Company Initiates Fiscal 2018
Guidance
Signet Jewelers Limited (“Signet”) (NYSE:SIG), the world's
largest retailer of diamond jewelry, today announced its results
for the 13 weeks (“fourth quarter Fiscal 2017”) and 52 weeks
("Fiscal 2017") ended January 28, 2017.
Summary:
- Fourth quarter Fiscal 2017
- Same store sales ("SSS") declined 4.5%;
diluted earnings per share (“EPS”) $3.92; adjusted EPS $4.03.
- Operating income $399.2 million, up
1.6%. Operating margin increased 120 basis points. Selling,
general, and administrative expense ("SGA") ratio improved 160
basis points.
- Fiscal 2017
- SSS declined 1.9%; total sales $6.4
billion, declined 2.2%. EPS $7.08, up 20.6%; adjusted EPS $7.45, up
8.6%.
- Free cash flow $400.3 million, up
$183.5 million.
- Net synergies: Achieved $120 million on
incremental basis.
- Provides full year guidance for Fiscal
2018 (53 weeks ending February 3, 2018).
Mark Light, Chief Executive Officer of Signet Jewelers, said,
“Signet had a challenging fourth quarter and fiscal year, but we
delivered top-and-bottom lines for the fourth quarter within our
revised expectations. This was driven principally by performance
from select categories and collections including diamond fashion
jewelry, bracelets, and earrings.
"We are adapting to a challenging retail environment and weak
mall traffic. Given the importance of an omni-channel experience to
jewelry customers, we have an intensive focus on an omni-channel
approach to customer service supported by a significant increase in
resources directed to our digital ecosystem. We have re-aligned our
executive organization structure to sharpen our focus on our
customers' channel preferences. And we are making greater
technology investments to improve customers' on-line experience.
Going forward, our digital marketing and presence on-line will be
more pronounced than ever.
"In addition, the integration of Zale continues to go well. We
delivered Signet's anticipated annual synergies which protected us
against a general slowdown in retail. Our solid financial
performance and cash generation capabilities have allowed us to
invest back into our business to pursue long term profitable growth
and return excess cash to shareholders.
“I want to thank all Signet team members for their contributions
to our results and for all their hard work throughout the fiscal
year and into the new year.”
EPS Analysis:
Fourth quarter EPS was $3.92. Fourth quarter Adjusted EPS was
$4.03. Weighted average shares outstanding were 75.8 million.
Adjusted EPS can be reconciled to EPS as follows:
Adjustments EPS Purchase
accounting Integration Adjusted EPS1
$3.92 $(0.03) $(0.08) $4.03
Fiscal 2017 EPS was $7.08. Fiscal 2017 Adjusted EPS was $7.45.
Weighted average shares outstanding were 76.7 million. Adjusted EPS
can be reconciled to EPS as follows:
Adjustments EPS Purchase
accounting Integration Adjusted EPS1
$7.08 $(0.14) $(0.23) $7.45 1 = In Fiscal
2017, Signet used adjusted metrics which adjusted for purchase
accounting and integration costs in relation to the Zale
acquisition and in relation to Signet integration. See non-GAAP
reconciliation tables. Adjusted EPS is a non-GAAP measure and is
defined as EPS adjusted for the impact of purchase accounting and
integration costs. Purchase accounting included deferred revenue
adjustments related to acquisition accounting which resulted in a
reset of deferred revenue associated with extended service plans
previously sold by Zale Corporation. Integration is consulting
expenses associated with information technology ("I/T")
implementations, severance related to organizational changes and
expenses associated with the settlement of miscellaneous legal
matters pending as of the date of the Zale acquisition.
Financial Guidance:
Fiscal 2018
SSS down low-to-mid single-digit % EPS $7.00 to $7.40
Effective tax rate 24% to 25% Weighted average common shares
74 million to 75 million Capital expenditures $260 million to $275
million Net selling square footage growth -1% to 0%
As communicated last year, Signet has discontinued the practice
of issuing quarterly guidance. Signet is continuing to provide
annual guidance in order to foster a more long-term focus on the
Company's operating model and results. The following are some
additional considerations to assist financial modeling:
- Fiscal 2018 is a 53-week fiscal year
for Signet, ending February 3, 2018, driven by the retail industry
calendar.
- The financial impact of Mother's Day is
typically split between first quarter and second quarter. But in
Fiscal 2018, it will be entirely a second quarter impact. This
timing is unfavorable to sales and EPS in the first quarter and
favorable to sales and EPS in the second quarter. The amount of the
shift is expected to be approximately 300 to 350 basis points to
SSS and $0.12 to $0.15 EPS from the first quarter to the second
quarter.
- The additional week, January 28, 2018 -
February 3, 2018, will be accretive to fourth quarter total sales
by approximately $75 million. The additional week will have no
impact to SSS because it is excluded from the calculation. The
additional week will have an immaterial EPS impact to fourth
quarter due to the cadence of planned Valentine's Day marketing and
promotions.
