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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q


 
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended May 1, 2021 or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from to
Commission file number 1-32349
SIGNET JEWELERS LIMITED
(Exact name of Registrant as specified in its charter)
Bermuda Not Applicable
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
Clarendon House
2 Church Street
Hamilton HM11
Bermuda
(441) 296 5872
(Address and telephone number including area code of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol(s) Name of Each Exchange on which Registered
Common Shares of $0.18 each SIG The New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   o
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes   x     No   o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No   x
Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.
Common Shares, $0.18 par value, 52,667,090 shares as of June 4, 2021


SIGNET JEWELERS LIMITED
TABLE OF CONTENTS
 


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIGNET JEWELERS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
13 weeks ended
(in millions, except per share amounts) May 1, 2021 May 2, 2020 Notes
Sales
$ 1,688.8  $ 852.1  3
Cost of sales
(1,010.4) (648.3)
Restructuring charges - cost of sales
  0.4  5
Gross margin
678.4  204.2 
Selling, general and administrative expenses
(512.0) (358.4)
Restructuring charges
0.7  (12.7) 5
Asset impairments, net
(1.5) (136.3) 13
Other operating income, net
3.1  3.6 
Operating income (loss) 168.7  (299.6) 4
Interest expense, net
(3.9) (7.1)
Other non-operating income, net
0.1  0.1 
Income (loss) before income taxes 164.9  (306.6)
Income taxes
(26.5) 109.5  10
Net income (loss) $ 138.4  $ (197.1)
Dividends on redeemable convertible preferred shares
(8.6) (8.2) 7
Net income (loss) attributable to common shareholders $ 129.8  $ (205.3)
Earnings (loss) per common share:
Basic
$ 2.49  $ (3.96) 8
Diluted
$ 2.23  $ (3.96) 8
Weighted average common shares outstanding:
Basic
52.1  51.8  8
Diluted
62.0  51.8  8
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

SIGNET JEWELERS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
13 weeks ended
May 1, 2021 May 2, 2020
(in millions) Pre-tax
amount
Tax
(expense)
benefit
After-tax
amount
Pre-tax
amount
Tax
(expense)
benefit
After-tax
amount
Net income (loss)
$ 138.4  $ (197.1)
Other comprehensive income (loss):
Foreign currency translation adjustments
6.7    6.7  (26.7) —  (26.7)
Available-for-sale securities:
Unrealized gain (loss) (0.1)   (0.1) 0.3  —  0.3 
Cash flow hedges:
Unrealized gain (loss) (0.1)   (0.1) 0.2  —  0.2 
Reclassification adjustment for losses (gains) to net income (loss)
0.2    0.2  (10.7) 2.6  (8.1)
Pension plan:
Reclassification adjustment for amortization of actuarial losses (gains) to net income (loss)
0.2    0.2  0.1  —  0.1 
Reclassification adjustment for amortization of net prior service credits to net income (loss)
      0.2  —  0.2 
Total other comprehensive income (loss) $ 6.9  $   $ 6.9  $ (36.6) $ 2.6  $ (34.0)
Total comprehensive income (loss) $ 145.3  $ (231.1)
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

SIGNET JEWELERS LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions, except par value per share amount) May 1, 2021 January 30, 2021 May 2, 2020 Notes
Assets
Current assets:
Cash and cash equivalents
$ 1,298.4  $ 1,172.5  $ 1,066.6 
Accounts receivable, net
78.9  88.7  29.8  11
Other current assets
187.1  236.6  327.7 
Income taxes
58.4  51.7  199.2 
Inventories
2,019.0  2,032.5  2,392.2  12
Total current assets
3,641.8  3,582.0  4,015.5 
Non-current assets:
Property, plant and equipment, net of accumulated depreciation and amortization of $1,208.7, $1,198.1 and $1,092.6, respectively
544.5  605.5  687.1 
Operating lease right-of-use assets
1,301.2  1,362.2  1,541.4  14
Goodwill
244.9  238.0  238.0  15
Intangible assets, net
190.6  179.0  178.7  15
Other assets
241.0  195.8  204.9 
Deferred tax assets
16.8  16.4  12.1 
Total assets
$ 6,180.8  $ 6,178.9  $ 6,877.7 
Liabilities, Redeemable convertible preferred shares, and Shareholders’ equity
Current liabilities:
Loans and overdrafts
$   $ —  $ 22.2  18
Accounts payable
700.1  812.6  329.1 
Accrued expenses and other current liabilities
517.2  494.1  636.1 
Deferred revenue
310.0  288.7  271.2  3
Operating lease liabilities
345.7  377.3  390.3  14
Income taxes
24.5  26.0  27.8 
Total current liabilities
1,897.5  1,998.7  1,676.7 
Non-current liabilities:
Long-term debt
146.8  146.7  1,336.0  18
Operating lease liabilities
1,087.3  1,147.3  1,334.8  14
Other liabilities
108.9  111.1  113.3 
Deferred revenue
797.7  783.3  719.8  3
Deferred tax liabilities
171.1  159.2  95.9 
Total liabilities
4,209.3  4,346.3  5,276.5 
Commitments and contingencies
21
Series A redeemable convertible preferred shares of $.01 par value: authorized 500 shares, 0.625 shares outstanding (January 30, 2021 and May 2, 2020: 0.625 shares outstanding)
650.9  642.3  617.4  6
Shareholders’ equity:
Common shares of $.18 par value: authorized 500 shares, 52.7 shares outstanding (January 30, 2021 and May 2, 2020: 52.3 outstanding)
12.6  12.6  12.6 
Additional paid-in capital
252.2  258.8  246.4 
Other reserves
0.4  0.4  0.4 
Treasury shares at cost: 17.3 shares (January 30, 2021 and May 2, 2020: 17.7 shares)
(965.2) (980.2) (985.2)
Retained earnings
2,304.2  2,189.2  2,037.4 
Accumulated other comprehensive loss
(283.6) (290.5) (327.8) 9
Total shareholders’ equity
1,320.6  1,190.3  983.8 
Total liabilities, redeemable convertible preferred shares and shareholders’ equity
$ 6,180.8  $ 6,178.9  $ 6,877.7 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

SIGNET JEWELERS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
13 weeks ended
(in millions) May 1, 2021 May 2, 2020
Cash flows from operating activities
Net income (loss) $ 138.4  $ (197.1)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization
42.1  37.3 
Amortization of unfavorable contracts
(1.4) (1.4)
Share-based compensation
8.0  1.4 
Deferred taxation
9.5  83.3 
Asset impairments
1.5  136.3 
Restructuring charges
  6.7 
Other non-cash movements
0.5  0.6 
Changes in operating assets and liabilities, net of acquisition:
Decrease in accounts receivable 9.8  8.6 
Decrease in other assets and other receivables 44.0  72.4 
Decrease (increase) in inventories 19.3  (77.2)
Increase (decrease) in accounts payable (122.2) 99.0 
Increase (decrease) in accrued expenses and other liabilities 18.0  (40.1)
Change in operating lease assets and liabilities
(31.2) 61.4 
Increase (decrease) in deferred revenue 34.4  (5.0)
Changes in income tax receivable and payable (8.4) (192.7)
Pension plan contributions
(1.2) (1.1)
Net cash provided by (used in) operating activities 161.1  (7.6)
Investing activities
Purchase of property, plant and equipment
(11.3) (7.7)
Purchase of available-for-sale securities
(1.0) — 
Proceeds from sale of available-for-sale securities
1.9  1.3 
Acquisition of Rocksbox Inc., net of cash acquired (14.4) — 
Net cash used in investing activities (24.8) (6.4)
Financing activities
Dividends paid on common shares
  (19.3)
Dividends paid on redeemable convertible preferred shares
  (7.8)
Proceeds from revolving credit facilities
  900.0 
Repayments of revolving credit facilities
  (80.0)
Decrease of bank overdrafts
  (74.0)
Other financing activities
(13.7) (4.9)
Net cash (used in) provided by financing activities (13.7) 714.0 
Cash and cash equivalents at beginning of period
1,172.5  374.5 
Increase in cash and cash equivalents 122.6  700.0 
Effect of exchange rate changes on cash and cash equivalents
3.3  (7.9)
Cash and cash equivalents at end of period
$ 1,298.4  $ 1,066.6 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

