Signet Jewelers Limited (SIG) Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you all for joining us. I'm Vinnie Sinisi, SVP of Investor Relations and Treasury, and we are very pleased to have you here joining us for our virtual Investor Day. We're happy to have the opportunity to provide some further insight on our Inspiring Brilliance strategy. Day is set up. We have about 75 minutes or so of prepared material to share, and then we'll open it up for Q&A. Thanks to those who have submitted questions ahead of time. Tried to answer as many of those as we could in the material that you'll hear. And before though we share what's new, I have to first take a moment, so bear with me here just for a minute while I take care of the customary disclosures. So during today's presentation, we'll make certain forward-looking statements. Any statements that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. We urge you to read the risk factors, cautionary language and other disclosure in our annual report on Form 10-K, quarterly reports on 10-Q and current reports on 8-Ks. Except as required by law, we undertake no obligation to revise or publicly update forward-looking statements in light of any new information or future events. During the presentation, we'll discuss certain non-GAAP financial measures. For a further discussion of those as well as reconciliation of the non-GAAP to the most directly comparable GAAP measures, investors should review our most recent earnings release available online at www.signetjewelers.com/investors. Now with that behind us, let's go ahead and get started. We hope you enjoy the presentations today. [Presentation]

Thank you for joining us today. I'm Gina Drosos, CEO of Signet Jewelers, and I'm here with 6 of my colleagues. We represent Signet's leadership team and our total organization of nearly 22,000 team members. In the next 75 minutes, we'll share more details of our Inspiring Brilliance strategy and then look forward to taking your live questions at the end. The 4 most important messages I'd like you to take away from today are: number one, Signet is well positioned to continue growing market share in the jewelry industry; number two, our Inspiring Brilliance strategies build a pipeline of growth by enabling expansion of our mid-tier market position; number three, we are continuing to advance our strengths and are investing in digital capabilities and innovative technology, enabling us to leapfrog ahead in the fragmented jewelry market; and number four, we have the right talent on our leadership team and Board, which coupled with our say-do culture and purpose-inspired organization, are poised to deliver leadership results. When we announced our Path to Brilliance transformation strategy 3 years ago, our objective was clear: to build a foundation for future growth and establish Signet as the omnichannel leader of the jewelry category. We were very transparent about the challenges we saw, but we were also confident about our potential. Today, we are a much stronger company and team as we have faced our challenges head on, accomplished our goals and begun building positive momentum toward a future of sustainable long-term growth. In Path to Brilliance, we focused on 3 strategic pillars: customer first, omnichannel and building a culture of agility and efficiency. For customer first, we said we would strengthen our banners' relevance and value with customers. The banners weren't sufficiently differentiated and often overlapped one another, limiting our growth potential. We committed to put customers first, bringing greater differentiation to everything from banner customer experience to product assortment to marketing. We did the strategic work, clarifying each banner's target customers and defining its strongest points of difference. And as we've begun implementation, we are already seeing results. For omnichannel, we said we would invest in data analytics and e-commerce on a path to become the jewelry omnichannel leader. I outlined those investments in our fiscal '21 call last month, and they are clearly paying off. We've increased sales penetration of e-commerce more than fourfold, from approximately 5% pre-Path to Brilliance to nearly 23% today, which is well above the 15% we committed to. The good news is that we see further opportunity for growth. Data is also yielding insights that are optimizing our product assortment and real estate. Our bespoke greenfield analysis is guiding us as we optimize our store network. We have closed more than 20% of our fleet, significantly reducing exposure to lower-traffic malls and opening and repositioning stores into preferred locations. We're seeing higher sales retention from our closed stores than we anticipated because our decisions are much more precise. And we've improved our fulfillment capabilities, which is important when we talk about omnichannel. We said we would become the omnichannel leader in jewelry, and we are, with greater potential ahead. We are building an unrivaled competitive advantage as we intentionally connect commerce between our physical and digital storefronts. Strengthening our culture has also been an important enabler of our transformation, unlocking higher discretionary effort of our team as well as finding investment dollars from cost savings. We had set a 3-year goal to cut costs by $200 million to $225 million and exceeded that goal with $300 million in cost savings. We now have dramatically less debt, a much healthier cost structure and more cash than we had 3 years ago. We said we would become a more efficient and agile company, and we are. Simply stated, we have become a say-do culture. We have clear accountability at every level in the company and are energized by saying what we will do and then challenging ourselves to do it with excellence. This is another reason why Signet is well positioned for long-term growth. Now we're moving from our Path to Brilliance, which laid a strong foundation for growth, to Inspiring Brilliance, which is accelerating growth inspired by our purpose. As we enter the next phase of our strategy, let me give you a better sense of our competitive landscape. The jewelry and watch market is a roughly $90 billion category in our primary markets and has historically grown about 2% per year prior to COVID. Signet is nearly 10x larger than the next most comparable specialty retailer. The largest part of the market is represented by thousands of independent jewelers that hold more than 65% market share. We currently have a 6% share of this fragmented market, but the industry is consolidating, and we believe we can grow our share to 10% over time. In a category as fragmented as jewelry, a double-digit market share is a strong leadership presence and enabler of future growth. We believe we can achieve this level of share growth by leveraging our scale and structural advantages, including product innovation, jewelry services, training, marketing, supply chain and financial services, just to name a few. We also have a unique ability to connect our physical and virtual footprints in ways that's difficult for competitors to match. As a result of these advantages, Signet has once again become a market share-gaining company beginning in the back half of fiscal 2020. By our estimates, we gained 70 basis points in market share by fiscal '21 year-end. From this position of strength and growing momentum, our overarching objective is to grow the mid-market in which we compete and to gain a bigger share of that bigger market. When we began Path to Brilliance, we were focused on building a foundation for growth. Now that we have that foundation, we're aiming higher. We are committed to be the growth and innovation leader of the jewelry industry. We are striving to reach $9 billion in revenue in the coming years from roughly $6 billion communicated in our fiscal '22 guidance. We believe the build to $9 billion will come from growing momentum in areas where we currently lead and new opportunities in areas where we aren't yet present or are underdeveloped. More specifically, our 4 growth strategies are: one, winning in big businesses; two, accelerating services; three, expanding accessible luxury and value; and four, leading digital commerce. Let me explain briefly why these are the right choices. Winning in big businesses is essential because our largest banners represent approximately 60% of our sales and bridal is roughly 50%. We're strengthening our banners by clearly differentiating them from one another, while also managing them as a strategic portfolio to attract new customers we don't serve today. You'll hear more about this from Jamie. Accelerating services is important to customers. It's the glue that can enable us to build loyal lifetime relationships. It also has the added advantage of being a highly profitable business. Our share of services is very underdeveloped today, so we believe