- Anticipated EPS drivers include: gross
margin rate leverage; SGA ratio deleverage; and lower shares
outstanding consistent with capital allocation strategy around uses
of free cash. Gross margin rate leverage is expected to be driven
by merchandise margin; and SGA ratio deleverage is expected to be
driven by omni-channel and other I/T projects that will strengthen
customer service and infrastructure for the long-term.
- Capital expenditures will be driven
primarily by new Kay off-mall stores as well as store remodels and
I/T to support global implementations. But the mix in Fiscal 2018
will skew more in favor of I/T, particularly to support Signet's
omni-channel initiatives. As I/T initiatives depreciate faster than
store assets, this will have a small unfavorable impact as
depreciation accelerates near and medium term.
- Signet plans to close 165 to 170 stores
in Fiscal 2018 and open 90 to 115 stores for a net selling square
footage change of flat to a decline of 1%. Store closures are
primarily focused on mall-based regional brands not meeting
Signet's financial return expectations. Store openings will be
primarily Kay off-mall.
Fourth Quarter Fiscal 2017 Financial Highlights:
Signet's total sales were $2,269.9 million, down $122.7 million
or 5.1%, compared to an increase of 5.1% in the 13 weeks ended
January 30, 2016 ("fourth quarter Fiscal 2016"). SSS decreased
4.5% compared to an increase of 4.9% in the fourth quarter Fiscal
2016. Merchandise categories and collections were broadly lower
most notably in the mall and e-commerce selling channels. Select
merchandise and selling channels performed relatively well such as
diamond fashion jewelry, bracelets, earrings, and the off-mall and
kiosk selling channels.
E-commerce sales in the fourth quarter were $161.8 million, down
$4.5 million or 2.7% compared to $166.3 million in the fourth
quarter Fiscal 2016. The decline in e-commerce sales was primarily
attributed to technical performance issues during the holiday
period. By operating segment:
- Sterling Jewelers' SSS decreased 4.9%.
Average transaction value increased 7.0% and the number of
transactions decreased 11.4%. Broad-based declines across
merchandise categories and under performance in the mall and
e-commerce channels drove the SSS decline. This was partially
offset by higher sales of diamond fashion jewelry and Vera Wang
Love bridal.
- Zale Jewelry's SSS decreased 5.2%.
Average transaction value increased 2.4%, while the number of
transactions decreased 7.4%. Broad-based declines across
merchandise categories and under performance in the mall channel
drove lower SSS. Increases in diamond fashion jewelry and bracelets
partially offset the decline.
- Piercing Pagoda's SSS increased 5.7%.
Average transaction value increased 12.7%, while the number of
transactions decreased 5.6%. This was driven principally by strong
sales of 14 kt. gold, diamond jewelry, religious, and children's
jewelry.
- UK Jewelry's SSS decreased 3.8%.
Average transaction value increased 8.0% and the number of
transactions decreased 11.8%. The SSS decline was driven
principally by lower sales in fashion jewelry, fashion watches, and
gifts. The decline was partially offset by stronger sales of
prestige watches and bridal jewelry.
Sales change from previous year
Fourth quarter
Fiscal 2017
Samestoresales1
Non-samestoresales, net2
Total salesat constantexchangerate
Exchangetranslationimpact
Totalsales
Total sales(in mill. $)
Kay (5.0)% 2.3% (2.7)% (2.7)% 915.2 Jared (3.2)% 1.2% (2.0)%
(2.0)% 430.6 Regional brands (16.4)%
(11.2)% (27.6)%
(27.6)% 52.3
Sterling Jewelers division
(4.9)% 1.2%
(3.7)% (3.7)%
1,398.1 Zales Jewelers (4.5)% 2.6% (1.9)%
(1.9)% 452.5 Gordon’s Jewelers (13.3)% (17.7)% (31.0)% (31.0)% 18.7
Zale US Jewelry (4.9)% 1.4% (3.5)% (3.5)% 471.2 Peoples Jewellers
(7.6)% 0.5% (7.1)% 2.2% (4.9)% 73.2 Mappins (3.9)% (8.6)% (12.5)%
2.2% (10.3)% 10.5 Zale Canada Jewelry (7.2)% (0.6)% (7.8)% 2.2%
(5.6)% 83.7 Zale Jewelry (5.2)% 1.0% (4.2)% 0.4% (3.8)% 554.9
Piercing Pagoda 5.7% 1.5%
7.2% 7.2% 83.7
Zale division (3.9)%
1.1% (2.8)% 0.3%
(2.5)% 638.6 H.Samuel
(5.3)% 0.4% (4.9)% (15.9)% (20.8)% 119.7 Ernest Jones
(2.1)% 0.6% (1.5)%
(16.4)% (17.9)% 107.9
UK Jewelry
division (3.8)% 0.5%
(3.3)% (16.2)%
(19.5)% 227.6 Other
segment
133.3%
5.6 Signet (4.5)%
1.2% (3.3)%
(1.8)% (5.1)%
2,269.9 Adjusted Signet3
(5.2)% 2,272.5 Notes: 1=For stores open for at least
12 months. 2=For stores not open in the last 12 months. 3=Includes
$2.6 million deferred revenue adjustment related to acquisition
accounting which resulted in a reset of deferred revenue associated
with extended service plans sold by Zale Corporation prior to the
acquisition on May 29, 2014.