SIGNET JEWELERS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(in millions) Common
shares at
par value
Additional
paid-in
capital
Other
reserves
Treasury
shares
Retained
earnings
Accumulated
other
comprehensive
loss
Total
shareholders’
equity
Balance at January 30, 2021 $ 12.6  $ 258.8  $ 0.4  $ (980.2) $ 2,189.2  $ (290.5) $ 1,190.3 
Net income (loss) —  —  —  —  138.4  —  138.4 
Other comprehensive income (loss)
—  —  —  —  —  6.9  6.9 
Dividends declared:
Preferred shares, $13.14/share
—  —  —  —  (8.6) —  (8.6)
Net settlement of equity-based awards
—  (14.6) —  15.0  (14.8) —  (14.4)
Share-based compensation expense
—  8.0  —  —  —  —  8.0 
Balance at May 1, 2021 $ 12.6  $ 252.2  $ 0.4  $ (965.2) $ 2,304.2  $ (283.6) $ 1,320.6 
(in millions) Common
shares at
par value
Additional
paid-in
capital
Other
reserves
Treasury
shares
Retained
earnings
Accumulated
other
comprehensive
loss
Total
shareholders’
equity
Balance at February 1, 2020 $ 12.6  $ 245.4  $ 0.4  $ (984.9) $ 2,242.9  $ (293.8) $ 1,222.6 
Net income (loss) —  —  —  —  (197.1) —  (197.1)
Other comprehensive income (loss)
—  —  —  —  —  (34.0) (34.0)
Dividends declared:
Preferred shares, $12.50/share
—  —  —  —  (8.2) —  (8.2)
Net settlement of equity-based awards
—  (0.4) —  (0.3) (0.2) —  (0.9)
Share-based compensation expense
—  1.4  —  —  —  —  1.4 
Balance at May 2, 2020 $ 12.6  $ 246.4  $ 0.4  $ (985.2) $ 2,037.4  $ (327.8) $ 983.8 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

SIGNET JEWELERS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and principal accounting policies
Signet Jewelers Limited (“Signet” or the “Company”), a holding company incorporated in Bermuda, is the world’s largest retailer of diamond jewelry. The Company operates through its 100% owned subsidiaries with sales primarily in the United States (“US”), United Kingdom (“UK”) and Canada. Signet manages its business as three reportable segments: North America, International, and Other. The “Other” reportable segment consists of subsidiaries involved in the purchasing and conversion of rough diamonds to polished stones. See Note 4 for additional discussion of the Company’s segments.
Signet’s business is seasonal, with the fourth quarter historically accounting for approximately 35-40% of annual sales as well as accounts for a substantial portion of the annual operating profit. The “Holiday Season” consists of results for the months of November and December, with December being the highest volume month of the year.
The Company has evaluated additional events or transactions subsequent to May 1, 2021 for potential recognition or disclosure through the date the condensed consolidated interim financial statements were issued, and except as discussed in Note 22, there were no such events or transactions noted.
Risks and Uncertainties - COVID-19
In December 2019, a novel coronavirus (“COVID-19”) was identified in Wuhan, China. During Fiscal 2021, the Company experienced significant disruption to its business, specifically in its retail store operations through temporary closures during the first half of the year. By the end of the third quarter of Fiscal 2021, the Company had re-opened substantially all of its stores. However, during the fourth quarter of Fiscal 2021, both the UK and certain Canadian provinces re-established mandated temporary closure of non-essential businesses. The UK stores began to reopen in April 2021, while certain Canadian stores continue to be impacted by these government restrictions through the date of this report.
The full extent and duration of the impact of COVID-19 on the Company’s operations and financial performance is currently unknown and depends on future developments that are uncertain and unpredictable, including the duration and possible resurgence of the COVID-19 pandemic, the success of the vaccine rollout globally, its impact on the Company’s global supply chain (specifically in India), and the uncertainty of customer behavior and potential shifts in discretionary spending as the economy continues to reopen in the second half of the year. The Company will continue to evaluate the impact of the COVID-19 pandemic on its business, results of operations and cash flows throughout Fiscal 2022, including the potential impacts on various estimates and assumptions inherent in the preparation of the condensed consolidated financial statements.
Basis of preparation
The condensed consolidated financial statements of Signet are prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with US generally accepted accounting principles (“US GAAP”) have been condensed or omitted from this report, as is permitted by such rules and regulations. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes included in Signet’s Annual Report on Form 10-K for the fiscal year ended January 30, 2021 filed with the SEC on March 19, 2021.
Use of estimates
The preparation of these condensed consolidated financial statements, in conformity with US GAAP and SEC regulations for interim reporting, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and as a result of the above noted risks associated with COVID-19, it is reasonably possible that those estimates will change in the near term and the effect could be material. Estimates and assumptions are primarily made in relation to the valuation of accounts receivables, inventories, deferred revenue, derivatives, employee benefits, income taxes, contingencies, leases, asset impairments for goodwill, indefinite-lived intangible and long-lived assets and the depreciation and amortization of long-lived assets.
Fiscal year
The Company’s fiscal year ends on the Saturday nearest to January 31st. Fiscal 2022 and Fiscal 2021 refer to the 52 week periods ending January 29, 2022 and January 30, 2021, respectively. Within these condensed consolidated financial statements, the first quarter of the relevant fiscal years 2022 and 2021 refer to the 13 weeks ended May 1, 2021 and May 2, 2020, respectively.
8

Foreign currency translation
The financial position and operating results of certain foreign operations, including certain subsidiaries operating in the UK as part of the International segment and Canada as part of the North America segment, are consolidated using the local currency as the functional currency. Assets and liabilities are translated at the rates of exchange on the balance sheet date, and revenues and expenses are translated at the monthly average rates of exchange during the period. Resulting translation gains or losses are included in the accompanying condensed consolidated statements of shareholders’ equity as a component of accumulated other comprehensive income (loss) (“AOCI”). Gains or losses resulting from foreign currency transactions are included in other operating income, net within the condensed consolidated statements of operations.
See Note 9 for additional information regarding the Company’s foreign currency translation.
Acquisition of Rocksbox
On March 29, 2021, the Company acquired all of the outstanding shares of Rocksbox Inc. (“Rocksbox”), a jewelry rental subscription business, for cash consideration of $14.4 million, net of cash acquired. The acquisition was driven by Signet's "Inspiring Brilliance" strategy and its initiatives to accelerate growth in its services offerings. Based on a preliminary purchase price allocation, net assets acquired primarily consist of goodwill and intangible assets (see Note 15 for details). In connection with closing the acquisition, the Company incurred approximately $1.1 million of acquisition-related costs for professional services in the 13 weeks ended May 1, 2021, which were recorded as selling, general and administrative expenses in the condensed consolidated statement of operations.
The results of Rocksbox subsequent to the acquisition date are reported as a component of the North America segment. See Note 4 for additional information regarding the Company’s segments. Pro forma results of operations have not been presented, as the impact on the Company’s condensed consolidated financial results was not material.
2. New accounting pronouncements
The following section provides a description of new accounting pronouncements ("Accounting Standard Update" or "ASU") issued by the Financial Accounting Standards Board ("FASB") that are applicable to the Company.