this will be a strong driver of growth. You'll hear more about this opportunity from Bill. Expanding into accessible luxury and value is a clear path to growth because it's how we broaden the mid-market and also grow our share. It includes tiering up Jared's merchandise offering and bringing store innovation such as the custom design foundry experience. It also includes expanding our fast-growing and highly efficient Pagoda brand. You'll hear more about this from Kecia. Leading digital commerce is important because it's clearly the future of retail and is fueling every aspect of our growth. We've developed substantial digital capability so far, as you'll hear from both Howard and Rebecca, and we are continuing to invest in new functionality and customer experiences. While growing our top line with these strategies, we are also focused on margin expansion. We expect this to come from the combination of higher-margin services, expansion of our highly efficient Pagoda banner as well as cost savings benefiting both gross margin and SG&A. Our confidence that we can deliver industry-leading top and bottom line growth with these strategies and advantages is based on 3 factors. I'll highlight the first 2 of them: one, the competitive advantage that comes from our core how-to-win strengths; and two, the quality of our Board, leadership team and organization, all of whom are inspired by our purpose. Joan will discuss the third, which are the scale advantages we are increasingly leveraging and which we believe will lead to year-on-year margin expansion. Let's look first at our core strengths. We believe our consumer-inspired focus and insights will help us attract new loyal customers while inspiring even more purchases from our existing ones. This evolution from customer first to consumer inspired touches every part of our business, as you'll hear in the balance of our presentations today. Our new Connected Commerce presence is transcending omnichannel. We're creating shopping experiences across the full and are winning with customers wherever and however they want to engage. With our culture of innovation and agility, we're aiming to unlock the full potential of our diverse organization. We're investing in our team, from ongoing learning and development, to enhanced benefits, to our commitment to establish a $15 minimum wage for every U.S. employee. We're making these ongoing investments because we know that when we help team members grow as professionals and empower them to inspire love in everything they do, we all win. What I hope you can see is that our strategy and our strengths are already at work. They drove our holiday results. We believe they're fueling our fiscal '22 momentum, and we are just getting started. As I've outlined, I'm confident we have these end strengths. I also believe we have the right organization to turn these into sustainable growth at every level, from the field, to our leadership team, to our Board. I talk often about how much our broader Signet organization inspires me. Today, I'd like to share the inspiration that I get from our Board of Directors and our leadership team. Signet's Board is highly diverse and widely experienced. 2/3 of our directors have joined in the past 3 years, and nearly 60% of our Board members are women or persons of color. This experience, diversity, independence and freshness are critical drivers of our transformation. What I've observed over my career is that a great Board is one that provides a broad range of experiences, eliminates blind spots and collaborates with candor. That's the kind of Board under Todd Stitzer's leadership that we've built. Beyond that, we've curated a Board that aligns perfectly with our strategies. We've assembled a team of directors whose experiences across diverse roles and industries have helped shape our strategic choices, and they are actively adding value to our leadership team with ongoing consultation and advice. Our directors come from retail, financial services, electronics, fashion, e-commerce pure play and consumer products. They also come from iconic companies, and their collective experience gives us deep understanding of everything that matters to our strategy, brand building, digital, entrepreneurial speed and cost consciousness, operations, supply chain, real estate, talent development and ESG. Transforming companies is the core of this Board's experience. This is a catalytic combination of strengths, and it's turbocharged by the Board's collaborative spirit. As a result, members of our leadership team feel comfortable bringing innovative ideas and challenges to our Board and tapping into their perspective. I'll give you just one example. You'll hear from Howard about our cloud acceleration program, which will dramatically improve our digital innovation capabilities. One of the reasons we're making such tremendous progress in this area is because of the relationship that exists between Howard and Zack Hicks. As you may know, Zack leads Toyota Connect (sic) [ Toyota Connected ] and is helping transform Toyota from an automobile company to a mobility company through the use of connected intelligence. He is sharing invaluable advice on how to create a comparable transformation for Signet, a great example of how we're blending the expertise of our leadership team with the experience of our directors. The point I want to make is simply this. Our Board has become an important source of competitive advantage for our company. And the longer we work together, the greater that advantage becomes. Our Signet leadership team is also a reason I'm bullish about our future. Approximately 40% of this team are jewelry industry professionals who bring great depth and expertise, representing more than 80 years of combined jewelry experience. At the same time, nearly 60% have joined Signet within the last 3 years. They bring the outside in with fresh perspective from other great companies and industries, and they all have transformational success stories. We've built this team by retaining the strongest and most innovative leaders from Signet and recruiting new leaders from a mix of Fortune 500 companies and entrepreneurial ventures. As we've done this, we have focused on a demanding talent profile. We've looked for people who are change leaders, deeply committed to growing talent and are able to blend visionary thinking, innovative ideas and hands-on execution to deliver results. Few people ever get to see this team and action the way I'm privileged to, and I'd like to share an example of how seamlessly they work together. When our stores shut down last spring, Bill Luth, a 32-year veteran, came to the Signet leadership team for help. Within 48 hours, Howard had activated iPads for every store manager in the United States. And Steve Lovejoy, veteran of Starbucks distribution, increased our supply chain e-commerce capability fivefold in only 5 months, unheard of. Rebecca, who joined right at the time when stores were shutting down, immediately began implementing agile, digitally savvy teams and empowering fast, iterative learning, resulting in the launch of our virtual selling capabilities and enhanced website features when we needed them most. Meanwhile, our business unit presidents, along with Joan, replanned merchandise timing, marketing and promotional support, while also renegotiating payment terms to preserve cash without inhibiting growth. And with every decision, we followed our core value of people first. We stayed in touch with every single team member at a time when connection was a human need as well as a business priority. I've never been more inspired by our team than I am by this one, and there's one more thing I want to say about my team. The majority of our SLT leaders joined during our Path to Brilliance journey. They came on board, bought in and stepped up, which is why you've seen the transformation we've created. Our Path to Brilliance was a strategy they embraced one by one. But what's even more powerful now is that Inspiring Brilliance is a strategy each of them helped create together. Our collective energy and ownership for what's ahead is truly invigorating, and it gives us all great confidence in our future. When we put all this together, the clarity of our Inspiring Brilliance strategy and the combination of experience, expertise and insight that exists in our Board and leadership team, we have every reason to believe we are capable of sustainable growth that leads the jewelry industry. This is a vision that we are energized to pursue. And with the perspective of the strategic framework I've just laid out, it's a strong path forward that my colleagues and I are eager to share more in-depth. I'll now turn this over to Jamie Singleton, a visionary and inspiring leader and President of our largest business. And then Joan and I will come back at the end for some live Q&A we're very much looking forward to. Jamie?