Gross margin was $945.5 million or 41.7% of sales, down 80 basis
points from fourth quarter Fiscal 2016. Adjusted gross margin rate
was 41.7%, down 90 basis points. The declines were driven
principally by lower sales leading to deleverage on fixed costs as
well as incremental promotional activity resulting in a flat
merchandise margin rate to last year.
- Sterling Jewelers gross margin dollars
decreased $41.2 million. The gross margin rate decreased 120 basis
points due primarily to lower sales which deleveraged fixed costs
such as store occupancy. In addition, higher bad debt expense and
incremental promotional activity unfavorably impacted the gross
margin rate.
- Zale division gross margin dollars
decreased $2.3 million but the gross margin rate increased 70 basis
points. Included in gross margin were purchase accounting
adjustments totaling $1.7 million compared to $4.7 million in prior
year. Adjusted gross margin dollars in the Zale division decreased
$5.3 million. The adjusted gross margin rate increased 40 basis
points with higher merchandise margins more than offsetting
deleverage of fixed costs on lower sales.
- Gross margin dollars in the UK Jewelry
division decreased $26.6 million. The gross margin rate decreased
220 basis points driven principally by deleverage on lower sales
and lower merchandise margins due to increased promotional
activity.
SGA was $615.3 million or 27.1% of sales compared to $686.6
million or 28.7%. Included in fourth quarter SGA are adjustments of
$11.5 million in Fiscal 2017 and $20.6 million in Fiscal 2016.
Fourth quarter Fiscal 2017 adjusted SGA was $603.8 million or 26.6%
of sales compared to $666.0 million or 27.8% in the prior year.
- The decline in dollars was driven by a
variety of factors (including synergies) such as: lower variable
compensation including short-term and long-term incentive
compensation; lower advertising expense; merchant fees savings in
Zale credit programs; and foreign exchange translation.
- These savings were partially offset by
higher I/T expense associated with Signet's I/T modernization
roadmap.
Despite lower sales, SGA ratio leveraged due to the decline in
SGA expenses.
Other operating income was $69.0 million compared to $63.7
million in the prior year fourth quarter, up $5.3 million or 8.3%.
This increase was due to the Sterling division’s higher interest
income earned from higher outstanding receivable balances.
In the fourth quarter, Signet's operating income was $399.2
million or 17.6% of sales compared to $393.1 million or 16.4% of
sales in prior year fourth quarter. Included in operating income
were purchase accounting and integration costs of $13.2 million in
Fiscal 2017 and $25.3 million in Fiscal 2016. Adjusted operating
income was $412.4 million or 18.1% of adjusted sales compared to
$418.4 million or 17.4% of sales in prior year fourth quarter. By
division:
Fourth Quarter Fiscal 2017 Fourth
Quarter Fiscal 2016 (in millions) $ % of sales $
% of sales Sterling Jewelers division $ 298.0 21.3% $
305.4 21.0% Zale division1 71.7 11.2% 63.0 9.6% UK Jewelry division
42.6 18.7% 57.8 20.5% Other2,3 (13.1) nm (33.1) nm 1.
Zale division includes net operating loss impact of $3.3 million
for purchase accounting adjustments. Excluding the impact from
accounting adjustments, Zale division’s operating income was $75.0
million or 11.7% of sales. The Zale division operating income
included $62.7 million from Zale Jewelry or 11.3% of sales and $9.0
million from Piercing Pagoda or 10.8% of sales. In the prior year
fourth quarter, Zale division includes net operating loss impact of
$6.2 million for purchase accounting adjustments. Excluding the
impact from accounting adjustments, Zale division’s operating
income was $69.2 million or 10.6% of sales. The Zale division
operating income included $54.2 million from Zale Jewelry or 9.4%
of sales and $8.8 million from Piercing Pagoda or 11.3% of sales.
2. Other includes fourth quarter adjustments of $9.9 million and
$19.1 million for Fiscal 2017 and Fiscal 2016, respectively. Fiscal
2017 adjustments are expenses associated with I/T implementations,
severance related to organizational changes and expenses associated
with the settlement of miscellaneous legal matters pending as of
the date of the Zale acquisition. 3. Fiscal 2016 adjustments
related to advisor fees for legal, tax, and I/T implementations. nm
Not meaningful.
Income tax expense was $88.7 million compared to $109.1 million
in the prior year fourth quarter. The Fiscal 2017 effective tax
rate was 23.9%, driven by pre-tax earnings mix by jurisdiction,
compared to 28.9% in prior year.
