Just before 24 Karat Club weekend, Signet CEO Virginia “Gina” Drosos took some time to speak with JCK. Here, she discusses areas where the industry may see growth, the company’s credit issues, and what it plans to do with its store count.
JCK: Can you talk a little bit about your background and how your past experience brought you to this moment and informs what you do at Signet?
Gina Drosos: I have had an incredibly enjoyable career as an entrepreneur, both inside big companies and also small companies. I have the incredible opportunity to build and, in fact, turn around a number of brands by getting them focused on customer understanding and innovation. All of those things are very relevant to where Signet is now.
So I can introduce myself with a little bit of my background. When I came out of graduate school, I went to Proctor & Gamble, and I spent 25 years there. I was part of the team that helped to build a beauty company inside a soap and diaper company. As you can imagine, that required an entrepreneurial spirit. We took old tired brands that had lost the luster of their equity and hadn’t been industry leaders in innovation and turned both of those things on their ear.
For example, the Olay business was about $150 million when I started on it. It was primarily one pink beauty fluid. We transformed that into a $2.5 billion breakthrough brand. We brought breakthrough innovation to that brand. It changed the customer’s paradigm from “the best innovation starts in department stores” to “I can get the best innovation where I’m comfortable to shop,” whether it’s Target, or CVS, or Walgreens, or Walmart. We expanded it into a full line of skin care products, across anti-aging, skin cleansing, even body products.
Cover Girl, same thing. We had a tired image on that brand. We were declining in market share. We brought breakthrough innovation across several different parts of the product line: to the mascara, to lip products, to foundations. I had the distinct pleasure to partner with a diverse group, including Queen Latifah, Taylor Swift, and Ellen DeGeneres, and to really reshape how customers thought about beauty products and cosmetics. And from that effort, we took Cover Girl to number one.
So these are examples of taking brands that have still-strong equities and are very meaningful to customers and infusing them with a new level of consumer-led innovation. [It starts with going] straight to the consumer and really understanding what he or she wants in the shopping experience.
JCK: What do you think the Signet brands need right now?
Drosos: Our brand banner equities are very strong. Customers have a high trust relationship with us and they value the service they receive in our stores. A place where we can bring more innovation is to our assortment. We can modernize that. We can bring more new innovations faster. Where we have done that, we have been very successful.
So, for example, this past holiday season, we brought and really capitalized on a trend in stacking and layering in bracelets and necklaces, and we had a really good business on that and really drove that trend in the industry.
At Signet we can really reshape our innovation engine and get out in front of being able to drive consumer trends in jewelry, we can help drive industry growth.
JCK: What do you see as areas for growth in the industry?
Drosos: Bridal continues to be an area for growth. We have been through a several-year period where the number of engagements was declining, which was really a demographic factor: Young people are getting engaged later on average. Now it’s 29 for men and 27 for women. So we have come through that trend, and now we are expecting to see year-on-year growth in the number of engagements. There is an opportunity for bridal.
There is always an opportunity for continuing to celebrate milestones in relationships, whether that’s anniversary bands or using our custom services at Jared to redesign wedding rings. So we see continued opportunity in that space.
Beyond that, our opportunity is to really speak to women self-purchasers, like myself, like many other women who want to express themselves, and have jewelry as part of their look. We haven’t had the kind of assortment, nor frankly the marketing, that has allowed us to reach those customers.
I have just been on board for five months, but in this holiday season we had 50 percent more fashion items than we did one year ago. And we have also restructured our marketing support to do more targeted digital marketing, which has allowed us to reach many more female self-purchasers. And we saw that show up in improved results in the fashion part of our line. We are on the beginning of our journey on that front, but we still see more opportunity.
JCK: Signet has 3,000 stores in the United States. With so much talk of store closings, do you see that changing in the years to come?
Drosos: This is an area that I’ve been very focused on with my leadership team since I joined the company. As we announce our strategy plans with our new fiscal year, I’ll be providing more detail on that front. We are very customer-led on this. Where there is traffic, we will be there. We see a competitive advantage in our store footprint. For a number of years, we have been moving out of malls where traffic is declining, into off-mall formats, where we are able to serve our customers much better. I imagine that we will continue to optimize our store footprint.