Thank you, Gina. I want to take the next few minutes and drill more deeply into the overarching objective of our Inspiring Brilliance strategy to grow the mid-market and then grow Signet's share of that larger market on the strength of our winning portfolio, our connected commerce presence and our industry-leading scale. This is a winning trifecta, and I want to explain how it is driving our growth. The jewelry industry is highly fragmented. There are independents, specialty, nonspecialty and pure-play digital competitors. There are in-mall and off-mall stores, department stores, home shopping channels and e-commerce retailers. It's a market that can get very complex. We believe that the best way to respond to complexity is with simplicity and clarity. As a result, we look at the category from a customer point of view more than from a competitor point of view. Most people buy fine jewelry for 2 reasons: as an expression of love or as self-expression. Purchasing and giving jewelry is an emotional experience and an experience that's taken on added significance in the past year as we've all looked for ways to appreciate one another and to be kind to ourselves. We've seen a particular emphasis, for example, in people wanting to celebrate their moms in their lives. Moms have even more roles than usual, from breadwinners to caregivers to teachers and more. Jewelry matters in moments like this because it's a timeless way to celebrate and to appreciate one another. Understanding what jewelry means to people and why they're drawn to it as a gesture of love and expression is the key to relevance and to lifetime relationships. So we've dug deep into what jewelry means in people's lives, what it brings out in people and what it says about them. We've defined our banners with much greater precision than before, and they're coming together as a highly catalytic mix of customer experiences that are bringing more people into the jewelry category and are increasing our total share of a growing market. We've done this work before and made our banners stronger today by operating with a brand-building playbook that builds on one we created when I was leading the turnaround of Piercing Pagoda and since have used to take Zales, Kay and Jared to new levels of performance. I thought it might be helpful to take a quick look back at the Piercing Pagoda story as a way to look forward at our Inspiring Brilliance story and to showcase the role that our big core businesses are playing in our strategy. Piercing Pagoda is a 50-year-old brand, and there's really nothing else like it in the market. It's pop-up Pagoda profile in the center of malls, and its focus on piercing attracted a very loyal audience. But over time, the brand's freshness and relevance faded, and it fell into a period of stagnancy and decline. We did 3 things to reinvent this great brand: we clarified which customers we were serving; we defined what the brand stood for and did not stand for, by the way, style, not fashion, for example; and we proved how to grow a brand with billion-dollar potential on a remarkably lean budget. Later, as I'll discuss in a moment, we did very much the same thing for Zales and for Kay, and we're doing it now for Jared, too. For all these brands, we start where every great brand starts, with the customer. Now in my own case, we went to some stores, and we watched the people who shop with us. I saw the remarkable creativity they brought to the way they put pieces together, the care that they invested in expressing themselves. I saw that they were value conscious and didn't want to have to ask about prices. I observed how intimate the piercing experience really was, and I noticed that our customers looked almost nothing like the decidedly less expressive associates who staffed our stores. We made similar observations for Kay and Zales. And in every case, these observations and the insights that they revealed shaped our turnaround strategy for each of these banners. We defined each brand's voice. We sharpened our product assortments with a particular focus on what mattered most to the individual banner. We clarified what mattered to our customers and what did not. This told us precisely where to cut costs and where to invest in growth. And we hired talent who looked, talked and expressed themselves like the people we were serving. So when we say the cornerstone of our strategy is to win with our big businesses, we are laser-focused on knowing our customer, on knowing what jewelry means in his or her life, on cutting costs customers don't care about and investing in what they do and building the right team so that we can be agile and drive innovation through every element of the customer experience. These are simple fundamentals really, but when well executed, they can unlock significant and sustainable growth. We see this in the way our banners are performing today, individually and as a portfolio. We've used a vast combination of proprietary and industry data to identify 7 different types of customers across the 2 segments, expression of love and self-expression, and we've locked on 4 which represent the greatest growth potential and with whom we're best positioned to win: the generous sentimentalist who gives for the sake of giving; the bold statement makers who want to stand out in every crowd; and the extravagant indulgers who love to go all out to celebrate others and themselves; and the confident creatives who express their personalities to the world with total confidence and creativity. Together, these 4 customer groups represent nearly 80% of jewelry category sales with a U.S. market size of more than $70 billion, which we believe is split pretty evenly between this expression of love and the self-expression segments. Given that our largest 4 banners in the U.S. represent nearly $4.5 billion in Signet revenue today, you can see its tremendous growth potential. Kay is focused on the generous sentimentalist, which is the largest segment and the largest growth opportunity. Kay is the share leader, but still holds less than 3% of the U.S. market, so we have significant upside to go after, and we're confident we can. Kay has the most reach, the largest footprint and is already a leading voice in sentimental love. Zales is focused on the bold statement maker who tends to be at the heart of the millennial generation. Zales has already earned credit with these customers for female empowerment and expression and for fresh stylish brands such as Vera Wang, Marilyn Monroe and Disney. Jared is focused on the extravagant indulger with a higher-priced assortment and the grand personal shopping experience, such as the foundry concept, that are important to this customer. Jared's journey is just getting started in many ways, so let me talk for a moment about how we've differentiated and are growing both Zales and Kay. These 2 banners are attitudinally very different, but that wasn't how we positioned them when Signet acquired Zales 7 years ago. The company treated Zales pretty much as a smaller version of Kay, which meant that it continued to be one of Kay's direct competitors. The lack of differentiation wasn't good for either banner. As we dug into our proprietary customer research, we saw that each banner could appeal to an entirely different customer, creating space for both of them to grow together rather than compete for the same customers and market share. By differentiating these 2 great brands so clearly, we've unlocked growth potential that we weren't fully pursuing before. And just as important, we've created multiple points of entry that allow us to meet customers where they are right now and then be there for them where they are with a different banner as their lives and attitudes evolve. Confident creatives often grow into bold statement makers, and generous sentimentalists often step up to become extravagant indulgers. We're there for all these customers at every stage of their lives. Once they come into the Signet franchise, there's no reason for them to ever leave. We have a physical store footprint that pure-play digital or e-commerce retailers just don't have. We have digital presence and capability from customer engagement to technology scale to the largest customer data pool that we believe exist in the specialty jewelry industry. Independent jewelers simply can't replicate these advantages economically. We have a fully staffed and dedicated customer insights team that extracts proprietary intelligence from our data pools, driving product innovation, store experiences and our marketing. These are insights we believe no other company in the jewelry industry has. And again, we're able to leverage these advantages across every one of our banners to drive growth and to capture share. It's a virtuous cycle, and it takes a company of Signet's size and presence to invest in and make this cycle possible. You saw these advantages and capabilities in action over the back half of last year, especially during the holiday. Our strategies gave us clarity. Our agility gave us flex. And our portfolio gave us relevance and breadth that's not replicated anywhere else in our industry. There's one other aspect of our portfolio strategy that I want to highlight, one that's not as visible to you, but it's a big part of our secret sauce. And that's the seamless collaboration that occurs day in and day out across our leadership team in our banners and in our stores. From the beginning of the pandemic, Kecia, Bill, [ Neil ] and I were meeting every day to set priorities and communicate to our banner teams. We were in lockstep with Bill Luth and with unending engagement from Gina and from Joan. We were also working hand in hand with Rebecca, Howard and Oded to ensure that we were using and growing our digital capabilities. The company's investment in digital and other capabilities come primarily from the banners, so we wanted to be certain that they had the resources that they needed to make the most of the moment and to continue strengthening our foundation for the future. The key thing I want you to take away is that our banner portfolio is stronger and more tightly integrated than ever in Signet history. Our pace of innovation continues to accelerate in product, in digital, data and customer experience. And our team members are coming together with commitment, with collaboration and a deep sense of pride and belonging as part of a company that we have transformed together. I like where we stand, and I'm confident about where we're headed. We're humble and hungry. We respect the business and the people who built it. We're hiring the best talent inside and outside our industry and giving them clarity and freedom to be brilliant. And we're all inspired by our customers who celebrate life and express their love with the only certainty anyone can have these days, the certainty that love is unstoppable. I love the spirit of this Kay campaign, so it's a great way to wrap up and move on to Kecia, with certainty that the potential for these big Signet businesses is as unlimited as love is unstoppable. It's a great time to be part of this company. [Presentation]

Thank you. Now here's Kecia.