Fiscal 2017 Financial Highlights:
Signet's total sales were $6,408.4 million, down $141.8 million
or 2.2%, compared to an increase of 14.2% in Fiscal 2016. SSS
decreased 1.9% compared to an increase of 4.1%. Merchandise
categories and collections were broadly lower most notably in the
mall selling channel, while select merchandise and selling channels
performed relatively well such as diamond fashion jewelry,
bracelets, earrings, and the off-mall and kiosk selling channels.
E-commerce sales in the fiscal year were $363.1 million, up $3.5
million or 1.0% compared to $359.6 million in Fiscal 2016. By
operating segment:
- Sterling Jewelers' SSS decreased 2.6%.
Average transaction value increased 4.5% and the number of
transactions decreased 7.9%. Broad-based declines across
merchandise categories and under performance in the mall and
e-commerce channels drove the SSS decline. This was partially
offset by increases in select fashion jewelry such as Ever Us and
non-branded earrings and bracelets.
- Zale Jewelry's SSS decreased 2.4%.
Average transaction value increased 3.4%, while the number of
transactions decreased 5.3%. The SSS decline was driven by slower
sales across merchandise categories broadly, most notably bridal,
as well as under performance in the mall channel and energy regions
where Zale has greater exposure. This was partially offset by
higher sales in select diamond jewelry such as Ever Us and Endless
Brilliance.
- Piercing Pagoda's SSS increased 6.6%.
Average transaction value increased 13.7%, while the number of
transactions decreased 6.2%. This was driven principally by a
strategic and successful change to merchandise mix which drove
strong sales of 14 kt. gold and diamond jewelry.
- UK Jewelry's SSS increased 0.1%.
Average transaction value increased 6.0% and the number of
transactions decreased 6.3%. Higher sales of bridal and prestige
watches was virtually offset by lower sales in other
categories.
Sales change from previous year Fiscal
2017
Samestoresales1
Non-samestoresales, net2
Total salesat constantexchangerate
Exchangetranslationimpact
Totalsales
Total sales(in mill. $)
Kay (1.4)% 1.8% 0.4% 0.4% 2,539.7 Jared (4.1)% 2.1% (2.0)%
(2.0)% 1,227.5 Regional brands (9.6)%
(11.0)% (20.6)%
(20.6)% 163.2
Sterling Jewelers division
(2.6)% 1.1%
(1.5)% (1.5)%
3,930.4 Zales Jewelers (1.4)% 2.7% 1.3% 1.3%
1,257.4 Gordon’s Jewelers (12.2)% (14.3)% (26.5)% (26.5)% 57.7 Zale
US Jewelry (2.0)% 1.7% (0.3)% (0.3)% 1,315.1 Peoples Jewellers
(4.6)% 1.1% (3.5)% (1.1)% (4.6)% 204.9 Mappins (4.2)% (6.9)%
(11.1)% (1.3)% (12.4)% 29.7 Zale Canada Jewelry (4.5)% —% (4.5)%
(1.2)% (5.7)% 234.6 Zale Jewelry (2.4)% 1.4% (1.0)% (0.2)% (1.2)%
1,549.7 Piercing Pagoda 6.6% 1.6%
8.2% —% 8.2%
263.1
Zale division (1.2)%
1.4% 0.2%
(0.1)% 0.1%
1,812.8 H.Samuel (1.3)% 0.4% (0.9)% (13.0)% (13.9)% 323.5
Ernest Jones 1.6% 1.2%
2.8% (13.4)% (10.6)%
323.6
UK Jewelry division 0.1%
0.8% 0.9%
(13.2)% (12.3)%
647.1 Other segment
44.8% 18.1 Signet
(1.9)% 1.2%
(0.7)% (1.5)%
(2.2)% 6,408.4 Adjusted Signet3
(2.4)% 6,421.7 Notes:
1=For stores open for at least 12 months. 2=For stores not open in
the last 12 months. 3=Includes $13.3 million deferred revenue
adjustment related to acquisition accounting which resulted in a
reset of deferred revenue associated with extended service plans
sold by Zale Corporation prior to the acquisition on May 29, 2014.
Balance Sheet and Statement of Cash Flows:
Cash and cash equivalents were $98.7 million compared to $137.7
million as of January 30, 2016. The lower cash position was
primarily due to share repurchases partially offset by favorable
cash provided by operating activities.
In Fiscal 2017, Signet deployed cash of $1.0 billion to
repurchase outstanding common stock, or 11.2 million shares, at an
average cost of $89.10 per share. Of the $1.0 billion, $625 million
of repurchases were executed to offset dilution from the October
convertible preferred offering. As of January 28, 2017, there
was $510.6 million remaining under Signet’s share repurchase
authorization.
Net inventories were $2,449.3 million, down 0.2% compared to
$2,453.9 million at the end of the prior year. The impact of
synergies related to improved inventory management was virtually
offset by lower sales.