JCK: Speaking of which, how do you differentiate Zales and Kay so they don’t cannibalize each other?
Drosos: Again, I’m going to go back to the customers. Over the last number of months, we have been doing some in-depth research on who are the different customers who shop at Zales versus Kay versus Jared. We have seen that shoppers at Kay are shopping for relationship reasons—bridal, gifting, mom-to-daughter gifts, first Communion gifts—in addition to romantic kinds of gifts.
And while that is also prevalent—particularly bridal, at Zales—we have a higher proportion of women shopping for themselves at Zales. What we’re doing is continuing to differentiate our brand banners more than we have in the past. I will tell you in my experience managing portfolios of brands in the same categories throughout my career, I think that over the last number of years since Signet acquired Zales, those banners have become more similar. We need to make them more differentiated to appeal to a broader range of customers.
We think that the shopper who is buying bridal at Zales is a bit more fashion-oriented. She knows that Meghan Markle just got engaged with a three-stone diamond that was responsibly sourced, and she knows that many celebrities got engaged with solitaries. And she knows that Vera Wang has been the number one fashion designer in the bridal industry. She expects to find that kind of merchandise in our Zales stores.
JCK: Where do you see James Allen in the e-tail space?
Drosos: That was a highly strategic acquisition for us. That was the first decision I made as the CEO. As a board member who was very involved in working with the management team on strategy, we had identified omnichannel, and especially acquiring a pure-play retailer, as an important strategic priority.
Why James Allen? It was the fastest growing brand in the online space. They brought propriety technology that we think will help the ability to sell diamonds in-store and online. Their technology can take more than 500 photos of the diamond, and we are now able to show [the diamond] in high-definition, 40 times magnification. Customers who have struggled for many years to see a diamond and appreciate its beauty and uniqueness can now do that very easily on a beautiful retina screen in our stores.
JCK: Is James Allen profitable?
Drosos: We have announced publicly that we expect James Allen to be profitable within the first full year as part of Signet. We are on track to deliver that.
JCK: We just heard about a new reorganization, which involves the departure of some company veterans. Is there a danger of Signet losing the experienced people that brought it to where it is?
Drosos: At Signet, we are very team-oriented. There is tremendous value in having people who have been part of that team for a long time—who know the industry inside and out—partner with people who have a fresh perspective and can make the changes that we need to grow our company and the industry.
The announcement that we made this week was really about an organization structure that is similar to those that have been highly effective in retail companies that manage a portfolio of businesses. It’s putting single-point accountability in place for our brand banner. It’s about our people waking up in the morning with a fire in their belly and accountability: “I’m going to make Kay great today.” “I’m going to drive Zales’ sales.”
Quite honestly, with the structure we had moved into we had lost some of that. There was confusion about decision-making, it was taking us too long to move forward with innovative ideas. This structure will allow us to be faster, more entrepreneurial, and drive growth in a different way.
JCK: Do you see the Zale division becoming more integrated into the company?
Drosos: I see Zales becoming more distinct, in terms of having real excitement to drive that business and having a better, more targeted assortment for our customers—and having unique product offerings, like our Enchanted Disney collection that’s doing very well, and being able to drive even further on brands like Vera Wang.
I can see areas where our in-store experience and marketing will become more differentiated. I can also see areas where, as a company, we haven’t driven the scale that we can, on back-office things like IT infrastructure and things like purchasing and sourcing.
We have been a little bit in the middle ground, where we have not achieved the full effectiveness of everything that acquisition can be.
JCK: Signet has always considered its in-house credit a competitive advantage. Do you see that changing?
Drosos: Credit has been, is, and will be a competitive advantage for our company. It’s not going away. What’s changed is how we finance our credit, and that part of the decision has gone very well. It frees up Signet to invest more money in the things that we believe will be able to drive growth.
What, frankly, has not gone well in the transition is the operational and executional changes. And that’s really a change-management issue that was underestimated. I’m a person of plain speak, so I’ve been transparent about that internally and externally. It’s something that we are working very hard to fix, and we are making improvements on day by day, but we are not 100 percent there yet.
(Image courtesy of Signet Jewelers)