The fine jewelry industry has seen big changes in the recent past, and Joan Hilson has been there to lead the way. Since 2019, she’s been CFO of Signet Jewelers, the world’s largest retailer of diamond jewelry that is the parent company of Kay Jewelers, Jared, Zales, Blue Nile and Banter by Piercing Pagoda. She’s on her second turn in the financial department of this company, having served seven years at its predecessor Sterling Jewelers in the 1990s. Hilson was recently promoted to chief financial and operating officer.
I talked to Hilson about how Signet Jewelers’ new strategies, both before and since the Covid-19 pandemic, have helped the company cut down on costs and increase sales. This conversation has been edited for length, continuity and clarity. It was excerpted in the Forbes CFO newsletter.
What brought you to Signet Jewelers?
Hilson: I’ve had the privilege of serving as Signet’s chief financial officer since 2019, and I really felt that there was a lot of opportunity for the company. I think I was the last hire on the senior leadership team as [former CEO Gina Drosos] launched [transformation plan] “Path to Brilliance.” I saw the opportunity to create, to build on the culture that she was creating and participate in that as we lead with purpose. One of our fundamental principles is that our team is the single biggest piece of our strategy. When our teams rally together and focus on the goal of growing the company and serving our people, our communities and our customers, we have an incredible opportunity to win.
I also saw financial opportunity to create an operating model that could generate the financial health and strength to reinvest in our business and support our strategic initiatives. In fact, we’ve been able to do that. One of the fundamental principles that I lead by is that our team has to align to a common goal. We need to understand what is expected of each of us, and in that way, we can deliver success in our transformation initiatives. That’s what we’ve done over my tenure since 2019.
Signet Jewelers Chief Financial and Operating Officer Joan Hilson.
Signet Jewelers
What about working for seven years at this company, in its previous form as Sterling Jewelers, made you want to come back?
I love the energy of retail, and I love serving customers. I think the retail jewelry space has a unique opportunity to celebrate with our customers: their life moments, special moments, everyday moments of self-expression. I found that very attractive in terms of being within a business that is about celebrating self and love.
The jewelry industry is dynamic, and it is gold-based and diamond-based and can be mixed metal. There’s a lot of sourcing opportunities and interesting ways of bringing designs to our customers that really attracted me as well. I really wanted to be a part of transforming a segment from a traditional jeweler to a fashion-relevant jeweler that can bring product to customers to help them express themselves.
When you first came to Signet in 2019, you focused on restructuring the company’s finances. Why was this important, and how did you do it?
I joined Signet in 2019, as we were working to transform the overall company. The transformation was cultural. It was strategic, and at its core, financial. My job was to link arms with our [then-]CEO Gina Drosos and the senior leadership team, to be one of the key drivers and an architect of our future growth plans.
To give a bit of context, Gina joined the company as CEO in 2017, and she hit the ground running, working to listen and learn when it came to the cultural challenges facing the company. We have a brilliant and very talented organization at Signet, and our team needed more autonomy and authority to be able to do their jobs and to truly excel. When I came in as CFO, Gina started to disassemble some of the top-down culture that needed to change. I was excited to dig into the financial side, the forecasting, and bring goals and an understanding of those goals to the team, so that they can realize what we needed to achieve to drive a strong framework for our future. We rolled out “Path to Brilliance” in 2018, and because of the progress we made on those goals, we accelerat[ed] to the “Path to Brilliance” strategy, which focused on enhanced capabilities.
As we think about the financial structure and the framework that enabled us to invest, one of the things that I focused on as the financial leader of the company is: What do we need to do to drive top line growth, and recognize that our banners span 80% of U.S. jewelry customers. By focusing on our core banners, we can drive that top line growth, which was critical to our strategies. We also focused on expanding our operating margins. That came along with developing a high-margin jewelry services business, which can take care of all of our customer needs, in terms of love and care for their jewelry.
Along with that, we focused on a cost-savings initiative that drove out costs over $900 million since 2019. We did that by not just focusing on cutting costs that the customer doesn’t see or care about, but by changing processes, and understanding how to simplify and what’s important to the overall growth of our business. Those efficiencies included the labor scheduling model we have in our stores. We have over 2,500 stores, and with investments in data and analytics, we were able to bring forward labor scheduling models that enabled the strongest jewelry consultants to be in the stores at peak hours. We were able to look at locations by hour, by jewelry consultant, and understand where the best productivity opportunity is. Our sales per labor hour is a key metric. [It] was up more than 40% versus pre-pandemic. A huge improvement in leveraging analytics and labor scheduling to serve our customers ultimately in a better way.
