Signet Jewelers Limited (“Signet”) (NYSE:SIG), the world's
largest retailer of diamond jewelry, today announced its results
for the 13 weeks ended August 3, 2019 (“second quarter Fiscal
2020”).
Summary:
Second Quarter Fiscal 2020
- Same store sales ("SSS") down 1.5%1, with eCommerce sales up
4.4%
- GAAP diluted earnings per share ("EPS") of $(0.86) including a
goodwill impairment charge of $0.91
- Non-GAAP diluted EPS of $0.512
- Net cash provided by operating activities of $246.6 million
year to date
- Free cash flow of $194.4 million year to date2
Fiscal 2020 Guidance
- Fiscal 2020 same store sales down 2.5% to down 1.5% and total
sales of $6.0 billion - $6.03 billion
- Fiscal 2020 GAAP operating income of $142 - $172 million and
non-GAAP operating income of $260 - $280 million2
- Fiscal 2020 GAAP diluted EPS of $0.87 - $1.33 and non-GAAP
diluted EPS of $2.91 - $3.232
Refinancing
- Expects to refinance existing credit facilities by entering
into new fully committed 5-year $1.6 billion senior asset-based
credit facilities which will extend maturities and increase
liquidity
Fiscal Q2'201
Fiscal Q2'19
YTD Fiscal
2020
YTD Fiscal
2019
Revenue ($ in millions)
$
1,364.4
$
1,420.1
$
2,796.1
$
2,900.7
Same store sales % change1
(1.5
)%
1.7
%
(1.4
)%
0.7
%
GAAP
Operating income (loss)
$
(22.4
)
$
(58.1
)
$
(25.0
)
$
(632.3
)
Operating income (loss) as % of sales
(1.6
)%
(4.1
)%
(0.9
)%
(21.8
)%
GAAP Diluted EPS
$
(0.86
)
$
(0.56
)
$
(1.21
)
$
(9.27
)
Non-GAAP(2)
Non-GAAP operating income (loss)
$
53.1
$
48.6
$
77.3
$
72.7
Non-GAAP operating income (loss) as % of
sales
3.9
%
3.4
%
2.8
%
2.5
%
Non-GAAP Diluted EPS
$
0.51
$
0.52
$
0.59
$
0.60
(1)
Same store sales include physical store
sales and eCommerce sales.
(2)
See non-GAAP reconciliation page.
“We continue to gain traction on our transformation initiatives
and delivered second quarter results that exceeded our same store
sales, non-GAAP operating profit, and non-GAAP earnings per share
expectations. Our continuing cost control and disciplined inventory
management also led to improved adjusted free cash flow generation
in both the second quarter as well as year to date. We remain on
track to deliver our full year non-GAAP financial guidance,” said
Signet Chief Executive Officer Virginia C. Drosos.
“As we enter the competitive holiday season, we believe we are
positioned to execute our product strategy by launching additional
flagship brands, delivering relevant on-trend new merchandise and
offering a highly competitive assortment for value-oriented
shoppers. We remain focused on delivering our Path to Brilliance
transformation designed to drive sustainable growth and create
value for our shareholders over the long-term.”
Change from previous
year
Second Quarter Fiscal 2020
Same store sales
Non-same store sales,
net
Total sales at constant
exchange rate
Exchange translation
impact
Total sales as
reported
Total sales (in
millions)
Kay
(2.7
)%
(0.4
)%
(3.1
)%
na
(3.1
)%
$
528.9
Zales
2.0
%
(2.9
)%
(0.9
)%
na
(0.9
)%
$
275.9
Jared
(3.5
)%
(2.6
)%
(6.1
)%
na
(6.1
)%
$
254.6
Piercing Pagoda
11.4
%
(1.6
)%
9.8
%
na
9.8
%
$
74.2
James Allen
(1.5
)%
—
%
(1.5
)%
na
(1.5
)%
$
53.6
Peoples
(0.9
)%
(2.1
)%
(3.0
)%
(1.6
)%
(4.6
)%
$
45.5
Regional banners
(10.0
)%
(50.8
)%
(60.8
)%
(0.2
)%
(61.0
)%
$
8.3
North America segment
(1.0
)%
(2.5
)%
(3.5
)%
(0.1
)%
(3.6
)%
$
1,241.0
International segment
(7.0
)%
(1.9
)%
(8.9
)%
(4.4
)%
(13.3
)%
$
113.9
Other(1)
na
400.0
%
400.0
%
—
%
400.0
%
$
9.5
Signet
(1.5
)%
(1.9
)%
(3.4
)%
(0.5
)%
(3.9
)%
$
1,364.4
(1)
Includes sales from Signet’s diamond
sourcing initiative.