Thanks, Jamie, and hello, everyone. As a company, Signet's banner value propositions are one of our greatest competitive advantages. As Jamie just detailed, each banner brings something unique to the table, doing so in their unmistakable cadence and unique style. Piercing Pagoda is truly its own gem. From vibrant and energetic colors that command attention to diverse bold models who epitomize self-expression and pride, our style and our customer style is unmistakable, and we encourage every customer to express themselves. This idea of empowerment and self-expression starts with our Piercing Pagoda team members. They are the embodiment of self-expression, and we are proud to have them represent us just as they represent themselves to the world. As I give insight into the world of Piercing Pagoda, how we define ourselves, our following, what we've accomplished, what we're inspired to do and the milestones we're marked for success, hopefully, will bring another facet to the brilliance of the Signet portfolio. So who's Piercing Pagoda? We operate primarily in a mall-based kiosk format. We've had 6 straight years of positive same-store sales growth while not compromising merchandise margins. We define our product assortment as affordable fine jewelry, with an average transaction value just over $100 in fiscal '21. We're continually expanding our offering to meet our customers at price points they're looking for. If it's more carats or quality of gold or unique design, we're enabling more and more customers to find what they're looking for, the jewelry that lets them express who they are and allows every individual who shops at Piercing Pagoda to be fearless in that self-expression. As our name alludes to, we provide piercing services for children and adults at all of our locations. We pierce ears and noses in a safe environment, strictly following and sometimes exceeding health and safety protocols issued by the CDC and other health organizations. So team members and every customer is always the priority. Last year, we expanded our piercing services to include facial piercings in select locations. As we expand this offering throughout the brand, we'll be able to more fully serve the needs of our piercing customers as they showcase their personalities through the art of the ear. As distinct as Piercing Pagoda is within the Signet portfolio, so is the Pagoda customer. We refer to them as a confident creative, and they're the closest to the Gen Z and millennial loyal customer in Signet's customer mix. The Pagoda customer is passionate about jewelry and fashion, and they're passionate about letting their style tell their story. We pride ourselves on the diversity of our customer base. Two out of 3 customers are female, and we over-index in serving the African-American and Hispanic shopper. This has reflected our marketing and customer experience initiatives, and it also extends to our product collections and assortments. Labels belong on soup cans, not Pagoda jewelry, and we're proud to continue to increase the level of gender-neutral pieces that fit any style and anyone. Our jewelry is meant to adorn the expressive, the creative, the outlier and the just plain adorable. With our mall store size and low capital requirements, our store efficiency lends itself extremely well to the mall format. We are a center of the mall, recognizable and trusted banner. Coupled with our team's ability to convert sales, we have driven over 20% improvement to our top line sales since FY '18, even with approximately 15% less stores. There's no doubt that Piercing Pagoda is seeing the momentum that Signet has strategically built during its past 3 years of a Path to Brilliance transformation. We have established a clearly targeted banner value proposition as well as a trust and report to our customers. They trust us to be their partners in their pursuit to express their feelings for themselves and others. Now we're looking ahead to continue our momentum. Part of that comes through e-commerce growth. Piercing Pagoda has seen approximately 140% year-over-year e-commerce growth in fiscal '21. In fact, over the holiday season, over 90% of our e-commerce sales were completed on customers' mobile devices. That's the Gen Z and millennial way, and we are redoubling our focus to ensure we're providing the ultimate experience for our customers on their mobile devices. Our advertising and our website design are intentionally optimized to augment the phone users' experience while still ensuring an enjoyable desktop experience. We believe Pagoda is underpenetrated in e-commerce sales and that this focus will drive penetration in the years ahead. What's more, digital sales allow us to offer an increased assortment often at higher carat weights and higher price points. This year was a proving ground for that as we saw great performance in our VIP collection of merchandise. These are pieces that are at the higher end of price points we stock in store, but there are pieces our customers have asked for and it can be accessed online anytime, anywhere. And we believe that as e-commerce penetration continues to grow, so will our expanded online exclusive offerings at the right value for our customers. While we're excited about e-commerce growth opportunities, the Pagoda in-person experience and the safe, innovative piercing techniques we provide will always remain a cornerstone of our business. As I've mentioned, our piercing services provide safe and clean options to offer our customers significantly more ways to express themselves. Hand in hand with the ways we pierce is our testing of new store formats. We understand that some customers may be more comfortable with their piercing experience when we provide them a degree of privacy. That's why we're testing an in-line format with a lounge designated for piercing. These growth opportunities teamed with the extensive greenfield analysis of our real estate team are why we plan to open up to 100 locations this year. We've identified customer trade areas that can support our formats, and we're excited to serve our customers. We are excited for the future of Piercing Pagoda. We're looking forward to all the ways we help inspire love and help our customers express themselves. And we believe our consumer-inspired banner value proposition can win our place in the value market, contributing to our expansion of the traditional mid-market definition. I'll now turn it over to Rebecca to explain our digital transformation. Rebecca?