New accounting pronouncements recently adopted

There were no new accounting pronouncements adopted as of January 31, 2021 that have a material impact on the Company’s financial position or results of operations.
New accounting pronouncements issued but not yet adopted
There are no new accounting pronouncements issued that are expected to be applicable to the Company in future periods.
3. Revenue recognition
The following tables provide the Company’s revenue, disaggregated by banner, major product and channel, for the 13 weeks ended May 1, 2021 and May 2, 2020:
13 weeks ended May 1, 2021 13 weeks ended May 2, 2020
(in millions) North America International Other Consolidated North America International Other Consolidated
Sales by banner:
Kay
$ 676.8  $   $   $ 676.8  $ 333.5  $ —  $ —  $ 333.5 
Zales
370.8      370.8  182.3  —  —  182.3 
Jared
284.1      284.1  145.4  —  —  145.4 
Piercing Pagoda
148.8      148.8  51.4  —  —  51.4 
James Allen
101.5      101.5  43.8  —  —  43.8 
Peoples
34.6      34.6  24.7  —  —  24.7 
International segment banners
  57.4    57.4  —  64.9  —  64.9 
Other
1.4    13.4  14.8  —  —  6.1  6.1 
Total sales
$ 1,618.0  $ 57.4  $ 13.4  $ 1,688.8  $ 781.1  $ 64.9  $ 6.1  $ 852.1 


9

13 weeks ended May 1, 2021 13 weeks ended May 2, 2020
(in millions) North America International Other Consolidated North America International Other Consolidated
Sales by product:
Bridal
$ 726.7  $ 28.8  $   $ 755.5  $ 314.1  $ 28.1  $ —  $ 342.2 
Fashion
661.4  9.7    671.1  297.9  12.6  —  310.5 
Watches
46.9  17.2    64.1  24.6  17.5  —  42.1 
Other (1)
183.0  1.7  13.4  198.1  144.5  6.7  6.1  157.3 
Total sales
$ 1,618.0  $ 57.4  $ 13.4  $ 1,688.8  $ 781.1  $ 64.9  $ 6.1  $ 852.1 
(1)     Other revenue primarily includes gift, beads and other miscellaneous jewelry sales, repairs, subscriptions, service plan and other miscellaneous non-jewelry sales.
13 weeks ended May 1, 2021 13 weeks ended May 2, 2020
(in millions) North America International Other Consolidated North America International Other Consolidated
Sales by channel:
Store
$ 1,299.6  $ 29.5  $   $ 1,329.1  $ 631.9  $ 49.4  $ —  $ 681.3 
E-commerce
318.4  27.9    346.3  149.2  15.5  —  164.7 
Other
    13.4  13.4  —  —  6.1  6.1 
Total sales
$ 1,618.0  $ 57.4  $ 13.4  $ 1,688.8  $ 781.1  $ 64.9  $ 6.1  $ 852.1 

The Company recognizes revenues when control of the promised goods and services are transferred to customers, in an amount that reflects the consideration expected to be received in exchange for those goods. Transfer of control generally occurs at the time merchandise is taken from a store, or upon receipt of the merchandise by a customer for an e-commerce shipment. The Company excludes all taxes assessed by government authorities and collected from a customer from its reported sales. The Company’s revenue streams and their respective accounting treatments are further discussed below.
Merchandise sales and repairs
Store sales are recognized when the customer receives and pays for the merchandise at the store with cash, in-house customer finance, private label credit card programs, a third-party credit card or a lease purchase option. For online sales shipped to customers, sales are recognized at the estimated time the customer has received the merchandise. Amounts related to shipping and handling that are billed to customers are reflected in sales and the related costs are reflected in cost of sales. Revenues on the sale of merchandise are reported net of anticipated returns and sales tax collected. Returns are estimated based on previous return rates experienced. Any deposits received from a customer for merchandise are deferred and recognized as revenue when the customer receives the merchandise. Revenues derived from providing replacement merchandise on behalf of insurance organizations are recognized upon receipt of the merchandise by the customer. Revenues on repair of merchandise are recognized when the service is complete and the customer collects the merchandise at the store.
Extended service plans and lifetime warranty agreements (“ESP”)
The Company recognizes revenue related to ESP sales in proportion to when the expected costs will be incurred. The deferral period for ESP sales is determined from patterns of claims costs, including estimates of future claims costs expected to be incurred. Management reviews the trends in claims to assess whether changes are required to the revenue and cost recognition rates utilized. A significant change in estimates related to the time period or pattern in which warranty-related costs are expected to be incurred could materially impact revenues. All direct costs associated with the sale of these plans are deferred and amortized in proportion to the revenue recognized and disclosed as either other current assets or other assets in the condensed consolidated balance sheets. These direct costs primarily include sales commissions and credit card fees. Amortization of deferred ESP selling costs is included within selling, general and administrative expenses in the condensed consolidated statements of operations. Amortization of deferred ESP selling costs was $9.9 million and $4.3 million during the 13 weeks ended May 1, 2021 and May 2, 2020, respectively.
Unamortized deferred selling costs as of May 1, 2021, January 30, 2021 and May 2, 2020 were as follows:
(in millions) May 1, 2021 January 30, 2021 May 2, 2020
Other current assets $ 26.4  $ 26.2  $ 23.6 
Other assets 86.1  85.1  79.5 
Total deferred selling costs $ 112.5  $ 111.3  $ 103.1 
10

The North America segment sells ESP, subject to certain conditions, to perform repair work over the life of the product. Customers generally pay for ESP at the store at the time of merchandise sale. Revenue from the sale of the lifetime ESP is recognized consistent with the estimated pattern of claim costs expected to be incurred by the Company in connection with performing under the ESP obligations. Lifetime ESP revenue is deferred and recognized over a maximum period of 17 years after the sale of the warranty contract. Although claims experience varies between the Company’s national banners, thereby resulting in different recognition rates, approximately 55% of revenue is recognized within the first two years on a weighted average basis.
The North America segment also sells a Jewelry Replacement Plan (“JRP”). The JRP is designed to protect customers from damage or defects of purchased merchandise for a period of three years. If the purchased merchandise is defective or becomes damaged under normal use in that time period, the item will be replaced. JRP revenue is deferred and recognized on a straight-line basis over the period of expected claims costs.
Signet also sells warranty agreements in the capacity of an agent on behalf of a third-party. The commission that Signet receives from the third-party is recognized at the time of sale less an estimate of cancellations based on historical experience.
Consignment inventory sales
Sales of consignment inventory are accounted for on a gross sales basis as the Company maintains control of the merchandise through the point of sale and provides independent advice, guidance and after-sales services to customers. Supplier products are selected at the discretion of the Company, and the Company is responsible for determining the selling price and for physical security of the products. The products sold from consignment inventory are similar in nature to other products that are sold to customers and are sold on the same terms.
Deferred revenue
Deferred revenue consists primarily of ESP and voucher promotions as follows:
(in millions) May 1, 2021 January 30, 2021 May 2, 2020
ESP deferred revenue $ 1,049.4  $ 1,028.9  $ 961.0 
Other deferred revenue (1)
58.3  43.1  30.0 
Total deferred revenue
$ 1,107.7  $ 1,072.0  $ 991.0 
Disclosed as:
Current liabilities $ 310.0  $ 288.7  $ 271.2 
Non-current liabilities 797.7  783.3  719.8 
Total deferred revenue $ 1,107.7  $ 1,072.0  $ 991.0 
(1) Other deferred revenue includes primarily revenue collected from customers for custom orders and eCommerce orders, for which control has not yet transferred to the customer.
13 weeks ended
(in millions) May 1, 2021 May 2, 2020
ESP deferred revenue, beginning of period $ 1,028.9  $ 960.0 
Plans sold (1)
124.1  55.0 
Revenue recognized (2)
(103.6) (54.0)
ESP deferred revenue, end of period $ 1,049.4  $ 961.0 
(1)    Includes impact of foreign exchange translation.
(2)    During the 13 weeks ended May 1, 2021 and May 2, 2020, the Company recognized sales of $72.6 million and $44.5 million, respectively, related to deferred revenue that existed at the beginning of the period in respect to ESP. In Fiscal 2021, no ESP revenue was recognized beginning on March 23, 2020 due to the temporary closure of the Company’s stores and service centers as a result of COVID-19. As the Company began reopening stores and service centers during the second quarter of Fiscal 2021, the Company resumed recognizing service revenue as it fulfilled its performance obligations under the ESP.
4. Segment information
Financial information for each of Signet’s reportable segments is presented in the tables below. Signet’s chief operating decision maker utilizes segment sales and operating income, after the elimination of any inter-segment transactions, to determine resource allocations and performance assessment measures. Signet manages its business as three reportable segments: North America, International, and Other. Signet’s sales are derived from the retailing of jewelry, watches, other products and services as generated through the management of its reportable segments. The Company allocates certain support center costs between operating segments, and the remainder of the unallocated costs are included with the corporate and unallocated expenses presented.
11