Second quarter Fiscal
2020
Second quarter Fiscal
2019
GAAP Operating income (loss) in
millions
$
% of sales
$
% of sales
North America segment
$
24.2
2.0
%
$
(4.2
)
(0.3
)%
International segment
(1.0
)
(0.9
)%
(6.1
)
(4.6
)%
Other
(45.6
)
n
m
(47.8
)
n
m
Total GAAP operating income (loss)
$
(22.4
)
(1.6
)%
$
(58.1
)
(4.1
)%
Second quarter Fiscal
2020
Second quarter Fiscal
2019
Non-GAAP Operating income (loss) in
millions
$
% of sales
$
% of sales
North America segment
$
73.6
5.9
%
$
68.9
5.4
%
International segment
(1.0
)
(0.9
)%
(2.3
)
(1.7
)%
Other
(19.5
)
n
m
(18.0
)
n
m
Total Non-GAAP operating income (loss)
$
53.1
3.9
%
$
48.6
3.4
%
Signet Path to Brilliance Expected Savings and Restructuring
Costs
In Fiscal 2020, the company expects net cost savings of $70
million - $80 million. The company expects its transformation plan
to deliver $200 million - $225 million of net cost savings in
Fiscal Years 2019-2021, inclusive of the $85 million achieved in
Fiscal 2019.
In Fiscal 2020, the Company’s preliminary estimate for pre-tax
charges related to cost reduction activities ranges from $60
million - $70 million, of which $46 million - $58 million are
expected to be cash charges. The company's estimate for pre-tax
charges in Fiscal Years 2019 - 2021 is a range of $200 million -
$220 million, of which $105 million - $115 million are expected to
be cash charges.
In Fiscal 2020, the company expects to close approximately 150
stores, with 66 closures in the fiscal year to date and limited new
store openings for the full year. The company expects it will have
reduced its store base by approximately 13% over the three-year
period from Fiscal Years 2018 - 2020, materially reducing its
exposure to lower grade malls and simplifying the portfolio by
exiting most of its regional banners.
Refinancing
Signet announced today that it expects to enter into new
fully-committed 5-year $1.6 billion senior asset-based credit
facilities to refinance all outstanding amounts under its existing
senior credit facilities that mature in July 2021, to finance a
tender offer for its outstanding senior notes due in 2024, to pay
related fees and expenses, and for general corporate purposes.
The new credit facilities are subject to final documentation and
customary closing conditions. Please see the separate press release
issued today for further details of the tender offer.
These new senior asset-based credit facilities improve financial
flexibility as they are expected to be leverage neutral, extend
Signet's debt maturity profile and increase available liquidity.
These facilities are expected to have a slightly lower interest
expense versus the company's existing capital structure.
Goodwill and Intangible Asset Impairment
During the second quarter of Fiscal 2020 a non-cash immaterial
out of period adjustment was recognized related to the calculation
of goodwill impairment during Fiscal 2019. The amount of the
goodwill adjustment recognized was $47.7 million, with $35.2
million related to Zales goodwill and $12.5 million related to
R2Net goodwill.
Second Quarter 2020 Financial Highlights
Signet's total sales were $1.36 billion, down 3.9%, in the 13
weeks ended August 3, 2019 on a reported basis and down 3.4% on a
constant currency basis. Total same store sales performance
decreased 1.5% year-over-year, inclusive of: 1) an unfavorable 40
bps impact related to a timing shift of service plan revenue
recognized and 2) an unfavorable 35 bps impact due to a planned
shift in timing of promotions at Jared.
North America payment plan participation rate, including both
credit and leasing sales, was 51.4% versus 53.3% in the prior year
second quarter.
eCommerce sales were $156.9 million, up 4.4% year over year.
eCommerce sales accounted for 11.5% of sales, up from 10.6% of
total sales in the prior year quarter. Brick and mortar same store
sales declined 2.3%.
By operating segment:
North America
- North America same store sales decreased 1.0%, inclusive of: 1)
an unfavorable 45 bps impact related to a timing shift of service
plan revenue recognized and 2) an unfavorable 40 bps impact due to
a planned shift in timing of promotions at Jared (which had an
unfavorable impact of 190 bps on Jared's same store sales). North
America same store sales performance strengthened each month as we
moved through the second quarter.
- Average transaction value ("ATV") increased 0.5% and the number
of transactions decreased 1.6%.