Thanks, Kecia. Hello, everyone. I'm excited to shed more light on our digital transformation and the reason we believe digital commerce will deliver roughly 1/3 of the $9 billion revenue goal. When I joined Signet last April, one of my first priorities was to establish Agile development teams organized around the customer journey. These teams are at the core of our connected commerce strategy. We define connected commerce as seamless interaction through digital experiences that carry our customers through any and all touch points, whether you start online with a virtual consultant or you buy online and pick up in store. Looking through the lens of connected commerce, it's why our new Agile teams were intentionally kept small. These teams are nimble and empowered, able to react quickly due to the iterative nature of how they deliver features. Development of customer-facing iterations come in 2-week sprints. This accelerated cycle allows us to deliver quickly, test and course correct if we need to. We are innovating and enhancing our customer experience at near real-time speed, and we're doing it at each step of the customer journey. This strategy isn't simply about working faster, it's about putting the customer at the center of everything we do. The agility these teams provide allow us to quickly pivot to meet customers' needs based on what is most important to them. This was especially critical last year as we navigated our response to COVID. As mentioned, our teams are currently organized based on the customer journey, and we are uniquely positioned to provide a digital experience above anything seen in the retail jewelry industry today. Our first group of teams are focused on the shopping experience itself. These teams are enabling our customers to find the product they want quickly and easily. We put in place a large number of features in fiscal '21 centered around our virtual selling capabilities, from the ability to instantly message a virtual consultant to visual search and even early testing of virtual try-on. We've also implemented a number of enhancements that drove both higher traffic and higher conversion rates to the prior year. Our second group of teams are focused on the purchase experience. Once a customer has made their selection, the purchase should be easy and allow the customer to choose fulfillment options that suits them best. Similar to our shopping teams, the purchase teams were critical to our back-half success by providing improved checkout experiences as well as the launch of crucial fulfillment options such as curbside pick-up and ship from store. We also have a group of teams specifically focused on customer experience after the purchase. These teams are working to support the way Signet offers services that build customer loyalty and trust. So whether it's customer care, warranties, repairs or any interaction that supports building a lifelong relationship, we want every interaction to be special, regardless of whether it will involve an immediate purchase. I hope this small window into our new organization add some clarity to what we mean by digital transformation and Agile delivery. We aren't a company that just added a digital department, we are now a digitally focused company committed to exceptional customer experience. What is unique about our strategy is we're not just implementing digital as a solely self-serve experience limited to our websites alone, we have combined the power of technology, the intersection of virtual consultants and the ability to put the human into our digital ecosystem. In addition, we are using data-driven insights to connect online and in-store experiences. So while some online retailers failed to make the human connection and smaller independents may lack the supply chain and customer fulfillment options, we are delivering innovation at every step of the customer journey. We know our initial progress is already creating convenience, trust and ongoing relationships and a connected experience, giving us a competitive advantage. As we look ahead, we have a number of exciting ideas underway. Our shop teams are looking to expand our virtual selling capabilities, including how we build technology like virtual try-on as well as personalized product recommendations, We're looking to enhance how our virtual consultants can engage with customers proactively and the ability to connect them with the right consultant based on their shopping preferences. This ability for virtual as well as our in-store consultants to message customers beyond a single point-in-time transaction provides the personalized experience that creates the foundation for lifetime engagement. Who wouldn't want their own jewelry consultant to help remind them of important dates, new products or when it's just time to treat themselves? Beyond new capabilities, our shop teams also envision the integration of existing capabilities. So for example, what if we were to use one of our configurators to build your perfect ring and then you seamlessly used our virtual try-on to see how it would look on your own hand, all from your phone as you sit in the comfort of your home. This is an example of how we expect to fluidly connect experiences together, enhancing every aspect of the customer journey. Within purchase and delivery, we will continue to test flexible options, including same-day local delivery as well as enhanced tracking options, giving customers transparency in the delivery process. Looking further out, we are considering additional options for gift packaging and other add-ons to be integrated as customers checkout. There's not enough time today to detail all the exciting ideas our teams are working on, so I'll turn back to the numbers before handing off to Howard. We believe there is tremendous upside left in the digital jewelry market, and we are focused on growing our piece of that pie by offering an unmatched customer experience. Our opportunity lies in expanding that reach of our digital channel and expanding our digital sales penetration. Last year, we achieved e-commerce sales penetration of nearly 23%, and we're striving to reach approximately 30% penetration as we continue to implement features and enhancements with our Agile product teams. In fact, we quickly deployed more than 100 new features and enhancements in the first 6 weeks of this fiscal year, and we have a deep road map to deliver many more. Offering customers a simple, personalized and connected digital experience is what they're coming to expect more and more in any retail environment. This is why Signet aims to be at the forefront of this change in the jewelry industry. I'll now hand it over to Howard to discuss how our digital transformation is driving more than just the top line. Howard?

Thanks, Rebecca, and hello, everyone. I'd like to use the next few minutes to detail how we're leaning into our digital transformation. At Signet, we're using cloud structure and data analytics not only to improve the customer experience, but to gain internal efficiencies and optimize workflows. Said another way, we're using these tools to drive the top line while also targeting cost savings through the elimination of redundancies and decreased implementation costs. I'd like to explain our approach using 3 main strategies. First, the ability to simplify our technology while also expanding our capabilities utilizing cloud software. Second, how we're leveraging data analytics and the cloud to deliver actionable insights that will drive the way we enhance the customer experience. Lastly, I'll explain how this transformation feeds into our culture of innovation and agility by working as a platform for new revenue streams in the near future. We're not strangers to cloud technology. One of our most impactful innovations during the pandemic was our implementation of virtual selling. We leveraged our team's innovative thinking and cloud technology to provide our jewelry consultants the ability to continue serving customers while we sheltered in place. We are working on a joint opportunity with Amazon Web Services and Accenture. This relationship will bolster our cloud technology and analytics program to provide strategic acceleration as well as enhanced tools and assets that help Signet to jump-start innovation, fuel savings efforts and unlock new value. We view this opportunity, which is unique to the jewelry industry, as a competitive advantage as we accelerate our digital transformation. Technology changes at such a rapid pace that infrastructure costs can accumulate quickly. Cloud technology addresses this issue by giving Signet access to leading-edge hardware without the need to purchase it. Taking this a step further, it also gives us the ability to scale our operations quickly. This means during holiday seasons, we're able to scale our operations on demand rather than with extensive capital expenditures that could take weeks to implement. This simplification of our technology will reduce both implementation costs and the time required for implementation going forward. Looking ahead, we've already announced our intention to continue investing in technology and our digital customer journey, but I think it's important that we are optimizing those investments using the cloud. Cloud infrastructure will allow us to deploy technology at a rapid pace across our platforms faster and cheaper. Simplifying our technology through cloud computing will allow us to fuel the second strategy, actionable customer insights. Data analytics were one of our strongest competitive advantages in fiscal '21. We leveraged those insights across our business to drive strategic decisions throughout the year. For example, we used our data analytics alongside external data to create algorithms that clearly laid out the most optimal path for reopening our stores in the second quarter of fiscal '21. Further, our data analytics are enhancing our digital marketing and increasing our return on advertising spend. In other words, by using customer insights, we're better targeting our marketing to generate higher top line sales for each dollar we spend. We'll marry our cloud technology to machine learning and AI software. This powerful combination will provide us with advanced data analytics that further dimension our consumers. The digital teams that Rebecca detailed will have real-time access to these enhanced insights to drive ideas and innovate on the experience we provide our customers. Further, we'll leverage analytics to drive operational decisions like labor management, helping us to maximize the sales return on our labor investment. So together, we expect these advanced data analytics to contribute directly to our top line as we continue to increase our conversion rate through enhanced customer experiences while also cutting costs as we support operational decision-making like labor management. Our final strategy surrounds utilizing these tools within our culture of innovation and agility to support our teams in discovering new revenue streams. Later in our presentation, Bill is going to expand on all the exciting services that we're considering and testing for our customers, team with our cloud infrastructure that provides for quick implementation, we know both which services customers want most and which services provide the best margin. Summarized, we can move quickly and cost-effectively to implement technology that balances offering customers a great experience while growing our bottom line. The things I cover today are the behind-the-curtain strategic decisions that provide infrastructure and tools for all of the great strategy and vision that my colleagues will continue laying out. Our digital transformation is more than an embrace of the future. We're looking to be at the forefront. As Gina has said, Signet's goal is to drive innovation and provide experiences like no one else in the jewelry industry. I'm pleased to share with you that we recently learned that Signet received the FutureEdge 50 Award. This award recognizes our efforts to evolve and improve the end-to-end customer experience through innovation. It recognizes the most cutting-edge trials and applications of emerging technologies and the innovative cultures enabling them in business today. In addition, Signet received the 2021 CIO 100 Award earlier this year, an award given to those that drive digital business growth through technology and innovation. We're honored to have received these achievements and see them as indicators of our ability to innovate and enhance the customer experience. In closing, I'm happy to be part of the Signet team, and I'm excited about our Inspiring Brilliance strategy. I'll now hand it over to Bill to detail our plans to accelerate services. Bill?