The North America reportable segment operates across the US and Canada. Its US stores operate nationally in malls and off-mall locations principally as Kay (Kay Jewelers and Kay Jewelers Outlet), Zales (Zales Jewelers and Zales Outlet), Jared (Jared The Galleria Of Jewelry and Jared Vault), James Allen, Rocksbox and Piercing Pagoda, which operates through mall-based kiosks. Its Canadian stores operate as the Peoples Jewellers store banner.
The International reportable segment operates stores in the UK, Republic of Ireland and Channel Islands. Its stores operate in shopping malls and off-mall locations (i.e. high street) principally as H.Samuel and Ernest Jones.
The Other reportable segment consists of subsidiaries involved in the purchasing and conversion of rough diamonds to polished stones.
13 weeks ended
(in millions) May 1, 2021 May 2, 2020
Sales:
North America segment
$ 1,618.0  $ 781.1 
International segment
57.4  64.9 
Other segment
13.4  6.1 
Total sales
$ 1,688.8  $ 852.1 
Operating income (loss):
North America segment (1)
$ 212.0  $ (234.2)
International segment (2)
(19.7) (38.6)
Other segment
(0.9) (0.3)
Corporate and unallocated expenses (3)
(22.7) (26.5)
Total operating income (loss)
168.7  (299.6)
Interest expense, net
(3.9) (7.1)
Other non-operating income, net
0.1  0.1 
Income (loss) before income taxes
$ 164.9  $ (306.6)

(1)    Operating income (loss) during the 13 weeks ended May 1, 2021 includes: $1.1 million of acquisition-related expenses in connection with the Rocksbox acquisition; $0.7 million credit to restructuring expense, primarily related to adjustments to previously recognized restructuring liabilities; and $1.5 million of net asset impairments. See Note 5 and Note 13 for additional information.
Operating income (loss) during the 13 weeks ended May 2, 2020 includes a $0.4 million benefit recognized due to a change in inventory reserves previously recognized as part of the Company’s restructuring activities; charges of $8.9 million primarily related to severance and professional services recorded in conjunction with the Company’s restructuring activities; and asset impairment charges of $117.9 million. See Note 5, Note 13, and Note 15 for additional information.
(2)    Operating income (loss) during the 13 weeks ended May 2, 2020 includes charges of $3.6 million primarily related to severance and professional services recorded in conjunction with the Company’s restructuring activities; and asset impairment charges of $18.4 million. See Note 5, Note 13, and Note 15 for additional information.
(3)    Operating income (loss) during the 13 weeks ended May 2, 2020 includes a charge of $8.5 million related to the settlement of previously disclosed shareholder litigation matters; and charges of $0.2 million primarily related to severance and professional services recorded in conjunction with the Company’s restructuring activities. See Note 5 and Note 21 for additional information.
5. Restructuring Plans
Signet Path to Brilliance Plan
During the first quarter of Fiscal 2019, Signet launched a three-year comprehensive transformation plan, the “Signet Path to Brilliance” plan (the “Plan”), to reposition the Company to be a share-gaining, OmniChannel jewelry category leader. Restructuring activities related to the Plan were substantially completed in Fiscal 2021. The Company recorded credits to restructuring expense of $0.7 million during the 13 weeks ended May 1, 2021 primarily related to adjustments to previously recognized Plan liabilities.

Restructuring charges and other Plan-related costs are classified in the condensed consolidated statements of operations as follows:

13 weeks ended
(in millions) Statement of operations caption May 1, 2021 May 2, 2020
Inventory charges
Restructuring charges - cost of sales
$   $ (0.4)
Other Plan related expenses Restructuring charges (0.7) 12.7 
Total Signet Path to Brilliance Plan expenses $ (0.7) $ 12.3 

12

The composition of the restructuring charges the Company incurred during the 13 weeks ended May 1, 2021, as well as the cumulative amount incurred under the Plan through May 1, 2021, were as follows:
13 weeks ended Cumulative amount
(in millions) May 1, 2021 May 1, 2021
Inventory charges $ —  $ 72.8 
Termination benefits (0.7) 49.2 
Store closure and other costs —  129.9 
Total Signet Path to Brilliance Plan expenses $ (0.7) $ 251.9 
Plan liabilities of $7.1 million were recorded within accrued expenses and other current liabilities and Plan liabilities of $1.7 million were recorded within other liabilities in the condensed consolidated balance sheet as of May 1, 2021. The remaining Plan liabilities consist primarily of severance, store closure liabilities and professional fees. The following table summarizes the activity related to the Plan liabilities for Fiscal 2022:
(in millions) Termination benefits Store closure and other costs Consolidated
Balance at January 30, 2021 $ 2.1  $ 8.1  $ 10.2 
Payments and other adjustments
(0.6) (0.1) (0.7)
Charged (credited) to expense
(0.7) —  (0.7)
Balance at May 1, 2021 $ 0.8  $ 8.0  $ 8.8 
6. Redeemable preferred shares
On October 5, 2016, the Company issued 625,000 shares of Series A Redeemable Convertible Preference Shares (“Preferred Shares”) to certain affiliates of Leonard Green & Partners, L.P., for an aggregate purchase price of $625.0 million, or $1,000 per share (the “Stated Value”) pursuant to the investment agreement dated August 24, 2016. Preferred shareholders are entitled to a cumulative dividend at the rate of 5% per annum, payable quarterly in arrears either in cash or by increasing the stated value of the Preferred Shares. The Company declared the Preferred Share dividend during the fourth quarter of Fiscal 2021 payable “in-kind” by increasing the Stated Value of the Preferred Shares. The Stated Value of the Preferred Shares increased by $12.97 per share during the first quarter of Fiscal 2022 when this dividend was paid, all of which will become payable upon liquidation of the Preferred Shares. The Company has declared the first quarter Fiscal 2022 Preferred Share dividend (payable during the second quarter of Fiscal 2022) payable in cash. Refer to Note 7 for additional discussion of the Company’s dividends on Preferred Shares.
(in millions, except conversion rate and conversion price) May 1, 2021 January 30, 2021 May 2, 2020
Conversion rate
12.2297  12.2297  12.2297 
Conversion price
$ 81.7682  $ 81.7682  $ 81.7682 
Potential impact of preferred shares if-converted to common shares
8.0  7.9  7.6 
Liquidation preference (1)
$ 665.0  $ 656.8  $ 632.8 
(1) Includes the stated value of the Preferred Shares plus any declared but unpaid dividends
In connection with the issuance of the Preferred Shares, the Company incurred direct and incremental expenses of $13.7 million. These direct and incremental expenses originally reduced the Preferred Shares carrying value and will be accreted through retained earnings as a deemed dividend from the date of issuance through the first possible known redemption date in November 2024. Accumulated accretion recorded in the condensed consolidated balance sheets was $7.7 million as of May 1, 2021 (January 30, 2021 and May 2, 2020: $7.3 million and $6.1 million, respectively).
Accretion of $0.4 million was recorded to Preferred Shares in the condensed consolidated balance sheets during the 13 weeks ended May 1, 2021 ($0.4 million for the 13 weeks ended May 2, 2020).
7. Shareholders’ equity
Dividends on Common Shares
As a result of COVID-19, Signet’s Board of Directors elected to temporarily suspend the dividend program on common shares, effective in the first quarter of Fiscal 2021.
13

