Jim Sanderson: Question and congratulations on a great quarter. I wanted to dig into the commentary you provided about your long-term outlook, talking about engagement in bridal. If Bridal is about 40% of your sales mix, you’re expecting some softness post COVID, should we start to look at maybe mid- to high single-digit sales declines related to that segment in 2023 calendar year? Is that the right way to kind of look at that category?
Virginia Drosos: Yes. I think what I was trying to provide was some perspective on on the stability actually of bridal over time, it’s a very consistent part of the jewelry business. I mean, year in, year out, you have engagements, weddings, anniversaries. And if you look back pre-COVID, it was very, very steady. So about 2% growth of engagements and lettings year in, year out. COVID has caused a bit of a blip in the sense that last year, we saw an uptick in engagements. This current year that we’re in, we’ve seen a downtick in engagement, but it’s the peak ever or peak in the last 4 years anyway of weddings. So we shifted, we saw that coming, and we’ve shifted and we’ve really been working to own the wedding. So 2 wedding band purchases, bearings for the bridesmaid, wash for the groom, gifts for the mother of the bride, thing as an offset to slight downtick that we see in engagement.
Next year, we expect to see a slight downtick again in engagement, but then it normalizes all actually grows to get back to normal the year after, and we think normalizes ongoing after that. So it’s really the first meaningful, I would call it a temporary blip that we’ve seen in how engagement and weddings have been working. But the great news is that with our consumer insight work, we predicted that and came around that so that we’re really working on lifetime value. Our loyalty program and I gave a lot of stats in the call, has been a fantastic addition in that context because we’re seeing most people come into the loyalty business through engagement, we’re contacting previous engagement customers to bring them into the loyalty program, and then we’re working lifetime value with them.
So I think the fact is that there will be less engagement next year, Signet would expect to grow share the engagement category and we expect also to grow our fashion and gifting business as we surround the wedding.
Jim Sanderson: Okay. So a little bit of offset to maybe some slight tick down in the segment related to just the timing of the impact of COVID. Is that the message I want to take away?
Virginia Drosos: Yes. It’s really just a demographic fact. But what we do is leverage all the different aspects of our business to understand those and then offset that as we put together our business plans for the year ahead.
Operator: The next question today comes from Will Gaertner with Wells Fargo.
Will Gaertner: Look, I understand you’re not going to be guiding here, but maybe can you just give us some color on the puts and takes of gross margin, operating margin into next year, how to think about Blue Nile and Diamond Direct, how their impact on the business from a gross margin and an operating margin perspective. .
Virginia Drosos: So Blue Nile carries a profile similar to Diamonds Direct and James Allen because it’s largely — it’s predominantly in the bridal business, which carries a relatively lower margin well. So as you think about Blue Nile and it’s merchandise content, that will affect its merchandise margin rate. When we think about integrating that with James Allen, we believe that we can continue to expand the operating margin as we influence the assortment architecture of Blue Nile. So the other point that I really make is that as we continue to grow our services business, which can attach to all of our businesses, all of our banners, that also carries a higher gross margin profile. I mentioned in my prepared remarks that it’s 20% higher than other merchandise margin categories.
So that’s a positive. The other — we have sourcing opportunities that we continue to explore. And while we give us room to be positioned to be flexible with our promotional strategy into Q4 and as well as into next year. So that’s really the gross margin story. As we think about Blue Nile go forward, we’ve said in the past that it would be accretive as early as Q3 of next year. And as we look at it, we’re really viewing the combined banner with James Allen. So if you look in our 10-Q, you’ll see digitally native banners. What we’re really presenting to you is that this is a combined entity that really drives 2 commercial banners that play off of each other, attracting different customers with Blue Nile being slightly higher and slightly younger and more affluent, which really opens up the top of the funnel, but brings with a different margin profile.
So overall, really positive about Blue Nile, its impact on our business, our ability to manage its performance within the guidance that we’ve provided for this year. And as I said earlier, we will come back to you on our fourth quarter call with respect to looking into next year.
Operator: Our next question comes from Paul Lejuez with Citi.
Paul Lejuez: Two questions. One, I think you mentioned encouraging results of a Black Friday weekend met expectations. But you also said that you were seeing signs that the consumer was waiting for later in the season to complete their shopping. So just kind of curious how to square those 2 things. And then curious if you could talk a little bit more about transactions versus ticket and in which categories you’re seeing higher AURs versus where you might be seeing some pressure.