- eCommerce sales increased 5.3%, and brick and mortar same store
sales decreased 1.8%. Excluding James Allen, eCommerce sales
increased 9.9%.
- Fashion category sales increased on a same store sales basis
led by on trend collections including gold fashion jewelry, the
Love+Be Loved collection and Disney. The bridal, watches and other
categories declined on a same store sales basis. Enchanted Disney
and Leo performed well within bridal while Ever Us and Tolkowsky
declined. The other category performance primarily reflects
declines in Pandora®.
International
- International same store sales decreased 7.0%. ATV was flat and
the number of transactions decreased 6.8%. Sales declined across
categories and continued to reflect a difficult operating
environment in the UK.
GAAP gross margin was $458.7 million, or 33.6% of sales, up 350
bps versus the prior year quarter. The prior year quarter included
a $63.2 million restructuring charge related to inventory that the
company discontinued as part of its transformation plan. In the
current year quarter, an additional charge of $4.4 million was
taken related to this inventory based on an estimate of a lower net
realizable value. Excluding these charges, non-GAAP gross margin
was 33.9%, down 60 bps versus prior year. Factors impacting gross
margin rate include: 1) an unfavorable 65 bps impact related to
higher diamond sales to third parties from our Botswana operations,
2) an unfavorable 25 bps impact related to a timing shift of
revenue recognized on service plans; and 3) the favorable impact of
transformation cost savings.
SGA was $411.4 million, or 30.2% of sales, compared to $444.8
million, or 31.3% of sales in the prior year. Decreases in SGA were
driven by lower store staff costs primarily due to closed stores
and transformation cost savings. These savings were partially
offset by a $5 million increase in credit costs related to the
transition to an outsourced credit model.
GAAP operating income (loss) was $(22.4) million or (1.6)% of
sales, compared to $(58.1) million, or (4.1)% of sales in the prior
year second quarter. The operating income change reflected: 1) a
prior year restructuring charge related to inventory of $63.2
million compared to a $4.4 million restructuring charge related to
inventory in the current year, 2) a prior year loss of $23.9
million related to non-prime receivables classified as held for
sale, 3) a current year goodwill impairment charge of $47.7 million
related to Fiscal 2019; and 4) a $3.8 million year over year
increase in restructuring charges related to the Path to Brilliance
transformation plan.
Non-GAAP operating income was $53.1 million, or 3.9% of sales,
compared to $48.6 million, or 3.4% of sales in prior year second
quarter. Non-GAAP operating income excluded a $47.7 million
goodwill impairment charge and $27.8 million in restructuring
charges related to the Path to Brilliance transformation plan in
the current year quarter. The non-GAAP operating income change was
primarily driven by transformation cost savings somewhat offset by
lower sales. The outsourcing of credit had a $3 million unfavorable
impact on operating profit in the quarter.
Income tax expense was $3.8 million compared to income tax
benefit of $44.0 million in the prior year second quarter. The
current quarter GAAP effective tax rate was primarily driven by
pre-tax earnings mix by jurisdiction and a non-tax deductible
goodwill impairment. The prior year tax benefit was primarily
driven by: 1) restructuring charges related to the transformation
plan, 2) a loss recognized in the U.S. associated with the
writedown of the non-prime receivables; and 3) pre-tax earnings mix
by jurisdiction. On a non-GAAP basis, income tax expense was $8.7
million for an effective tax rate of 20.1%, primarily driven by
pre-tax earnings mix by jurisdiction.
GAAP EPS was $(0.86), including a $0.91 charge related to
goodwill impairment and a $0.46 charge related to the Path to
Brilliance transformation plan. Excluding these charges, EPS was
$0.51 on a non-GAAP basis.
GAAP and non-GAAP EPS in the quarter are based on net income
(loss) available to common shareholders as the preferred shares are
anti-dilutive and excluded from the ending share count due to the
level of second quarter net income (loss).
Balance Sheet and Statement of Cash Flows
Net cash provided by operating activities was $246.6 million
year to date and free cash flow was $194.4 million year to date.
Free cash flow benefited from significantly lower use of cash for
inventory.
Cash and cash equivalents were $271.5 million, compared to
$134.1 million at the prior year quarter-end. Total debt, including
short-term and long-term debt and excluding operating lease
liabilities, was $682.4 million, compared to $782.5 million at the
prior year quarter-end.