The Sterling Jewelers in-house credit participation rate for
Fiscal 2017 was 62.0% compared to 61.5% for Fiscal 2016. Credit
sales decreased 0.5%. For the year, finance charge income was
$277.6 million and net bad debt was $212.1 million -- a favorable
difference of $65.5 million. This was favorable to the prior year's
$62.0 million.
Long term debt was $1,317.9 million compared to $1,321.0 million
in the prior year period. Long term debt is entirely representative
of the financing of the Zale acquisition.
Signet remains committed to its capital allocation policy
initiated March 26, 2015. Signet’s strong balance sheet allows it
to execute on its strategic priorities, invest in the business, and
then return excess cash to shareholders while ensuring adequate
liquidity and maintaining its investment grade rating. Signet plans
to distribute 70% to 80% of annual free cash flow in the form of
stock repurchases or dividends, assuming no other strategic uses of
capital.
Signet has a diversified real estate portfolio. On
January 28, 2017, Signet had 3,682 stores totaling 5.1 million
square feet of selling space. Compared to prior year, store count
increased by 57 and square feet of selling space increased
2.6%.
Store
count Jan 30, 2016
Openings Closures Jan
28, 2017 Kay 1,129 68 (5) 1,192 Jared 270 8 (3) 275 Regional
brands 141 — (20)
121
Sterling Jewelers division
1,540 76
(28) 1,588 Zales 730 40 (19) 751
Gordons 59 — (17) 42 Peoples 145 2 (4) 143 Mappins 43 — (9) 34
Total Zale Jewelry 977 42 (49) 970 Piercing Pagoda
605 35 (24) 616
Zale division 1,582
77 (73)
1,586 H.Samuel 301 6 (3) 304 Ernest Jones 202
3 (1) 204
UK
Jewelry division 503
9 (4) 508
Signet 3,625
162 (105) 3,682
Quarterly Dividend:
Signet’s board declared a quarterly cash dividend of $0.31 per
share for the fourth quarter of Fiscal 2017, payable on May 31,
2017 to shareholders of record on April 28, 2017, with an
ex-dividend date of April 26, 2017. This represents a 19.2%
increase in the dividend and is the sixth year in a row that Signet
has raised its dividend.
Conference Call:
A conference call is scheduled today at 8:30 a.m. ET and a
simultaneous audio webcast and slide presentation are available at
www.signetjewelers.com. The slides are available to be downloaded
from the website. The call details are:
Dial-in: 1-647-788-4901
Access code: 65256773
A replay and transcript of the call will be posted on Signet's
website as soon as they are available and will be accessible for
one year.
About Signet and Safe Harbor Statement:
Signet Jewelers Limited is the world's largest retailer of
diamond jewelry. Signet operates approximately 3,600 stores
primarily under the name brands of Kay Jewelers, Zales, Jared The
Galleria Of Jewelry, H.Samuel, Ernest Jones, Peoples and Piercing
Pagoda. Further information on Signet is available at
www.signetjewelers.com. See also www.kay.com, www.zales.com,
www.jared.com, www.hsamuel.co.uk, www.ernestjones.co.uk,
www.peoplesjewellers.com and www.pagoda.com.
This release contains statements which are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements, based upon management's
beliefs and expectations as well as on assumptions made by and data
currently available to management, include statements regarding,
among other things, Signet's results of operation, financial
condition, liquidity, prospects, growth, strategies and the
industry in which Signet operates. The use of the words "expects,"
"intends," "anticipates," "estimates," "predicts," "believes,"
"should," "potential," "may," "forecast," "objective," "plan," or
"target," and other similar expressions are intended to identify
forward-looking statements. These forward-looking statements are
not guarantees of future performance and are subject to a number of
risks and uncertainties, including but not limited to general
economic conditions, regulatory changes following the United
Kingdom’s announcement to exit from the European Union, risks
relating to Signet being a Bermuda corporation, the merchandising,
pricing and inventory policies followed by Signet, the reputation
of Signet and its brands, the level of competition in the jewelry
sector, the cost and availability of diamonds, gold and other
precious metals, regulations relating to customer credit,
seasonality of Signet's business, financial market risks,
deterioration in customers’ financial condition, exchange rate
fluctuations, changes in Signet's credit rating, changes in
consumer attitudes regarding jewelry, management of social, ethical
and environmental risks, security breaches and other disruptions to
Signet's information technology infrastructure and databases,
inadequacy in and disruptions to internal controls and systems,
changes in assumptions used in making accounting estimates relating
to items such as extended service plans and pensions, the impact of
the acquisition of Zale Corporation on relationships, including
with employees, suppliers, customers and competitors, and our
ability to successfully integrate Zale's operations and to realize
synergies from the transaction.
For a discussion of these and other risks and uncertainties
which could cause actual results to differ materially from those
expressed in any forward-looking statement, see the "Risk Factors"
section of Signet's Fiscal 2016 Annual Report on Form 10-K filed
with the SEC on March 24, 2016 and quarterly reports on Form 10-Q
filed with the SEC. Signet undertakes no obligation to update or
revise any forward-looking statements to reflect subsequent events
or circumstances, except as required by law.