Dividends on Preferred Shares
Dividends declared on the Preferred Shares during the 13 weeks ended May 1, 2021 and May 2, 2020 were as follows:
Fiscal 2022 Fiscal 2021
(in millions, except per share amounts) Dividends
per share
Total dividends Dividends
per share
Total dividends
First quarter (1)
$ 13.14  $ 8.2  $ 12.50  $ 7.8 
(1)    Signet’s Preferred Shares dividends result in the dividend payment date being a quarter in arrears from the declaration date. As a result, as of May 1, 2021 and May 2, 2020, $8.2 million and $7.8 million, respectively, has been recorded in accrued expenses and other current liabilities in the condensed consolidated balance sheets reflecting the dividends on the Preferred Shares declared for the first quarter of Fiscal 2022 and Fiscal 2021, respectively.
There were no cumulative undeclared dividends on the Preferred Shares that reduced net income (loss) attributable to common shareholders during the 13 weeks ended May 1, 2021 or May 2, 2020. See Note 6 for additional discussion of the Company’s Preferred Shares.
Share repurchases
There were no share repurchases executed during the 13 weeks ended May 1, 2021 and May 2, 2020. The 2017 Program had $165.6 million remaining as of May 1, 2021.
8. Earnings (loss) per common share (EPS)
Basic EPS is computed by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding for the period. The computation of basic EPS is outlined in the table below:
13 weeks ended
(in millions, except per share amounts) May 1, 2021 May 2, 2020
Numerator:
Net income (loss) attributable to common shareholders $ 129.8  $ (205.3)
Denominator:
Weighted average common shares outstanding
52.1  51.8 
EPS – basic
$ 2.49  $ (3.96)
The dilutive effect of share awards represents the potential impact of outstanding awards issued under the Company’s share-based compensation plans, including restricted shares, restricted stock units and stock options issued under the Omnibus Plan and stock options issued under the Share Saving Plans. The dilutive effect of Preferred Shares represents the potential impact for common shares that would be issued upon conversion. Potential common share dilution related to share awards and Preferred Shares is determined using the treasury stock and if-converted methods, respectively. Under the if-converted method, the Preferred Shares are assumed to be converted at the beginning of the period, and the resulting common shares are included in the denominator of the diluted EPS calculation for the entire period being presented, only in the periods in which such effect is dilutive. Additionally, in periods in which Preferred Shares are dilutive, cumulative dividends and accretion for issuance costs associated with the Preferred Shares are added back to net income (loss) attributable to common shareholders. See Note 6 for additional discussion of the Company’s Preferred Shares.
The computation of diluted EPS is outlined in the table below:
13 weeks ended
(in millions, except per share amounts) May 1, 2021 May 2, 2020
Numerator:
Net income (loss) attributable to common shareholders $ 129.8 $ (205.3)
Add: Dividends on Preferred Shares
8.6
Numerator for diluted EPS $ 138.4 $ (205.3)
Denominator:
Basic weighted average common shares outstanding
52.1 51.8
Plus: Dilutive effect of share awards
1.9
Plus: Dilutive effect of Preferred Shares
8.0
Diluted weighted average common shares outstanding
62.0 51.8
EPS – diluted
$ 2.23 $ (3.96)
14


The calculation of diluted EPS excludes the following items for each respective period on the basis that their effect would be anti-dilutive:
13 weeks ended
(in millions) May 1, 2021 May 2, 2020
Share awards   1.0 
Potential impact of Preferred Shares   7.6 
Total anti-dilutive shares
  8.6 
9. Accumulated other comprehensive income (loss)
The following tables present the changes in AOCI by component and the reclassifications out of AOCI, net of tax:
Pension plan
(in millions) Foreign
currency
translation
Gains (losses) on available-for-sale securities, net Gains (losses)
on cash flow
hedges
Actuarial
gains (losses)
Prior
service
credits (costs)
Accumulated
other
comprehensive
income (loss)
Balance at January 30, 2021 $ (238.9) $ 0.5  $ (0.9) $ (47.2) $ (4.0) $ (290.5)
Other comprehensive income (loss) (“OCI”) before reclassifications
6.7  (0.1) (0.1) —  —  6.5 
Amounts reclassified from AOCI to net income
—  —  0.2  0.2  —  0.4 
Net current period OCI
6.7  (0.1) 0.1  0.2  —  6.9 
Balance at May 1, 2021 $ (232.2) $ 0.4  $ (0.8) $ (47.0) $ (4.0) $ (283.6)

The amounts reclassified from AOCI were as follows:
Amounts reclassified from AOCI
13 weeks ended
(in millions) May 1, 2021 May 2, 2020 Statement of operations caption
Losses (gains) on cash flow hedges:
Foreign currency contracts
$ 0.1  $ —  Cost of sales (see Note 16)
Commodity contracts
0.1  (0.8) Cost of sales (see Note 16)
Total before income tax
0.2  (0.8)
Losses (gains) on de-designating cash flow hedges:
Foreign currency contracts
  (0.6) Other operating income, net (see Note 16)
Commodity contracts
  (9.3) Other operating income, net (see Note 16)
Total before income tax
  (9.9)
Income taxes
  2.6 
Net of tax
0.2  (8.1)
Defined benefit pension plan items:
Amortization of unrecognized actuarial losses
0.2  0.1 
Other non-operating income, net
Amortization of unrecognized net prior service credits
  0.2 
Other non-operating income, net
Total before income tax
0.2  0.3 
Income taxes
  — 
Net of tax
0.2  0.3 
Total reclassifications, net of tax
$ 0.4  $ (7.8)
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10. Income taxes
13 weeks ended
May 1, 2021 May 2, 2020
Estimated annual effective tax rate before discrete items 18.6  % 24.5  %
Discrete items recognized
(2.5) % 11.2  %
Effective tax rate recognized in statement of operations
16.1  % 35.7  %
During the 13 weeks ended May 1, 2021, the Company’s effective tax rate was lower than the US federal income tax rate primarily due to the favorable impact of foreign rate differences and benefits from global reinsurance arrangements. The Company’s effective tax rate for the same period during the prior year was higher than the US federal income tax rate primarily due to the benefits from the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) recognized as a discrete item during the first quarter of Fiscal 2021, partially offset by the unfavorable impact of a valuation allowance recorded against certain US and state deferred tax assets and the impairment of goodwill which was not deductible for tax purposes.
The CARES Act provided a technical correction to the Tax Cuts and Jobs Act (“TCJA”) allowing fiscal year tax filers with federal net operating losses arising in the 2017/2018 tax year to be carried back two years to tax years that had higher enacted tax rates resulting in a tax benefit of $67.5 million recognized as a discrete item during the first quarter of Fiscal 2021. The CARES Act also provided for net operating losses incurred in Fiscal 2021 to be carried back five years to tax years with higher enacted tax rates resulting in an anticipated tax benefit as of the first quarter of Fiscal 2021 of $48.5 million. In addition, during the first quarter of Fiscal 2021, based on weighing all positive and negative evidence, management determined it was more likely than not that it would not be able to realize certain US and state deferred tax assets primarily related to state deferred tax assets including state net operating losses and recorded a valuation allowance of $56.7 million. The estimated annual effective tax rate excludes the effects of any discrete items that may be recognized in future periods.
As of May 1, 2021, there has been no material change in the amounts of unrecognized tax benefits, or the related accrued interest and penalties (where appropriate), in respect of uncertain tax positions identified and recorded as of January 30, 2021.
11. Accounts receivable, net
The following table presents the components of Signet’s accounts receivable:
(in millions) May 1, 2021 January 30, 2021 May 2, 2020
Customer in-house finance receivables, net $ 61.5  $ 72.0  $ — 
Accounts receivable, trade
9.5  11.6  27.8 
Accounts receivable, held for sale
7.9  5.1  2.0 
Accounts receivable, net
$ 78.9  $ 88.7  $ 29.8 

As previously disclosed, during Fiscal 2018, Signet announced a strategic initiative to outsource its North America private label credit card programs and sell the existing in-house finance receivables. In October 2017, Signet, through its subsidiary Sterling Jewelers Inc. (“Sterling”), completed the sale of the prime-only credit quality portion of Sterling’s in-house finance receivable portfolio to Comenity Bank (“Comenity”). The Company had previously entered into an agreement with Comenity to provide credit services to its Zales banners for all credit card customers (prime and non-prime), and this pre-existing Zales arrangement with Comenity was unaffected by the execution of the Sterling agreement. In May 2021, both the Sterling and Zales agreements with Comenity were amended and restated as further described in Note 22.
In June 2018, the Company completed the sale of the non-prime in-house accounts receivable to CarVal Investors (“CarVal”) and the appointed minority party, Castlelake, L.P. (“Castlelake” and collectively with CarVal, the “Investors”). In addition, for a five-year term, Signet would remain the issuer of non-prime credit with investment funds managed by the Investors purchasing forward receivables at a discount rate determined in accordance with their respective agreements. Signet would hold the newly issued non-prime credit receivables on its balance sheet for two business days prior to selling the receivables to the respective counterparty in accordance with the agreements. Receivables issued by the Company but pending transfer to the Investors as of period end were classified as “held for sale” and included in the accounts receivable caption in the condensed consolidated balance sheets. As of May 1, 2021, January 30, 2021, and May 2, 2020, the accounts receivable held for sale were recorded at fair value.
During Fiscal 2021, the 2018 agreements pertaining to the purchase of forward flow receivables were terminated and new agreements were executed with the Investors which, as noted below, are effective until June 30, 2021. Those new agreements provide that the Investors will continue to purchase add-on non-prime receivables created on existing customer accounts at a discount rate determined in accordance with the new agreements. As a result of the above agreements, Signet began retaining all forward flow non-prime
16