Financial Guidance:
Fiscal 2020
Same store sales
down 2.5% - down 1.5%
Total sales
$6.0 billion - $6.03 billion
GAAP operating income
$142 million - $172 million
Non-GAAP operating income
$260 million - $280 million
GAAP diluted EPS
$0.87 - $1.33
Non-GAAP diluted EPS
$2.91 - $3.23
Weighted average common shares - basic
51.8 million
GAAP tax rate
17.0% - 19.0%
Non-GAAP tax rate
16.0% - 17.0%
Capital expenditures
$135 million - $155 million
Net selling square footage
down 2.5% - down 3.5%
The above Fiscal 2020 guidance reflects the following
assumptions:
- GAAP and non-GAAP operating profit and EPS guidance is now
inclusive of recently announced U.S List 4 tariff impact enacted on
September 1, 2019.
- Same store sales guidance includes an unfavorable impact of 25
bps related to a timing shift of service plan revenue
recognized.
- Expected unfavorable $190 million impact on revenues due to
store closings.
- Company plans to close approximately 150 stores in Fiscal 2020
and open 30 stores, for a net selling square footage decline of
approximately 2.5% - 3.5%.
- Credit outsourcing is expected to have an approximately flat
year-over-year impact on operating profit.
- Transformation program net savings goal of $70 million - $80
million.
- Pre-tax charges of $60 million - $70 million related to the
transformation plan.
- Interest expense of $41 million - $43 million.
- For purposes of calculating both GAAP and non-GAAP EPS, the
company expects to use the basic share count for the first three
quarters and the full year, and the diluted share count for the
fourth quarter.
- Non-GAAP EPS guidance of $2.91 - $3.23 excludes restructuring
charges associated with the transformation plan, goodwill
impairment charges, any potential gain or loss on early
extinguishment of debt and fees on debt refinancing.
Q3 Fiscal 2020
Same store sales
down 2.0% - down 1.0%
Total sales
$1.14 billion - $1.16 billion
GAAP operating income
($58) million - ($45) million
Non-GAAP operating income
($50) million - ($42) million
GAAP diluted EPS
($1.48) - ($1.21)
Non-GAAP diluted EPS
($1.16) - ($1.02)
Weighted average common
shares - basic
51.7 million
GAAP tax rate
10.0% - 12.0%
Non-GAAP tax rate
15.0% - 15.5%
The above Q3 Fiscal 2020 guidance reflects the following
assumptions:
- GAAP and non-GAAP operating profit and EPS guidance is
inclusive of recently announced U.S List 4 tariff impact enacted on
September 1, 2019.
- Expected year-over-year advertising increase of approximately
$12 million related to the "Always On" media strategy.
- Expected unfavorable $35 million impact on revenues due to
store closings.
- Pre-tax charges of $3 million - $8 million related to the
transformation plan.
- Interest expense of $10.5 million - $11.5 million.
- GAAP and non-GAAP EPS guidance is calculated by subtracting the
preferred dividend from net income and applying basic share
count.
- Non-GAAP EPS guidance of ($1.16) - ($1.02) excludes
restructuring charges associated with the transformation plan, any
potential gain or loss on early extinguishment of debt and fees on
debt refinancing.
Quarterly Dividend:
Signet’s Board of Directors declared a quarterly cash dividend
of $0.37 per share for the third quarter of Fiscal 2020, payable on
November 29, 2019 to shareholders of record on November 1, 2019,
with an ex-dividend date of October 31, 2019.
Conference Call:
A conference call is scheduled today at 8:30 a.m. ET and a
simultaneous audio webcast is available at www.signetjewelers.com.