The below tables reflect the impact of costs associated with the
acquisition of Zale Corporation. Management finds the information
useful to analyze the results of the business excluding these items
in order to appropriately evaluate the performance of the business
without the impact of significant and unusual items. Management
views acquisition-related impacts as events that are not
necessarily reflective of operational performance during a period.
In particular, management believes the consideration of measures
that exclude such expenses can assist in the comparison of
operational performance in different periods which may or may not
include such expenses.
Non-GAAP Reconciliation for the fourth quarter ended
January 28, 2017 (in mil. of $ except per share data)
Signet
PurchaseAccounting1
IntegrationCosts2
Adjusted Signet Sales 2,269.9 100.0 %
(2.6) $ — 2,272.5 100.0 %
Cost of sales (1,324.4 ) (58.3 )% 0.9 —
(1,325.3 ) (58.3 )% Gross margin 945.5 41.7 % (1.7) —
947.2 41.7 % Selling, general and administrative expenses (615.3 )
(27.1 )% (1.6) (9.9) (603.8 ) (26.6 )% Other operating income, net
69.0 3.0 % — —
69.0 3.0 % Operating income 399.2 17.6 % (3.3) (9.9) 412.4
18.1 % Interest expense, net (13.0 ) (0.6 )% —
— (13.0 ) (0.5 )% Income before income taxes
386.2 17.0 % (3.3) (9.9) 399.4 17.6 % Income taxes (88.7 ) (3.9 )%
1.1 3.8 (93.6 ) (4.1 )%
Net income 297.5 13.1 % (2.2) (6.1) 305.8 13.5 % Dividends on
redeemable convertible preferred shares (9.7 ) nm —
— (9.7 ) nm Net income attributable to
common shareholders 287.8 12.7 % (2.2)
(6.1) 296.1 13.0 % Earnings per share –
diluted 3.92 (0.03)
(0.08) 4.03 1. Includes
the impact of all acquisition adjustments recognized in conjunction
with the acquisition of Zale Corporation in Fiscal 2015. 2.
Integration costs are expenses associated with I/T implementations,
severance related to organizational changes and expenses associated
with the settlement of miscellaneous legal matters pending as of
the date of the Zale acquisition. These costs are included within
Signet's Other segment. nm Not meaningful.
Non-GAAP Reconciliation for the fourth quarter ended January 30,
2016 (in mil. of $ except per share data)
Signet
PurchaseAccounting1
TransactionCosts2
Adjusted Signet Sales 2,392.6 100.0 %
(5.2) — 2,397.8 100.0 %
Cost of sales (1,376.6 ) (57.5 )% 0.5 —
(1,377.1 ) (57.4 )% Gross margin 1,016.0 42.5 % (4.7)
— 1,020.7 42.6 % Selling, general and administrative expenses
(686.6 ) (28.7 )% (1.5) (19.1) (666.0 ) (27.8 )% Other operating
income, net 63.7 2.6 % — —
63.7 2.6 % Operating income 393.1 16.4 % (6.2)
(19.1) 418.4 17.4 % Interest expense, net (12.1 ) (0.5 )%
— — (12.1 ) (0.5 )% Income
before income taxes 381.0 15.9 % (6.2) (19.1) 406.3 16.9 % Income
taxes (109.1 ) (4.5 )% 1.8 6.9
(117.8 ) (4.9 )% Net income 271.9 11.4 % (4.4) (12.2) 288.5
12.0 % Dividends on redeemable convertible preferred shares —
— — — —
— Net income attributable to common shareholders
271.9 11.4 % (4.4) (12.2)
288.5 12.0 % Earnings per share – diluted 3.42
(0.06) (0.15) 3.63
1. Includes the impact of all
acquisition adjustments recognized in conjunction with the
acquisition of Zale Corporation in Fiscal 2015. 2. Transaction
costs include transaction-related and integration expenses
associated with advisor fees for legal, tax, accounting, IT
implementations and consulting services, as well as severance
costs. These costs are included within Signet's Other segment.