receivables created for new customers beginning in the second quarter of Fiscal 2021. The termination of the previous agreements had no effect on the receivables that were previously sold to the Investors prior to the termination, except that Signet agreed to extend the Investors’ payment obligation for the remaining 5% of the receivables previously purchased in June 2018 until the new agreements terminate. The Company’s agreement with the credit servicer Genesis Financial Solutions (“Genesis”) remains in place.
In January 2021, the Company reached additional agreements with the Investors to further amend the purchase agreements described above through June 30, 2021. CarVal continued to purchase add-on receivables for existing accounts and began to purchase 50% of new forward flow non-prime receivables. Genesis (becoming one of the “Investors”) began to purchase the remaining 50% of new forward flow non-prime receivables through June 30, 2021. Castlelake will continue to purchase add-on receivables for existing accounts through June 30, 2021. Signet continued to retain add-on receivables for its existing accounts but is no longer retaining new forward flow non-prime receivables.
In March 2021, the Company provided notice to the Investors of its intent not to extend the respective agreements with such Investors beyond the expiration date of June 30, 2021. Effective July 1, 2021 (the “New Program Start Date”), all new prime and non-prime account origination will occur in accordance with the amended and restated Comenity and Genesis agreements as further described in Note 22. The Company is currently in discussions with the Investors to extend the agreements related to the add-on purchases for their respective existing non-prime accounts that were originated prior to the New Program Start Date.
Accounts receivable classified as trade receivables consist primarily of accounts receivable related to the sale of diamonds to third parties from its polishing factory deemed unsuitable for Signet's needs in the Other segment.
Customer in-house finance receivables

As discussed above, the Company began retaining certain customer in-house finance receivables beginning in the second quarter of Fiscal 2021. The allowance for credit losses is an estimate of expected credit losses, measured over the estimated life of its credit card receivables that considers forecasts of future economic conditions in addition to information about past events and current conditions. The Company accounts for the expected credit losses under ASC 326, “Measurement of Credit Losses on Financial Instruments,” which is referred to as the Current Expected Credit Loss (“CECL”) model. The estimate under the CECL model is significantly influenced by the composition, characteristics and quality of the Company’s portfolio of credit card receivables, as well as the prevailing economic conditions and forecasts utilized. The estimate of the allowance for credit losses includes an estimate for uncollectible principal as well as unpaid interest and fees.

The allowance is maintained through an adjustment to the provision for credit losses and is evaluated for appropriateness and adjusted quarterly. CECL requires entities to use a “pooled” approach to estimate expected credit losses for financial assets with similar risk characteristics. The Company evaluated multiple risk characteristics of its credit card receivables portfolio and determined that credit quality and account vintage to be the most significant characteristics for estimating expected credit losses. To estimate its allowance for credit losses, the Company segregates its credit card receivables into credit quality categories using the customers’ FICO scores.

The following three industry standard FICO score categories are used:

620 to 659 (“Near Prime”)
580 to 619 (“Subprime”)
Less than 580 (“Deep Subprime”)

These risk characteristics are evaluated on at least an annual basis, or more frequently as facts and circumstances warrant. The expected loss rates are adjusted on a quarterly basis based on historical loss trends and are risk-adjusted for current and future economic conditions and events. As summarized in the table below, based on the changes in the agreements with the Investors in Fiscal 2021, there is currently one vintage year since the Company began maintaining new accounts in Fiscal 2021 and ceased maintaining new accounts by the end of Fiscal 2021.

The following table disaggregates the Company’s customer in-house finance receivables by credit quality and vintage year as of May 1, 2021:

(in millions) Year of origination
Credit quality Fiscal 2021
Near Prime $ 46.0 
Subprime 26.2 
Deep Subprime 10.7 
Total at amortized cost $ 82.9 

In estimating its allowance for credit losses, for each identified risk category, management utilized estimation methods based primarily on historical loss experience, current conditions, and other relevant factors. These methods utilize historical charge-off data of the
17

Company’s non-prime portfolio, as well as incorporate any applicable macroeconomic variables (such as unemployment) that may be expected to impact credit performance. In addition to the quantitative estimate of expected credit losses under CECL using the historical loss information, the Company also incorporates qualitative adjustments for certain factors such as Company specific risks, changes in current economic conditions that may not be captured in the quantitatively derived results, or other relevant factors to ensure the allowance for credit losses reflects the Company’s best estimate of current expected credit losses. Management considered qualitative factors such as the unfavorable macroeconomic conditions caused by the COVID-19 uncertainty (including rates of unemployment), the Company’s non-prime portfolio performance during the prior recession, and the potential impacts of the economic stimulus packages in the US, in developing its estimate for current expected credit losses for the current period.

The following table is a rollforward of the Company’s allowance for credit losses on customer in-house finance receivables:

(in millions)
Balance at January 30, 2021
$ 25.5 
Provision for credit losses (1.2)
Write-offs (2.9)
Balance at May 1, 2021
$ 21.4 

Beginning in the second quarter of Fiscal 2021, in connection with the new agreements executed with the Investors, additions to the allowance for credit losses are made by recording charges to bad debt expense (credit losses) within selling, general and administrative expenses within the condensed consolidated statements of operations. The uncollectible portion of customer in-house finance receivables are charged to the allowance for credit losses when an account is written-off after 180 days of non-payment, or in circumstances such as bankrupt or deceased cardholders. Write-offs on customer in-house finance receivables include uncollected amounts related to principal, interest, and late fees. Uncollectible accrued interest is accounted for by recognizing credit loss expense. Recoveries on customer in-house finance receivables previously written-off as uncollectible are credited to the allowance for credit losses.

A credit card account is contractually past due if the Company does not receive the minimum payment by the specified due date on the cardholder’s statement. It is the Company’s policy to continue to accrue interest and fee income on all credit card accounts, except in limited circumstances, until the credit card account balance and all related interest and other fees are paid or written-off, typically at 180 days delinquent, as noted above.

The following table disaggregates the Company’s customer in-house finance receivables by past due status as of May 1, 2021:
(in millions)
Current $ 69.2 
1 - 30 days past due 5.4 
31 - 60 days past due 1.9 
61 - 90 days past due 1.9 
Greater than 90 days past due 4.5 
Total at amortized cost $ 82.9 

Interest income related to the Company’s customer in-house finance receivables is included within other operating income, net in the condensed consolidated statements of operations. Accrued interest is included within the same line item as the respective principal amount of the customer in-house finance receivables in the condensed consolidated balance sheets. The accrual of interest is discontinued at the time the receivable is determined to be uncollectible and written-off. The Company recognized $4.0 million of interest income on its customer in-house finance receivables during the 13 weeks ended May 1, 2021.
12. Inventories
The following table summarizes the Company’s inventory by classification:
(in millions) May 1, 2021 January 30, 2021 May 2, 2020
Raw materials
$ 72.9  $ 45.3  $ 69.8 
Finished goods
1,946.1  1,987.2  2,322.4 
Total inventories
$ 2,019.0  $ 2,032.5  $ 2,392.2 

18

As of May 1, 2021, inventory reserves were $45.5 million ($52.9 million and $55.5 million as of January 30, 2021 and May 2, 2020, respectively).
13. Asset impairments, net

The following table summarizes the Company's asset impairment activity for the periods presented:

13 weeks ended
(in millions) May 1, 2021 May 2, 2020
Goodwill impairment (1)
$   $ 10.7 
Indefinite-lived intangible asset impairment (1)
  83.3 
Property and equipment impairment 1.0  13.8 
Operating lease ROU asset impairment (2)
0.5  28.5 
Total asset impairments, net $ 1.5  $ 136.3 
(1) Refer to Note 15 for additional information.
(2) The Company recorded $0.2 million and $1.0 million of gains on terminations or modifications of leases resulting from previously recorded impairments of the right of use assets during the 13 weeks ended May 1, 2021 and May 2, 2020, respectively.