The call details are:
Toll Free Dial-in: 833-245-9657
International Dial-in: +1 647-689-4229
Access code: 6073039
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 3,300 stores
primarily under the name brands of Kay Jewelers, Zales, Jared,
H.Samuel, Ernest Jones, Peoples, Piercing Pagoda, and
JamesAllen.com. 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, www.pagoda.com, and
www.jamesallen.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, appear in a number of places
throughout this document and include statements regarding, among
other things, Signet’s results of operation, financial condition,
liquidity, prospects, growth, strategies, the industry in which
Signet operates, the expected entry into new credit facilities and
completion of the tender offer. 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 which could cause the actual results to not
be realized, including, but not limited to: our ability to complete
the tender offer, our ability to enter into the new credit
facilities, market conditions, or other factors that relate to us,
including our ability to implement Signet's transformation
initiative; the effect of US federal tax reform and adjustments
relating to such impact on the completion of our quarterly and
year-end financial statements; changes in interpretation or
assumptions, and/or updated regulatory guidance regarding the US
federal tax reform; the benefits and outsourcing of the credit
portfolio sale including technology disruptions, future financial
results and operating results; deterioration in the performance of
individual businesses or of the company's market value relative to
its book value, resulting in impairments of fixed assets or
intangible assets or other adverse financial consequences,
including tax consequences related thereto, especially in view of
the company’s recent market valuation; our ability to successfully
integrate Zale Corporation and R2Net’s operations and to realize
synergies from the Zale and R2Net transactions; general economic
conditions; potential regulatory changes, global economic
conditions or other developments related to the United Kingdom’s
announced intention to negotiate a formal exit from the European
Union; a decline in consumer spending or deterioration in consumer
financial position; the merchandising, pricing and inventory
policies followed by Signet; Signet’s relationships with suppliers
and ability to obtain merchandise that customers wish to purchase;
the failure to adequately address the List 4 tariff impact and or
imposition of additional duties, tariffs, taxes and other charges
or other barriers to trade; the reputation of Signet and its
banners; the level of competition and promotional activity in the
jewelry sector; the cost and availability of diamonds, gold and
other precious metals; changes in the supply and consumer
acceptance of gem quality lab created diamonds; regulations
relating to customer credit; seasonality of Signet’s business; the
success of recent changes in Signet’s executive management team;
the performance of and ability to recruit, train, motivate and
retain qualified sales associates; the impact of weather-related
incidents on Signet’s business, financial market risks; exchange
rate fluctuations; changes in Signet’s credit rating; changes in
consumer attitudes regarding jewelry; management of social, ethical
and environmental risks; the development and maintenance of
Signet’s OmniChannel retailing; the ability to optimize Signet’s
real estate footprint; 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 credit outsourcing fees, extended service plans
and pensions; risks related to Signet being a Bermuda corporation;
the impact of the acquisition of Zale Corporation on relationships,
including with employees, suppliers, customers and competitors;
Signet’s ability to protect its intellectual property; changes in
taxation benefits, rules or practices in the US and jurisdictions
in which Signet’s subsidiaries are incorporated, including
developments related to the tax treatment of companies engaged in
Internet commerce; and an adverse development in legal or
regulatory proceedings or tax matters, any new regulatory
initiatives or investigations, and ongoing compliance with
regulations and any consent orders or other legal or regulatory
decisions.
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 2019 Annual Report on Form 10-K filed
with the SEC on April 3, 2019 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.
GAAP to Non-GAAP Reconciliations
The following information provides reconciliations of the most
comparable financial measures calculated and presented in
accordance with accounting principles generally accepted in the
U.S. (“GAAP”) to presented non-GAAP financial measures. The company
believes that non-GAAP financial measures, when reviewed in
conjunction with GAAP financial measures, can provide more
information to assist investors in evaluating historical trends and
current period performance. For these reasons, internal management
reporting also includes non-GAAP measures. Items may be excluded
from GAAP financial measures when the company believes this
provides greater clarity to management and investors.
These non-GAAP financial measures should be considered in
addition to, and not superior to or as a substitute for the GAAP
financial measures presented in this earnings release and the
company’s financial statements and other publicly filed reports. In
addition, our non-GAAP financial measures may not be the same as or
comparable to similar non-GAAP measures presented by other
companies.
In discussing financial results, the company refers to free cash
flow which is not in accordance with GAAP and is defined as the net
cash provided by operating activities less purchases of property,
plant and equipment. Management considers adjusted free cash flow,
defined as free cash flow excluding proceeds from the sale of
non-prime receivables, as 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. Adjusted
free cash flow is an indicator used by management frequently in
evaluating its overall liquidity and determining appropriate
capital allocation strategies. Free cash flow and adjusted free
cash flow do not represent the residual cash flow available for
discretionary expenditure.