Non-GAAP Reconciliation for the fiscal year ended
January 28, 2017 (in mil. of $ except per share data)
Signet
PurchaseAccounting1
IntegrationCosts2
Adjusted Signet Sales 6,408.4 100.0 %
(13.3) $ — 6,421.7 100.0
% Cost of sales (4,047.6 ) (63.2 )% 2.0
— (4,049.6 ) (63.1 )% Gross margin 2,360.8 36.8 %
(11.3) — 2,372.1 36.9 % Selling, general and administrative
expenses (1,880.2 ) (29.3 )% (5.5) (28.4) (1,846.3 ) (28.7 )% Other
operating income, net 282.6 4.4 % —
— 282.6 4.4 % Operating income 763.2
11.9 % (16.8) (28.4) 808.4 12.6 % Interest expense, net (49.4 )
(0.8 )% — — (49.4 ) (0.8
)% Income before income taxes 713.8 11.1 % (16.8) (28.4) 759.0 11.8
% Income taxes (170.6 ) (2.6 )% 6.2
10.8 (187.6 ) (2.9 )% Net income 543.2 8.5 % (10.6)
(17.6) 571.4 8.9 % Dividends on redeemable convertible preferred
shares (11.9 ) nm — —
(11.9 ) nm Net income attributable to common shareholders 531.3
8.3 % (10.6) (17.6)
559.5 8.7 % Earnings per share – diluted 7.08
(0.14) (0.23) 7.45
1. Includes the impact of all
acquisition adjustments recognized in conjunction with the
acquisition of Zale Corporation in Fiscal 2015. 2. Integration
costs are expenses associated with I/T implementations, severance
related to organizational changes and expenses associated with the
settlement of miscellaneous legal matters pending as of the date of
the Zale acquisition. These costs are included within Signet's
Other segment. nm Not meaningful.
Non-GAAP
Reconciliation for the fiscal year ended January 30, 2016 (in mil.
of $ except per share data) Signet
PurchaseAccounting1
TransactionCosts2
Adjusted Signet Sales 6,550.2 100.0 %
(27.2) — 6,577.4 100.0 %
Cost of sales (4,109.8 ) (62.7 )% (8.4)
— (4,101.4 ) (62.4 )% Gross margin 2,440.4 37.3 %
(35.6) — 2,476.0 37.6 % Selling, general and administrative
expenses (1,987.6 ) (30.4 )% 9.2 (78.9) (1,917.9 ) (29.1 )% Other
operating income, net 250.9 3.8 % —
— 250.9 3.8 % Operating income 703.7
10.7 % (26.4) (78.9) 809.0 12.3 % Interest expense, net (45.9 )
(0.7 )% — — (45.9 ) (0.7
)% Income before income taxes 657.8 10.0 % (26.4) (78.9) 763.1 11.6
% Income taxes (189.9 ) (2.9 )% 9.3
16.8 (216.0 ) (3.3 )% Net income 467.9 7.1 % (17.1)
(62.1) 547.1 8.3 % Dividends on redeemable convertible preferred
shares — — — —
— — Net income attributable to common
shareholders 467.9 7.1 % (17.1)
(62.1) 547.1 8.3 % Earnings per share –
diluted 5.87 (0.21)
(0.78) 6.86 1. Includes
the impact of all acquisition adjustments recognized in conjunction
with the acquisition of Zale Corporation in Fiscal 2015. 2.
Transaction costs include transaction-related and integration
expenses associated with advisor fees for legal, tax, accounting,
IT implementations and consulting services, as well as severance
costs. These costs are included within Signet's Other segment.
Free cash flow is a non-GAAP measure defined as the net cash
provided by operating activities less purchases of property, plant
and equipment. Management considers that this is helpful in
understanding how the business is generating cash from its
operating and investing activities that can be used to meet the
financing needs of the business. Free cash flow is an indicator
used by management frequently in evaluating its overall liquidity
and determining appropriate capital allocation strategies. Free
cash flow does not represent the residual cash flow available for
discretionary expenditure.
(in millions) Fiscal 2017 Fiscal 2016
Net cash provided by operating activities $ 678.3 $ 443.3 Purchase
of property, plant and equipment (278.0) (226.5) Free cash flow $
400.3 $ 216.8
Condensed Consolidated Income
Statements(Unaudited)
13 weeks ended 52 weeks
ended (in millions, except per share amounts)
January 28,2017
January 30,2016
January 28,2017
January 30,2016
Sales 2,269.9 2,392.6 6,408.4 6,550.2
Cost of sales (1,324.4) (1,376.6)
(4,047.6) (4,109.8)
Gross margin
945.5 1,016.0 2,360.8 2,440.4 Selling,
general and administrative expenses (615.3) (686.6) (1,880.2)
(1,987.6) Other operating income, net 69.0
63.7 282.6 250.9
Operating
income 399.2 393.1 763.2 703.7
Interest expense, net (13.0) (12.1)
(49.4) (45.9)
Income before income
taxes 386.2 381.0 713.8 657.8
Income taxes (88.7) (109.1)
(170.6) (189.9)
Net income 297.5
271.9 543.2 467.9 Dividends on redeemable
convertible preferred shares (9.7) —
(11.9) —
Net income attributable to
common shareholders 287.8 271.9 531.3
467.9 Earnings per common share: Basic $ 4.17 $ 3.43 $ 7.13
$ 5.89 Diluted $ 3.92 $ 3.42 $ 7.08 $ 5.87 Weighted average common