Long-lived assets of the Company consist primarily of property and equipment, definite-lived intangible assets and operating lease right-of-use (“ROU”) assets. Long-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Potentially impaired assets or asset groups are identified by reviewing the undiscounted cash flows of individual stores or other asset groups. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset group, based on the Company’s internal business plans. If the undiscounted cash flow for the asset group is less than its carrying amount, the long-lived assets are measured for potential impairment by estimating the fair value of the asset group, and recording an impairment loss for the amount that the carrying value exceeds the estimated fair value. The Company utilizes primarily the replacement cost method to estimate the fair value of its property and equipment, and the income capitalization method to estimate the fair value of its ROU assets, which incorporates historical store level sales, internal business plans, real estate market capitalization and rental rates, and discount rates.
Fiscal 2021
Due to the various impacts of COVID-19 to the Company’s business during the 13 weeks ended May 2, 2020, including the temporary closure of all the Company’s stores beginning in late March 2020, the Company determined triggering events had occurred for certain of the Company’s long-lived asset groups at individual stores that required an interim impairment assessment during the first quarter of Fiscal 2021. This impacted property and equipment and ROU assets at the store level. The Company identified certain stores in the initial recoverability test which had carrying values in excess of the estimated undiscounted cash flows. For these stores failing the recoverability test, a fair value assessment for these long-lived assets was performed, and as a result of the estimated fair values, the Company recorded an impairment charge for property and equipment of $13.8 million and ROU assets of $28.5 million for the 13 weeks ended May 2, 2020.
Fiscal 2022
During the 13 weeks ended May 1, 2021, the Company determined that triggering events had occurred for certain long-lived asset groups at individual stores based on real estate assessments (including store closure decisions) and store performance for the remaining lease period for certain stores that required an impairment assessment. This impacted property and equipment and ROU assets at the store level. The Company identified certain stores in the initial recoverability test which had carrying values in excess of the estimated undiscounted cash flows. For these stores failing the initial recoverability test, a fair value assessment for these long-lived assets was performed, and as a result of the estimated fair values, the Company recorded an impairment charge for property and equipment of $1.0 million and ROU assets of $0.5 million, which is net of gains on terminations or modifications of leases resulting from previously recorded impairments of the ROU assets of $0.2 million.

The uncertainty of the COVID-19 impact to the Company’s business could continue to further negatively affect the operating performance and cash flows of the above identified stores or additional stores, including the magnitude and potential resurgence of COVID-19, occupancy restrictions in the Company’s stores, the inability to achieve or maintain cost savings initiatives included in the business plans, changes in real estate strategy or macroeconomic factors which influence consumer behavior. In addition, key assumptions used to estimate fair value, such as sales trends, capitalization and market rental rates, and discount rates could impact the fair value estimates of the store assets in future periods.
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14. Leases
Signet occupies certain properties and holds machinery and vehicles under operating leases. Signet determines if an arrangement is a lease at the agreement’s inception. Certain operating leases include predetermined rent increases, which are charged to store occupancy costs within cost of sales on a straight-line basis over the lease term, including any construction period or other rental holiday. Other variable amounts paid under operating leases, such as taxes and common area maintenance, are charged to store occupancy costs within cost of sales as incurred. Premiums paid to acquire short-term leasehold properties and inducements to enter into a lease are recognized on a straight-line basis over the lease term. In addition, certain leases provide for contingent rent based on a percentage of sales in excess of a predetermined level. Further, certain leases provide for variable rent increases based on indexes specified within the lease agreement. The variable increases based on an index are initially measured as part of the operating lease liability using the index at the commencement date. Contingent rent and subsequent changes to variable increases based on indexes will be recognized in the variable lease cost and included in the determination of total lease cost when it is probable that the expense has been incurred and the amount is reasonably estimable. Operating leases are included in operating lease right-of-use (“ROU”) assets and current and non-current operating lease liabilities in the Company’s condensed consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate available at the lease commencement date, based primarily on the underlying lease term, in measuring the present value of lease payments. Lease terms, which include the period of the lease that cannot be canceled, may also include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The operating lease ROU asset may also include initial direct costs, prepaid and/or accrued lease payments and the unamortized balance of lease incentives received. ROU assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable in accordance with the Company’s long-lived asset impairment assessment policy.
Payments arising from operating lease activity, as well as variable and short-term lease payments not included within the operating lease liability, are included as operating activities on the Company’s condensed consolidated statements of cash flows. Operating lease payments representing costs to ready an asset for its intended use (i.e. leasehold improvements) are represented within investing activities within the Company’s condensed consolidated statements of cash flows.

The Company deferred substantially all of its rent payments due in the months of April 2020 and May 2020. As of May 1, 2021, the Company had approximately $64 million of deferred rent payments remaining. This deferred rent is expected to be substantially repaid by the end of Fiscal 2022. The Company has not recorded any provision for interest or penalties which may arise as a result of these deferrals, as management does not believe payment for any such interest or penalties to be probable. In April 2020, the FASB granted guidance (hereinafter, the practical expedient) permitting an entity to choose to forgo the evaluation of the enforceable rights and obligations of the original lease contract, specifically in situations where rent concessions have been agreed to with landlords as a result of COVID-19. Instead, the entity may account for COVID-19 related rent concessions, whatever their form (e.g. rent deferral, abatement or other) either: a) as if they were part of the enforceable rights and obligations of the parties under the existing lease contract; or b) as lease modifications. In accordance with this practical expedient, the Company elected not to account for any concessions granted by landlords as a result of COVID-19 as lease modifications. Rent abatements under the practical expedient would be recorded as a negative variable lease cost. The Company negotiated with substantially all of its landlords and has received certain concessions in the form of rent deferrals and other lease or rent modifications. In addition, the Company recorded lease expense during the deferral periods in accordance with its existing policies.

The weighted average lease term and discount rate for the Company’s outstanding operating leases were as follows:
May 1, 2021
Weighted average remaining lease term 6.1 years
Weighted average discount rate 5.5  %
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Total lease costs are as follows:
13 weeks ended
(in millions) May 1, 2021 May 2, 2020
Operating lease cost $ 105.6  $ 111.4 
Short-term lease cost 0.8  4.9 
Variable lease cost 30.6  25.6 
Sublease income (0.7) (0.5)
Total lease cost $ 136.3  $ 141.4 
Supplemental cash flow information related to leases was as follows:
13 weeks ended
(in millions) May 1, 2021 May 2, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 128.1  $ 49.3 
Operating lease right-of-use assets obtained in exchange for lease obligations 24.6  14.2 
Reduction in the carrying amount of right-of-use assets (1)
85.9  87.9 
(1)    Amount excludes impairment of right-of-use assets of $0.5 million and $28.5 million during the 13 weeks ended May 1, 2021 and May 2, 2020, respectively, as further described in Note 13.

The future minimum operating lease payments for operating leases having initial or non-cancelable terms in excess of one year are as follows:
(in millions) May 1, 2021
Remainder of Fiscal 2022
$ 384.6 
Fiscal 2023 356.2 
Fiscal 2024 279.7 
Fiscal 2025 217.4 
Fiscal 2026 158.7 
Thereafter 399.9 
Total minimum lease payments 1,796.5 
Less: Imputed interest (363.5)
Present value of lease liabilities $ 1,433.0 
15. Goodwill and intangibles
Goodwill and other indefinite-lived intangible assets, such as indefinite-lived trade names, are evaluated for impairment annually. Additionally, if events or conditions indicate the carrying value of a reporting unit or an indefinite-lived intangible asset may be greater than its fair value, the Company would evaluate the asset for impairment at that time. Impairment testing compares the carrying amount of the reporting unit or other intangible assets with its fair value. When the carrying amount of the reporting unit or other intangible assets exceeds its fair value, an impairment charge is recorded.
Fiscal 2021
Due to various impacts of COVID-19 to the Company’s business during the 13 weeks ended May 2, 2020, the Company determined a triggering event had occurred that required an interim impairment assessment for all of its reporting units and indefinite-lived intangible assets. As part of the assessment, it was determined that an increase in the discount rates were required to reflect the prevailing uncertainty inherent in the forecasts due to current market conditions and potential COVID-19 impacts. This higher discount rate, in conjunction with revised long-term projections associated with certain aspects of the Company’s forecast, resulted in lower than previously projected long-term future cash flows for the reporting units and indefinite-lived intangible assets which negatively affected the valuation compared to previous valuations. As a result of the interim impairment assessment, during the first quarter of Fiscal 2021 the Company recognized pre-tax impairment charges related to goodwill of $10.7 million in the condensed consolidated statements of operations within its North America segment related to R2Net and Zales Canada goodwill.
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In conjunction with the interim goodwill impairment tests noted above, during the first quarter of Fiscal 2021 the Company determined that the fair values of indefinite-lived intangible assets related to certain Zales trade names were less than their carrying value. Accordingly, in the first quarter of Fiscal 2021, the Company recognized pre-tax impairment charges within asset impairments, net on the condensed consolidated statements of operations of $83.3 million within its North America segment.
Fiscal 2022
During the 13 weeks ended May 1, 2021, the Company did not identify any events or conditions that would indicate that it was more likely than not that the carrying values of the reporting units and indefinite-lived trade names exceed their fair values.
In connection with the acquisition of Rocksbox on March 29, 2021, the Company recognized $11.5 million of definite-lived intangible assets and $6.9 million of goodwill, which are reported in the North America segment. The weighted-average amortization period of the definite-lived intangibles assets acquired is eight years.
Goodwill
The following table summarizes the Company’s goodwill by reportable segment:
(in millions) North America
Balance at January 30, 2021 $ 238.0 
Acquisitions 6.9 
Balance at May 1, 2021 $ 244.9 