26 weeks ended
(in millions)
August 3, 2019
August 4, 2018
Net cash provided by operating
activities
$
246.6
$
452.6
Purchase of property, plant and
equipment
(52.2
)
(56.1
)
Free cash flow
$
194.4
$
396.5
26 weeks ended
(in millions)
August 3, 2019
August 4, 2018
Free cash flow
$
194.4
$
396.5
Proceeds from sale of in-house finance
receivables
—
(445.5
)
Adjusted free cash flow
$
194.4
$
(49.0
)
13 weeks ended
26 weeks ended
(in millions)
August 3, 2019
August 4, 2018
August 3, 2019
August 4, 2018
Gross margin
$
458.7
$
427.0
$
958.1
$
911.8
Restructuring charges - cost of sales
4.4
$
63.2
4.4
$
63.2
Non-GAAP Gross Margin
$
463.1
$
490.2
$
962.5
$
975.0
13 weeks ended
26 weeks ended
(in millions)
August 3, 2019
August 4, 2018
August 3, 2019
August 4, 2018
Total GAAP operating income (loss)
$
(22.4
)
$
(58.1
)
$
(25.0
)
$
(632.3
)
Charges related to transformation plan
27.8
82.8
54.6
89.3
Loss related to goodwill and intangible
impairment
47.7
—
47.7
448.7
Loss related to sale of non-prime
receivables
—
23.9
—
167.0
Total non-GAAP operating income (loss)
$
53.1
$
48.6
$
77.3
$
72.7
13 weeks ended
26 weeks ended
(in millions)
August 3, 2019
August 4, 2018
August 3, 2019
August 4, 2018
North America segment GAAP operating
income (loss)
$
24.2
$
(4.2
)
$
72.3
$
(541.5
)
Charges related to transformation plan
1.7
53.7
1.2
53.7
Loss related to goodwill and intangible
impairment
47.7
—
47.7
448.7
Loss related to sale of non-prime
receivables
—
19.4
—
160.4
North America segment non-GAAP operating
income (loss)
$
73.6
$
68.9
$
121.2
$
121.3
13 weeks ended
26 weeks ended
(in millions)
August 3, 2019
August 4, 2018
August 3, 2019
August 4, 2018
International segment GAAP operating
income (loss)
$
(1.0
)
$
(6.1
)
$
(9.0
)
$
(13.7
)
Charges related to transformation plan
—
3.8
—
3.8
International segment non-GAAP operating
income (loss)
$
(1.0
)
$
(2.3
)
$
(9.0
)
$
(9.9
)
13 weeks ended
26 weeks ended
(in millions)
August 3, 2019
August 4, 2018
August 3, 2019
August 4, 2018
Other segment GAAP operating income
(loss)
$
(45.6
)
$
(47.8
)
$
(88.3
)
$
(77.1
)
Charges related to transformation plan
26.1
25.3
53.4
31.8
Loss related to sale of non-prime
receivables
—
4.5
—
6.6
Other segment non-GAAP operating income
(loss)
$
(19.5
)
$
(18.0
)
$
(34.9
)
$
(38.7
)
13 weeks ended
August 3, 2019
August 4, 2018
GAAP effective tax rate
(11.8
)%
65.7
%
Charges related to transformation plan
(7.1
)%
(24.1
)%
Loss related to goodwill and intangible
impairment
39.0
%
—
%
Loss related to sale of non-prime
receivables
—
%
(23.2
)%
GAAP quarterly impact of annual tax
benefit1
—
%
(11.9
)%
Non-GAAP effective tax rate
20.1
%
6.5
%
13 weeks ended
August 3, 2019
August 4, 2018
GAAP Diluted EPS
$
(0.86
)
$
(0.56
)
Charges related to transformation
plan1
0.46
1.14
Loss related to goodwill and intangible
impairment1
0.91
—
Loss related to sale of non-prime
receivables1
—
0.10
GAAP quarterly impact of annual tax
benefit
—
(0.16
)
Non-GAAP Diluted EPS
$
0.51
$
0.52
Fiscal 2020
Guidance Low
End
Fiscal 2020
Guidance High
End
2020 GAAP operating income
$
142.0
$
172.0
Charges related to transformation plan
70.0
60.0
Loss related to goodwill and intangible
impairment
48.0
48.0
2020 Non-GAAP operating income
$
260.0
$
280.0
Fiscal 2020
Guidance Low
End
Fiscal 2020
Guidance High
End
2020 GAAP Diluted EPS
$
0.87
$
1.33
Fees related to debt refinancing1
0.10
0.10
Charges related to transformation
plan1
1.03
0.89
Loss related to goodwill and intangible
impairment
0.91
0.91
2020 Non-GAAP Diluted EPS
$
2.91
$
3.23
Q3 Fiscal 2020
Guidance Low
End
Q3 Fiscal 2020
Guidance High
End
Q3 2020 GAAP operating profit
$
(58.0
)
$
(45.0
)
Charges related to transformation plan
8.0
3.0
Q3 2020 Non-GAAP operating profit
$
(50.0
)
$
(42.0
)
Fiscal Q3'20
Guidance Low
End
Fiscal Q3'20
Guidance High
End
Q3 GAAP Diluted EPS
$
(1.48
)
$
(1.21
)
Fees related to debt refinancing1
0.10
0.10
Charges related to transformation
plan1
0.22
0.09
Q3 Non-GAAP Diluted EPS
$
(1.16
)
$
(1.02
)
1
Reconciliation of GAAP and non-GAAP charges and losses includes
related tax impact.