Thanks, Howard. As Gina shared, we believe we have all the ingredients for sustainable and long-term growth as well as the opportunity to expand by accelerating services. We believe we're well positioned to create a $1 billion business through services as well as expand our customer base and loyalty. We see services as both a strategic play that creates a bond between us and our customers, in addition to creating an expansion of our top and bottom lines, typically carrying a higher margin profile than our product assortment. Let me begin with why we believe we're going to emerge as a services leader in jewelry, all based on our proprietary research and as you would expect from us, all consumer-inspired. There are 4 compelling consumer needs we aim to meet as we accelerate services. These include: worry-free wear; customization; affordability and accessibility; and shopping your way. While the data is fragmented, we believe the total market for repair and care alone is a $3 billion business in the U.S. So expanding that to the 4 needs I just mentioned, we see a significant upside and market share potential. Candidly, jewelry customers are underserved today. In a way that customers service their cars, for example, customers also have the need to service their jewelry. With a team of more than 1,400 jewelry artisans, the strongest footprint in the industry and our emerging leadership and digital capabilities, Signet is well positioned to build on our existing infrastructure to scale up to meet customer needs more broadly. We are committed to accelerating services and have taken inspiration from iconic brands such as Apple, Best Buy and Home Depot, all retailers that excel in their respective spaces while staying true to our customers and who we are. We strive to not just meet, but exceed our customer expectations as we serve them through counseled expertise and seamless customer experiences. The initial purchase should be just the beginning of a long and trusted relationship. From a financial perspective, jewelry services carry a higher margin and require a relatively low level of investment. As such, we believe our acceleration into services will not only fuel top line growth, but also provide opportunity for margin expansion. Our goal is to create an ecosystem of offerings, to be the one-stop shop for any service related to jewelry. Our path will be a strategic combination of enhancing our existing services while addressing the 4 essential customer needs identified in our research. The first customer need I mentioned earlier is worry-free wear. Our customers want to know their most treasured possessions are protected so they can wear their jewelry with confidence. This is why we're placing focus on offerings such as repair and care, extended service plans, warranty and insurance. We are also improving our online experience for our customers, which we believe will improve the attachment rates over time. The second need is focused on customization by providing customers with the ability to create unique and personalized expressions of love. We are offering products and services tailored to individual tastes and creations. If our customer imagines it, we can craft it, and they'll be able to wear it forever. The third customer need centers around affordability and accessibility. We have the unique opportunity to provide customers with access to quality and product selection with a variety of payment options that make jewelry affordable. In short, we're making luxury more accessible through financial services as well as rental and subscription models. And fourth, shop your way. It enables customers to engage in jewelry services, however and wherever they want. Through Connected Commerce, we're building a more extensive road map for future enhancements, including marketplace capabilities and loyalty programs. Our research showed us that care and repair as well as extended service plans are the most important services to our customers. Let me tell you more about what we're doing in these areas. We are the nation's largest provider of jewelry repair service. As mentioned earlier, we have more than 1,400 skilled jewelers working in our design and service centers, proudly restoring and repairing our customers' jewelry. We know that customers attach significant meaning to jewelry, whether it's a symbol to mark a special milestone, a family heirloom or simply a treasured piece of self-expression. Our customers want expert jewelers, premium craftsmanship, transparency and timeliness in completing a repair. This is a competitive advantage that we will continue to scale through our Connected Commerce platform. As we grow care and repair, innovation and technology will be key to building trust as they're critical in helping us become even more transparent with our customers during the repair process. A few examples of our planned implementations include digital documentation of each piece of jewelry at intake, text updates and informational videos to keep customers informed through each stage of the process. These capability enhancements will continue to build trust with our customers and encourage long-lasting relationships. Extended service agreements, or ESAs, are the second most requested service by our customers and are beneficial to both our top and bottom lines. Our ESA program stands as our largest jewelry service business, and we see opportunities for expansion through enriched program benefits and improved attachment rates, both online and in-store. This service also provides an opportunity for customer engagement with regular checks to jewelry and routine cleanings, thereby encouraging consistent interactions within the Signet ecosystem. We also have a foothold in several other services that can play a meaningful role in our growth. Earlier, Kecia talked about the importance of safe and accessible piercing services. Customer demand for this service is strong, and it's one that provides attractive attachment rates with the purchase of additional jewelry. One of the advantages of Signet is its ability to leverage the experience and knowledge across our portfolio of banners. In this case, we're leaning on Piercing Pagoda's expertise in the category to test Kay and Zales. Though our initial test of over 400 stores had to be scaled back during the pandemic, the performance is promising. And as a result, we'll be expanding the piercing services to more locations in the coming months. Importantly, our piercing customers, typically a point of market entry and can mature into a lifetime of jewelry purchases for milestones such as engagements and anniversaries in our other banners. We are also proud to offer personalization services that can range from engraving, all the way to fully customized pieces that can start from a sketch on a napkin and mature into a full-blown CAD rendering brought to life through a 3D printer. The advances in technology around these services add a new level of what's possible in our customer shopping journey. We believe that we'll continue growing our custom sales by investing in the capabilities of our configurators across banners, and we have exceptional customization available through the Foundry at Jared, which we're expanding to an additional 30 doors for a total of 50 in fiscal year '22. On top of growing and scaling the services we already offer, we have a significant amount of white space opportunity as well. For example, jewelry rental. People rent fashion, cars, houses, banquet rooms. Customers want to rent sparkle and expressions of their unique personality. To this end, we're pleased to recently announce our acquisition of Rocksbox, the largest jewelry rental and subscription company in the U.S. with significant upside for growth potential. Welcoming Rocksbox to our portfolio will allow us to accelerate our path into this market. This highly engaged customer base has been a Signet white space and represents an entirely new revenue stream. As we look ahead, we'll be implementing more services our customers want over time. Beyond working towards a $1 billion revenue line, our goal is to create an ecosystem of offerings to be the one-stop shop for anything related to jewelry, so we enhance jewelry ownership for our customers. Our vision starts with our customers' first interaction and is only the beginning to driving lifetime customer value. Our path will be a strategic combination of enhancing our existing services and creating new consumer-inspired ones, building on our existing capabilities and industry-leading scale. Now I'll turn it over to Joan to put a financial perspective around our future opportunities. Joan?