We also have a payment plan offering that we were able to restructure, [to] bring more options to our customer, but also save a considerable amount of its cost to our company.
The next big focus that I had in driving the financial performance of our business was our real estate strategy. Over my tenure, we closed over 1,000 stores. We did reopen stores in optimal locations for our business, but the net was a 630 [store] closure. It improved our gross margin leverage by 400 basis points, by optimizing our fleet and then putting stores in the right locations within markets. We also moved from in-mall to off-mall to better serve some of the smaller markets in the U.S. We were able to bring that efficiency to our business.
While doing that, the savings that we were able to achieve we invest[ed] in our digital capabilities. With this change, we were able to grow our e-commerce business significantly over the five years from 2019. We went from 5% penetration to 20% penetration. We brought Signet into the digital and technology world and proved that jewelry and high-price-point items can be purchased online.
You’ve been talking about a lot of the changes that you made in strategy, and the timing of some of them coincided with the Covid-19 pandemic, which also altered consumer behavior. Tell me how that influenced your choices.
We closed our stores on March 23, 2020. It was 2,500 U.S. stores that were impacted, and we also closed in the U.K. We did that because we are a people-first company, and it was the right thing to do. We realized we had to change the way we were doing business immediately. We were investing in digital capabilities as we headed into Covid, but what we were able to do is accelerate those investments.
We put an iPad in every jewelry consultant’s hand, and they were able to conduct business online by using their iPads from wherever they were. So we were able to continue to serve our customers during that time.
As many other companies did in that time, we rethought where we were spending our money, and we were able to eliminate a lot of spend that really wasn’t moving our ball forward. The key was that we didn’t allow those costs to come back in later. That was something we were able to hold onto.
The other interesting dynamic that the team gained from the Covid experience was a very strong understanding of cash flow management. When you don’t have all of your stores open, you have limited cash flow coming in, so they were able to determine what mattered. We were able to leverage the inventory that we had in our pipeline to serve our customers, and they saw and believed that we can do more with less. The inventory levels have not returned back to pre-Covid levels. In fact, the health of our inventory has improved. As an example, clearance levels within our pipeline have reduced 50%. That was a major accomplishment and a belief by the team that we can do business this way.
The other opportunity that was born out of Covid was what we call flexible fulfillment. We invested in buy online, pick up in store, or ship from store. We were able to leverage inventory within each store to service online customers. That is something that also contributed to the [lower] clearance inventory. The team’s belief in their ability to do business on a lower inventory level has served us very well. We’ve had, over the last four years, an average of $600 million of free cash flow, much driven by inventory management.
In general, consumer spending across many categories has been down for about the last year and a half. How has Signet made it through that?
Our view is that we have a value-oriented consumer, and they are looking for a value in whatever they purchase. What we’ve done is brought an assortment that can speak to different economic circumstances of our customers. We have a portfolio that spans from Banter by Piercing Pagoda, to Diamonds Direct and Blue Nile at the accessible luxury end of our business. Within each of those banners, we have good, better, best price points, which has a value offering at every price point within our business based on design, content of precious metals, as well as the overall design of the piece. We’ve addressed it with assortment architecture, and bringing our customers price points that we believe can serve wherever they are at that time of year or in their circumstance.
With Gina Drosos’s retirement, you’ve also become COO and received some additional responsibilities. What are you doing now in addition to your work as CFO?
I’m very excited to take on responsibility for our James Allen and Blue Nile banners—which is our online pure play—as well as our supply chain logistics and diamond sourcing. I’m very excited to be able to work with the team and drive to impact our acquisition economics there.
What do you have planned in terms of strategy for the next few years?
“Inspiring Brilliance” is just wrapping up. At the end of this fiscal year, we’re working very closely with the team to continue and evolve our inspiring, brilliant strategy. We’ll work with [new CEO] J.K. [Symancyk] to bring the strategy forward, which we do off of our fourth quarter earnings call, typically. I’m excited about what our core banners can bring to customers, and really leveraging the customer journeys and the investments that we’ve made in marketing and technology to better serve our customers. We have significant investments that we’ve made in our fleet to enhance our shopping experience to make it more modern and more relevant for our customers. That’s a bit of a sneak peek into the future.
Do you have any closing thoughts?
In my role as chief financial officer, as well as now chief financial and operating officer, the underlying message I would leave you with is that our culture and the teams working together is the strongest piece of our success. The idea that our teams understand our goals, they understand our customers, and we’re all working together to drive to those goals is fundamental to who we are as a business. I believe in our strategy, our culture, and our team, and I look forward to our future successes together.