Condensed Consolidated Income
Statements (Unaudited)
13 weeks ended
26 weeks ended
(in millions, except per share
amounts)
August 3, 2019
August 4, 2018
August 3, 2019
August 4, 2018
Sales
$
1,364.4
$
1,420.1
$
2,796.1
$
2,900.7
Cost of sales
(901.3
)
(929.9
)
(1,833.6
)
(1,925.7
)
Restructuring charges - cost of sales
(4.4
)
(63.2
)
(4.4
)
(63.2
)
Gross margin
458.7
427.0
958.1
911.8
Selling, general and administrative
expenses
(411.4
)
(444.8
)
(886.6
)
(927.6
)
Credit transaction, net
—
(23.9
)
—
(167.0
)
Restructuring charges
(23.4
)
(19.6
)
(50.2
)
(26.1
)
Goodwill and intangible impairments
(47.7
)
—
(47.7
)
(448.7
)
Other operating income, net
1.4
3.2
1.4
25.3
Operating income (loss)
(22.4
)
(58.1
)
(25.0
)
(632.3
)
Interest expense, net
(10.1
)
(9.4
)
(19.3
)
(18.3
)
Other non-operating income
0.2
0.5
0.5
1.1
Income (loss) before income taxes
(32.3
)
(67.0
)
(43.8
)
(649.5
)
Income taxes
(3.8
)
44.0
(2.3
)
129.9
Net income (loss)
$
(36.1
)
$
(23.0
)
$
(46.1
)
$
(519.6
)
Dividends on redeemable convertible
preferred shares
(8.2
)
(8.2
)
(16.4
)
(16.4
)
Net income (loss) attributable to common
shareholders
$
(44.3
)
$
(31.2
)
$
(62.5
)
$
(536.0
)
Earnings (loss) per common share:
Basic
$
(0.86
)
$
(0.56
)
$
(1.21
)
$
(9.27
)
Diluted
$
(0.86
)
$
(0.56
)
$
(1.21
)
$
(9.27
)
Weighted average common shares
outstanding:
Basic
51.7
56.1
51.6
57.8
Diluted
51.7
56.1
51.6
57.8
Dividends declared per common share
$
0.37
$
0.37
$
0.74
$
0.74
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions, except par value per share
amount)
August 3,
2019
February 2,
2019
August 4,
2018
Assets
Current assets:
Cash and cash equivalents
$
271.5
$
195.4
$
134.1
Accounts receivable
21.8
23.7
11.1
Other current assets
190.6
244.0
239.3
Income taxes
2.6
5.8
119.2
Inventories
2,272.1
2,386.9
2,363.8
Total current assets
2,758.6
2,855.8
2,867.5
Non-current assets:
Property, plant and equipment, net of
accumulated depreciation of $1,338.3, $1,282.8 and $1,249.2,
respectively
750.2
800.5
820.1
Operating lease right-of-use assets
1,729.3
—
—
Goodwill
248.8
296.6
509.0
Intangible assets, net
264.3
265.0
341.3
Other assets
194.7
181.2
200.7
Deferred tax assets
19.7
21.0
2.2
Total assets
$
5,965.6
$
4,420.1
$
4,740.8
Liabilities and Shareholders’
equity
Current liabilities:
Loans and overdrafts
$
54.2
$
78.8
$
111.4
Accounts payable
224.1
153.7
236.7
Accrued expenses and other current
liabilities
418.0
502.8
440.4
Deferred revenue
265.4
270.0
276.3
Operating lease liabilities, current
324.8
—
—
Income taxes
25.1
27.7
—
Total current liabilities
1,311.6
1,033.0
1,064.8
Non-current liabilities:
Long-term debt
628.2
649.6
671.1
Operating lease liabilities,
non-current
1,499.0
—
—
Other liabilities
122.7
224.1
236.1
Deferred revenue
699.8
696.5
663.3
Deferred tax liabilities
—
—
91.0
Total liabilities
4,261.3
2,603.2
2,726.3
Commitments and contingencies
Series A redeemable convertible preferred
shares of $.01 par value: authorized 500 shares, 0.625 shares
outstanding (February 2, 2019 and August 4, 2018: 0.625 shares
outstanding)
616.1
615.3
614.4
Shareholders’ equity:
Common shares of $0.18 par value:
authorized 500 shares, 52.3 shares outstanding (February 2, 2019
and August 4, 2018: 51.9 outstanding)
12.6
12.6
15.7
Additional paid-in capital
236.3
236.5
287.6
Other reserves
0.4
0.4
0.4
Treasury shares at cost: 17.7 shares
(February 2, 2019: 18.1 shares; August 4, 2018: 35.3 shares)
(993.0
)
(1,027.3
)
(2,418.0
)
Retained earnings
2,154.2
2,282.2
3,820.7
Accumulated other comprehensive loss