Thanks, Bill, and hello, everyone. Today, I'll put more details around the underlying financial framework of our Inspiring Brilliance strategy. I'll discuss how we expect to use our diverse portfolio, expanded services and digital reach to our competitive advantage to grow our top and bottom lines while gaining market share. As you've heard from our team today, we're encouraged by the top line momentum that we've seen over the last several quarters and the opportunities we see in our competitive landscape. We're striving to reach $9 billion in revenue. We expect roughly 1/3 of our revenue goal to come from winning in our biggest brands, another 1/3 from leading digital commerce and the final 1/3 from expanding services and our market reach. When we refer to market reach, we believe Signet is underpenetrated in the mid-market at the bookends of value with Piercing Pagoda and affordable look. From an industry perspective, we expect the jewelry category to continue to grow approximately 2% per year, and we expect Signet's growth to outpace industry growth as we leverage our scale and investments to win with customers. While our digital investments are focused on growing e-commerce, we do expect some cannibalization of brick-and-mortar. That said, we have not seen significant cannibalization today. Also, within our e-commerce growth, our luxury and value brands are underpenetrated online. As an example, in our value banner, Pagoda, we currently only have a mid-single-digit e-commerce penetration rate. Now let me provide more details on how we'll use our portfolio to not only drive top line growth, but to also expand operating margin over time. Our biggest banners, differentiated and supported by digital commerce, are critical to driving top line growth and cost leverage. At the same time, we'll expand our higher-margin services business and extend our reach in the mid-tier jewelry market through both affordable luxury with Jared and James Allen and through value with our highly efficient Piercing Pagoda banner. Underpinning our growth strategy will be our continued cost discipline, benefiting both gross margin and SG&A, which includes further optimization of our physical and digital footprints. Recall, we've identified cost savings of $175 million to $200 million over the next 3 years, of which, $50 million to $75 million is expected to be realized in fiscal '22. Offsetting the cost savings, we're prioritizing investments in digital and technology innovation which will continue to support growth across our portfolio, including square footage expansion in Piercing Pagoda. We believe this formula is one that will use our size, scale and cash position to drive sustainable top line growth and operating margin expansion over time. I'd now like to discuss in some more depth the opportunities for efficiency in both gross margin and SG&A. These opportunities build on the efficient operating structure established through the first phase of our Path to Brilliance transformation. With the stage set, we are now focused on expanding margins with an operating model that only requires near flat to slightly positive top line growth. Opportunities for gross margin expansion include services, as Bill detailed earlier. Services carry higher margin profiles, and we are focused on expanding services and their attachment rates, not only in-store, but also in e-commerce. Occupancy costs are another opportunity as we continue to optimize our fleet and focus on shorter-term leases. Further, we are focused on supply chain efficiencies, leveraging our scale in purchasing as well as elements of vertical integration. These include in-house design and diamond sourcing operations through James Allen as well as our own diamond polishing facility. Additionally, we placed significant focus on inventory life cycle management, which put pressure on fiscal '21 gross margin. While clearance will always remain a part of our promotional and inventory management strategies, we used last year to better position our inventory for the future. Effective sell-through of product at each stage of the inventory life cycle is working to optimize the margin captured before product has the need to move to lower-margin clearance. Now let's turn to opportunities within SG&A. We have a more efficient labor model that leverages data to determine schedules, hour by hour, location by location. We're improving returns on marketing spend and using our scale to benefit procurement efforts. For example, our return on advertising spend in fiscal '21 improved 40% versus prior year. We are also seeking to optimize our financial services offering across providers in a way that gives our customers a seamless purchasing journey while enabling cost efficiencies for our company. In addition, you heard from Howard today about how we're leveraging cloud technology to simplify our infrastructure. This enables cost efficiencies as well as cost-effective investments in our digital platform, all contributing to our goal of operating margin expansion. Turning to our real estate strategy. In FY '18, we were overstored. We began accelerating the rationalization of our fleet, and we've reduced our overall store count by more than 20% since that time. Our real estate strategy is now moving away from strict fleet rationalization toward fleet optimization, effectively determining which formats best serve our customers' needs within their acceptable drive time. As an example, in the Northeast Dallas area, our insights supported our decision to close 3 stores, with our remaining locations and virtual presence able to effectively serve customers. While this is a small example within our much larger strategy, it offers insight on the depth of our analysis. On our recent earnings call, we announced our plans to close at least 100 locations this year as well as open up to 100 new locations, primarily in Pagoda formats which offer high contribution with short lease commitments. For our larger in-line banners, we're continuing to shift away from the traditional mall to off-mall locations. As we continue to test new formats such as Kay-Zale combinations, shop-in-shop and pop-up locations which may provide greater efficiencies. Our cash of $1.2 billion at year-end puts us in a position to take decisive actions that align with our strategy. Turning to capital allocation. Our priorities remain to invest in the business for long-term sustainable growth, pay down debt and return capital to shareholders. As noted on our fourth quarter call, we are targeting a leverage ratio of below 3x adjusted debt to EBITDAR over time. Our debt maturities come due in calendar 2024. While this is still a few years out, we are assessing alternatives to effectively address these maturities while aligning us with our leverage target. We hope the discussions today were helpful in providing further insights into our Inspiring Brilliance strategy and how we believe we'll deliver a seamless customer experience while we strive to lead innovation in the jewelry industry and drive sustainable long-term growth. I'll now turn it back to Gina.

Thank you again for your attention and engagement. I want to wrap up with one final observation about the power of our purpose, Inspiring Love. Company purpose can seem less substantial than strategy, but it's not. Our purpose is central to our strategy because it motivates the performance of our organization, attracts top talent to our company and earns the respect, admiration and lifetime loyalty of our customers. Inspiring Love is fundamental to how we help all people celebrate life and express love through our products and services. And people care about caring, for one another, for their communities and for themselves. Being part of and supporting a company that inspires love helps them do that, and I believe it's a key reason why employee engagement at Signet is up by 30% in just the past year and why almost 90% of our team members say their work is an incredible source of pride. I wanted to close on this point to make a larger point. Everything we've shared with you today is tightly integrated and interdependent. Our purpose inspires us. Our strategies focus and guide us. Our strengths empower us. And our spirit of saying what we'll do and doing what we say brings out the absolute best in us. I'll leave you with this brief video that brings our purpose to life, and then we'll be happy to take your questions. Thank you. [Presentation]

All right. Perfect. Well, welcome back, everybody. We hope everyone enjoyed our presentations today. And again, thanks to everyone for all the questions that have been submitted. I'm now here, as you can see, with Gina and Joan, to start off the live session. First, actually, I'm going to turn it over to Joan to address the press release that we put out this morning, and then we'll come back and take some Q&A. Joan?

Thanks, Vinnie, and hello, everyone. I'd like to discuss our updated fiscal '22 guidance. As detailed in our press release today, we've seen stronger-than-expected conversion and average ticket values in the first quarter. We believe this top line strength is due in part to traction from strategic initiatives, which our team continues to deliver on with dedication, commitment and solid execution. In addition, we believe we are benefiting from tailwinds related to stimulus, tax refunds and consumer enthusiasm on the heels of vaccine rollouts, during our guest appreciation events in late March. Reflecting this momentum, we've raised our Q1 guidance. We now expect Q1 total sales in the range of $1.57 billion to $1.60 billion, with same-store sales of 97% to 99% and non-GAAP operating income of $85 million to $100 million. The increase in our Q1 guidance is now reflected in our full year guidance. In addition, we note that we've evaluated the impact of the inventory delays related to recent COVID-19 surges in India and other parts of the world. At this time, we believe we have mitigated the short-term impacts. However, if the duration and magnitude of these inventory slowdowns intensify, there could be future negative impacts on our full year guidance. As discussed on our last earnings call, the magnitude and timing of expected consumer shifts to more experience-oriented categories is difficult to predict, and we continue to plan for same-store sales to be negative in the second half of the year. And now I'll turn it back to Vinnie to begin taking questions. Vinnie?

All right. Terrific. Thanks very much, Joan. And with that, we're going to open it up to Q&A. Looks like the first one from an investor. And Gina, this one's going to go to you. Can you explain your $9 billion revenue goal? And also, where is that coming from?