shares outstanding: Basic 69.0 79.2 74.5 79.5 Diluted 75.8 79.4
76.7 79.7 Dividends declared per common share $ 0.26 $ 0.22 $ 1.04
$ 0.88
Condensed Consolidated Balance
Sheets(Unaudited)
(in millions, except par value per
share amount)
January 28,2017
January 30,2016
Assets Current assets: Cash and cash equivalents 98.7 137.7
Accounts receivable, net 1,858.0 1,756.4 Other receivables 95.9
84.0 Other current assets 136.3 152.6 Income taxes 4.4 3.5
Inventories 2,449.3 2,453.9
Total current assets
4,642.6 4,588.1 Non-current assets: Property, plant
and equipment, net 822.9 727.6 Goodwill 517.6 515.5 Intangible
assets, net 417.0 427.8 Other assets 165.1 154.6 Deferred tax
assets 0.7 — Retirement benefit asset 31.9 51.3
Total assets
6,597.8 6,464.9 Liabilities and Shareholders’
equity Current liabilities: Loans and overdrafts 91.1 57.7
Accounts payable 255.7 269.1 Accrued expenses and other current
liabilities 478.2 498.3 Deferred revenue 276.9 260.3 Income taxes
101.8 65.7
Total current liabilities 1,203.7
1,151.1 Non-current liabilities: Long-term debt 1,317.9
1,321.0 Other liabilities 213.7 230.5 Deferred revenue 659.0 629.1
Deferred tax liabilities 101.4 72.5
Total liabilities
3,495.7 3,404.2 Commitments and contingencies
Series A redeemable convertible preferred shares of $0.01 par
value: 500 shares authorized,0.625 shares outstanding
611.9 — Shareholders’ equity: Common shares of $0.18
par value: authorized 500 shares, 68.3 shares outstanding(2016:
79.4 outstanding) 15.7 15.7 Additional paid-in capital 280.7 279.9
Other reserves 0.4 0.4 Treasury shares at cost: 18.9 shares (2016:
7.8 shares) (1,494.8) (495.8) Retained earnings 3,995.9 3,534.6
Accumulated other comprehensive loss (307.7) (274.1)
Total
shareholders’ equity 2,490.2 3,060.7 Total
liabilities, redeemable convertible preferred shares and
shareholders’ equity 6,597.8 6,464.9
Condensed Consolidated Statements of Cash
Flows(Unaudited)
52 weeks ended (in millions)
January 28,2017
January 30,2016
Cash flows from operating activities: Net
income 543.2 467.9 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
188.8 175.3 Amortization of unfavorable leases and contracts (19.7)
(28.7) Pension benefit (1.6) — Share-based compensation 8.0 16.4
Deferred taxation 27.7 25.0 Excess tax benefit from exercise of
share awards (2.4) (6.9) Amortization of debt discount and issuance
costs 2.8 3.6 Other non-cash movements 0.4 3.6 Changes in operating
assets and liabilities: Increase in accounts receivable (102.7)
(189.8) Increase in other receivables and other assets (20.4)
(44.1) Decrease (increase) in other current assets 13.5 (26.5)
Increase in inventories (9.7) (46.0) (Decrease) in accounts payable
(7.0) (6.4) (Decrease) increase in accrued expenses and other
liabilities (21.8) 51.8 Increase in deferred revenue 43.6 76.3
Increase (decrease) in income taxes payable 38.9 (25.7) Pension
plan contributions (3.3) (2.5)
Net
cash provided by operating activities
678.3 443.3 Investing activities
Purchase of property, plant and equipment (278.0) (226.5) Purchase
of available-for-sale securities (10.4) (6.2) Proceeds from sale of
available-for-sale securities 10.0 4.0
Net cash used in investing activities
(278.4) (228.7) Financing activities
Dividends paid on common shares (75.6) (67.1) Proceeds from
issuance of common shares 2.1 5.0 Proceeds from issuance of
redeemable convertible preferred shares, net of issuance costs
611.3 — Excess tax benefit from exercise of share awards 2.4 6.9
Repayments of term loan (16.4) (25.0) Proceeds from securitization
facility 2,404.1 2,303.9 Repayments of securitization facility
(2,404.1) (2,303.9) Proceeds from revolving credit facility 1,270.0
316.0 Repayments of revolving credit facility (1,214.0) (316.0)
Payment of debt issuance costs (2.7) — Repurchase of common shares
(1,000.0) (130.0) Net settlement of equity based awards (4.9) (8.3)
Principal payments under capital lease obligations (0.2) (1.0)
Proceeds from (repayment of) short-term borrowings
(10.2) (47.1)
Net cash (used in) provided by
financing activities (438.2)
(266.6) Cash and cash equivalents at beginning of period
137.7 193.6 Decrease in cash and cash equivalents (38.3) (52.0)
Effect of exchange rate changes on cash and cash equivalents (0.7)
(3.9) Cash and cash equivalents at end of period 98.7
137.7
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170309005347/en/
Signet JewelersInvestors:James Grant, +1-330-668-5412VP Investor
RelationsorMedia:David Bouffard, +1-330-668-5369VP Corporate
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