(322.3
)
(302.8
)
(306.3
)
Total shareholders’ equity
1,088.2
1,201.6
1,400.1
Total liabilities, redeemable convertible
preferred shares and shareholders’ equity
$
5,965.6
$
4,420.1
$
4,740.8
Condensed Consolidated Statements of
Cash Flows (Unaudited)
26 weeks ended
(in millions)
August 3,
2019
August 4,
2018
Cash flows from operating
activities
Net income (loss)
$
(46.1
)
$
(519.6
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Amortization of operating lease assets
175.2
—
Depreciation and amortization
85.8
93.7
Amortization of unfavorable leases and
contracts
(2.7
)
(4.1
)
Share-based compensation
8.3
8.2
Deferred taxation
(0.4
)
(0.3
)
Credit transaction, net
—
160.4
Goodwill and intangible impairments
47.7
448.7
Restructuring charges
14.0
77.4
Other non-cash movements
(0.4
)
(2.9
)
Changes in operating assets and
liabilities:
Decrease in accounts receivable
1.5
58.6
Proceeds from sale of in-house finance
receivables
—
445.5
Decrease in other assets and other
receivables
19.3
9.8
Decrease (increase) in inventories
96.8
(170.9
)
Increase in accounts payable
74.7
3.6
Decrease in accrued expenses and other
liabilities
(44.6
)
(2.0
)
Change in operating lease liabilities
(177.1
)
—
Decrease in deferred revenue
(1.1
)
(17.0
)
Decrease in income taxes payable
(1.1
)
(134.9
)
Pension plan contributions
(3.2
)
(1.6
)
Net cash provided by operating
activities
246.6
452.6
Investing activities
Purchase of property, plant and
equipment
(52.2
)
(56.1
)
Proceeds from sale of assets
—
5.5
Purchase of available-for-sale
securities
(11.7
)
(0.6
)
Proceeds from sale of available-for-sale
securities
0.5
8.5
Net cash used in investing activities
(63.4
)
(42.7
)
Financing activities
Dividends paid on common shares
(38.5
)
(40.6
)
Dividends paid on redeemable convertible
preferred shares
(15.6
)
(15.6
)
Repurchase of common shares
—
(485.0
)
Repayments of term loans
(17.9
)
(13.4
)
Proceeds from revolving credit
facility
—
308.0
Repayments of revolving credit
facility
—
(237.0
)
Repayments of bank overdrafts
(29.1
)
(8.1
)
Other financing activities
(0.6
)
(2.1
)
Net cash used in financing activities
(101.7
)
(493.8
)
Cash and cash equivalents at beginning of
period
195.4
225.1
Increase (decrease) in cash and cash
equivalents
81.5
(83.9
)
Effect of exchange rate changes on cash
and cash equivalents
(5.4
)
(7.1
)
Cash and cash equivalents at end of
period
$
271.5
$
134.1
Real Estate Portfolio:
Signet has a diversified real estate portfolio. On August 3,
2019, Signet had 3,284 stores totaling 4.7 million square feet of
selling space. In the second quarter, store count decreased by 16
and square feet of selling space decreased 0.4%. Compared to year
end Fiscal 2019, store count decreased by 50 and square feet of
selling space decreased 1.3%.
Store count by banner
February 2, 2019
Openings
Closures
August 3, 2019
Kay
1,214
12
(28
)
1,198
Zales
658
3
(8
)
653
Peoples
123
—
(4
)
119
Jared
256
1
(7
)
250
Piercing Pagoda
574
—
(7
)
567
Regional banners
32
—
(4
)
28
North America segment
2,857
16
(58
)
2,815
H.Samuel
288
—
(4
)
284
Ernest Jones
189
—
(4
)
185
International segment
477
—
(8
)
469
Signet
3,334
16
(66
)
3,284
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190905005259/en/
Investors: Randi Abada SVP Corporate Finance Strategy
& Investor Relations +1 330 668 3489
randi.abada@signetjewelers.com
Media: David Bouffard VP Corporate Affairs +1 330 668
5369 david.bouffard@signetjewelers.com
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