economy keeps reminding Drosos and her team how fragile that progress can be. In its most recent quarter, Signet’s comparable sales, or business excluding newly added or removed stores and business units, fell by 7.6%. Much of that drop was just the law of arithmetic after the dramatic sales bounce-back a year ago as the pandemic eased. Nonetheless, Wall Street is expecting very limited sales growth over the next three years, with analysts predicting that annual sales will hover at about $8 billion during that time.

To power through a softening economy, the company will have to keep following Drosos’s playbook of listening closely to what customers want. It has recently taken Jared further upscale with higher price points, and focused Kay more tightly on bridal jewelry and Zales on fashion, and analysts say moves like that could help protect its market share and margins. “Signet deserves credit for pivoting its assortment, services, and marketing to better cater to consumers,” says Neil Saunders, managing director of GlobalData.

Drosos recently got to try out Signet’s bridal-ring services, working with staff at James Allen to design her own engagement ring ahead of her marriage in 2021. The ring had an Italian Art Deco design from the 1930s. “They couldn’t find a diamond that they were proud enough of to put in the ring at first, and so they made me wait,” she recalls. The wait was well worth it, she says: “I’m a bit more of a bold statement maker myself.”