We've guided to $6 billion. We think we are competing in about a $90 billion category in the markets that we compete in, and so we have around a 6% or 7% share. We think the jewelry market will continue to grow around 2% annually. We've been outpacing that growth, and they have been gaining share, we believe, since the back half of fiscal '20. And we think that we can continue to do that as more of the Inspiring Brilliance strategy comes to life. So the $9 billion then is composed of about 1/3 or $3 billion from winning in our big businesses. This is really what Jamie talked about today, how we are differentiating our banners so that we're appealing to different target consumer groups. That's something that we haven't done as effectively in the past, so I think that will play out as an additional opportunity to attract customers. The second is from leading in digital commerce. COVID has certainly changed the face of retail once again, and everyone is more comfortable buying online in every category than they have been in the past, and we aim to lead digital commerce for the jewelry category. So both Howard and Rebecca talked about that today. And then the remaining 1/3 comes from expanding the traditional mid-market that we've played in. So we want to expand up into more accessible luxury. We can do that with services like the Jared Foundry or with higher price points of jewelry. We want to be very strong in the value part of the market, and we can do that through the expansion of Piercing Pagoda, as Kecia talked about. And then services is really an area that we are underdeveloped in. It's even more fragmented than the merchandise market, and so we believe that we can grow there. So roughly 1/3, 1/3, 1/3 on those strategies to get to $9 billion.

All right. Perfect. And you know what, don't go anywhere. I'm throwing the second one your way as well, Gina. So we have a question here around digital. We talked quite a bit around digital, we're leaning into e-commerce pretty heavily. Why do we think that's the right strategy?

Well, obviously, one is the change in customer shopping behavior that I just talked about. COVID has changed that forever. I think that what we're trying to do is develop competitive advantages in digital commerce that are unassailable. And so there are really 3 key competitive advantages that I want to point out. The first is that we have consultation capabilities that no one else does. We can do that at scale. We now have 700 virtual jewelry consultants who are using many of the tools that Rebecca talked about earlier, and that is, I think, something very special as we bring that expertise to life. We are also enabling all of our store staff to be able to work digitally, so that ultimately then enables thousands more experts to be able to work with customers virtually. I think another is our visualization capability. We have capability to show diamonds in ways that no one else does with our proprietary Segoma camera that we got for our R2Net acquisition and a lot of the virtual try-on tools, so a real competitive advantage there. And then I think just our ability to continue to attract top talent is another one. So we've been, I think, very focused on doing that in the digital space. We're continuing to acquire great talent in that space, and that will continue to take us further.

All right. Terrific. And let's see, I'm going to do my best here to combine a couple of our analyst questions. So Paul from Citi and Dana from TAG. So these are around -- and this one, I'm going to put to Joan here. So around our banners, so do you still have trade areas where you have multiple banners? And also, what are you seeing? What's the impact on the remaining stores in the trade area when a store closes, Joan?

Well, thanks to the both of you for those questions. And yes, we still have trade areas with multiple banners, including trade areas with multiple same banner locations within the trade area. So -- and this is all depends on the jewelry market potential in a given trade area. Not only the size of the market, we also consider the dimensions of the customer base there. Some trade areas will likely always require multiple banners based on how broad of the customer base we serve there. And that positioning is intentional, and it's data-driven. You've heard a lot about that today. You recall that we delivered same-store sales growth for all of our U.S. banners in the back half of fiscal '21. And to then add some color around the closing stores, we see higher comp benefit to remaining stores in that trade area. And further, when it comes to retaining customers cross-banner or even in a single-banner trade area, our Connected Commerce strategy is paying off. With combination of store tests and enhanced virtual selling, we're able to keep serving our customers with the unique product assortment that they've grown loyal to. We've also improved our ability to close stores the right way. So for example, we closed 153 stores within our North America fleet between December of 2019 and July of 2020. We used trade area and analytics to identify those stores, and we used our Connected Commerce strategy to retain as many customers as possible. We were able to deliver sales transference that was more than 60% higher than we anticipated due to the success of our approach.

All right. Thank you for that, Joan. And then let's see, I'm going to actually stay with Joan on our next one. So you updated your guidance this morning. Can you provide any further details just on what you're seeing or what we're expecting?

Yes. Sure, Vinnie. We believe there, we're seeing tailwinds, as we mentioned, from tax refunds, stimulus and spending surges surrounding vaccine effectiveness. These tailwinds have, coupled with customer appreciation events that we ran in late March, to drive Q1 momentum that is exceeding our initial guidance. And then when we look to our full year guidance update, our guidance implies an expected operating margin rate between 5.6% and 5.9% for the full year, which reflects margin expansion compared to FY '20 to note that and even on the low end by nearly 40 basis points. So it's really a reflection in the full year of what we achieved in the first quarter. And I remind you that in our second -- we're in our second year of COVID, so there are still factors that are just too hard to predict. So this update doesn't include any potential impact from the recent surge of COVID cases like those in India. We're working, as I mentioned, to mitigate potential impacts using the strength of our vendor relationships. However, the duration and magnitude of them are difficult to estimate at this time.

Okay. All right. Thank you, Joan. And then let's see, I know we're coming up on the half-hour mark here, we want to be respectful of everyone's time. So let's -- I think we have time for one final question here. And Gina, I'm going to turn this to you. So we have a question on services. You guys did talk about services today. Why do you believe services can be a $1 billion business?

Well, it's a business where we already have scale. We believe that we're the #1 jewelry services provider in the United States. We have a strong extended service plan program that we are able to leverage our 1,400 jewelry artisans to help people keep their jewelry in great shape. Not only do we do care and repair, but also custom work. But even given the size that we have, there's a tremendous opportunity for us to expand further. We think our share of services is even lower than our share of merchandise in the jewelry category. So first, we'll leverage that scale to grow our existing businesses. And then there are new businesses that we're not in yet. Obviously, Rocksbox is very meaningful, new addition to our portfolio. It gets this into the rental and subscription business, something that's been very successful in the apparel space. That hasn't really grown the way that we think it can in the jewelry category, so we're excited to have that very talented team come on board. And then as we look down the road, jewelry appraisal is certainly another area for us to continue expanding piercing as we expand our Piercing Pagoda business and offering new services and then on our larger road map like things like marketplace opportunities, really marrying our capabilities that we've been building with an opportunity to connect customers to jewelry that they wouldn't otherwise have a chance to be able to purchase. So It will be an exciting journey from us for us. We're learning from some of the best. We have some great directors on our Board who've had experience in this space, so I'm looking forward to us growing further.

Awesome. Terrific. Thank you, Gina. Well, Gina and Joan, thank you both very much for the helpful input and answers to these questions here. And just on behalf of all of us at Signet, we appreciate everyone for tuning in today for the questions, for the interest in our story. We really hope that you found the time and the presentations to be valuable. And we also hope that we gave you a good sense for really the incredible people on this team who are behind this company. We're certainly excited about our Path to Brilliance turning into Inspiring Brilliance. And we're energized and we look forward to speaking with everybody again soon. So thank you all for joining us today.

Thank you.

Thank you.