Intangibles
Definite-lived intangible assets include trade names, technology and customer relationship assets. Indefinite-lived intangible assets consist of trade names. Both definite and indefinite-lived assets are recorded within intangible assets, net, on the condensed consolidated balance sheets. Intangible liabilities, net, consists of unfavorable contracts and is recorded within accrued expenses and other current liabilities and other liabilities on the condensed consolidated balance sheets.
The following table provides additional detail regarding the composition of intangible assets and liabilities:
May 1, 2021 January 30, 2021 May 2, 2020
(in millions) Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
Intangible assets, net:
Definite-lived intangible assets
$ 17.1  $ (4.6) $ 12.5  $ 5.6  $ (4.2) $ 1.4  $ 5.6  $ (3.6) $ 2.0 
Indefinite-lived intangible assets (1)
178.1    178.1  177.6  —  177.6  176.7  —  176.7 
Total intangible assets, net
$ 195.2  $ (4.6) $ 190.6  $ 183.2  $ (4.2) $ 179.0  $ 182.3  $ (3.6) $ 178.7 
Intangible liabilities, net
$ (38.0) $ 29.0  $ (9.0) $ (38.0) $ 27.5  $ (10.5) $ (38.0) $ 23.5  $ (14.5)

(1)    The gross carrying amount is presented net of accumulated impairment losses of $297.5 million as of May 1, 2021, January 30, 2021 and May 2, 2020 as well as including the impact of foreign currency.
16. Derivatives
Derivative transactions are used by Signet for risk management purposes to address risks inherent in Signet’s business operations and sources of financing. The main risks arising from Signet’s operations are market risk including foreign currency risk, commodity risk, liquidity risk and interest rate risk. Signet uses derivative financial instruments to manage and mitigate certain of these risks under policies reviewed and approved by the Board of Directors. Signet does not enter into derivative transactions for speculative purposes.
Market risk
Signet generates revenues and incurs expenses in US dollars, Canadian dollars and British pounds. As a portion of the International segment purchases and purchases made by the Canadian operations of the North America segment are denominated in US dollars, Signet enters into forward foreign currency exchange contracts and foreign currency swaps to manage this exposure to the US dollar.
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Signet holds a fluctuating amount of British pounds and Canadian dollars reflecting the cash generative characteristics of operations. Signet’s objective is to minimize net foreign exchange exposure to the condensed consolidated statements of operations on non-US dollar denominated items through managing cash levels, non-US dollar denominated intra-entity balances and foreign currency swaps. In order to manage the foreign exchange exposure and minimize the level of funds denominated in British pounds and Canadian dollars, dividends are paid regularly by subsidiaries to their immediate holding companies and excess British pounds and Canadian dollars are sold in exchange for US dollars.
Signet’s policy is to reduce the impact of precious metal commodity price volatility on operating results through the use of outright forward purchases of, or by entering into options to purchase, precious metals within treasury guidelines approved by the Board of Directors. In particular, Signet undertakes some hedging of its requirements for gold through the use of forward purchase contracts, options and net zero premium collar arrangements (a combination of forwards and option contracts).
Liquidity risk
Signet’s objective is to ensure that it has access to, or the ability to generate, sufficient cash from either internal or external sources in a timely and cost-effective manner to meet its commitments as they become due and payable. Signet manages liquidity risks as part of its overall risk management policy. Management produces forecasting and budgeting information that is reviewed and monitored by the Board of Directors. Cash generated from operations and external financing are the main sources of funding, which supplement Signet’s resources in meeting liquidity requirements.
The primary external sources of funding are an asset-based credit facility and senior unsecured notes as described in Note 18.
Interest rate risk
Signet has exposure to movements in interest rates associated with cash and borrowings. Signet may enter into various interest rate protection agreements in order to limit the impact of movements in interest rates.
Credit risk and concentrations of credit risk
Credit risk represents the loss that would be recognized at the reporting date if counterparties failed to perform as contracted. Signet does not anticipate non-performance by counterparties of its financial instruments. Signet does not require collateral or other security to support cash investments or financial instruments with credit risk; however, it is Signet’s policy to only hold cash and cash equivalent investments and to transact financial instruments with financial institutions with a certain minimum credit rating. As of May 1, 2021, management does not believe Signet is exposed to any significant concentrations of credit risk that arise from cash and cash equivalent investments, derivatives or accounts receivable.
Commodity and foreign currency risks
The following types of derivative financial instruments are utilized by Signet to mitigate certain risk exposures related to changes in commodity prices and foreign exchange rates:
Forward foreign currency exchange contracts (designated) — These contracts, which are principally in US dollars, are entered into to limit the impact of movements in foreign exchange rates on forecasted foreign currency purchases. These contracts were de-designated during the 13 weeks ended May 2, 2020. This de-designation occurred due to uncertainly around the volume of purchases in the Company’s UK business. These contracts were unlikely to retain hedge effectiveness given the change in circumstances as a result of COVID-19. Trading for these contracts resumed during the third quarter of Fiscal 2021. The total notional amount of these foreign currency contracts outstanding as of May 1, 2021 was $19.0 million (January 30, 2021 and May 2, 2020: $12.5 million and $0.0 million, respectively). These contracts have been designated as cash flow hedges and will be settled over the next 12 months (January 30, 2021 and May 2, 2020: 12 months and not applicable, respectively).
Forward foreign currency exchange contracts (undesignated) — Foreign currency contracts not designated as cash flow hedges are used to limit the impact of movements in foreign exchange rates on recognized foreign currency payables and to hedge currency flows through Signet’s bank accounts to mitigate Signet’s exposure to foreign currency exchange risk in its cash and borrowings. The total notional amount of these foreign currency contracts outstanding as of May 1, 2021 was $108.8 million (January 30, 2021 and May 2, 2020: $107.6 million and $177.6 million, respectively). The outstanding amount as of May 2, 2020 included certain contracts which were previously designated, as well as a forward contract entered into to hedge the portion of the insurance proceeds expected to be received in British Pounds associated with the shareholder litigation, which had a notional amount of £95 million.
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Commodity forward purchase contracts and net zero premium collar arrangements (designated) — These contracts are entered into to reduce Signet’s exposure to significant movements in the price of the underlying precious metal raw materials. During the 13 weeks ended May 2, 2020, the contracts which were still outstanding (and unrealized) were de-designated and liquidated. The contracts which were already settled remained designated as the hedged inventory purchases from these contracts were still on hand. The unrealized contracts were de-designated as a result of uncertainty around the Company’s future purchasing volume due to COVID-19 and thus the contracts were unlikely to retain hedge effectiveness. Trading for these contracts resumed during the third quarter of Fiscal 2021. Trading for these contracts was suspended during Fiscal 2022 due to the current commodity price environment and there was no material notional amount of these commodity derivative contracts outstanding as of May 1, 2021, January 30, 2021, or May 2, 2020.
The bank counterparties to the derivative instruments expose Signet to credit-related losses in the event of their non-performance. However, to mitigate that risk, Signet only contracts with counterparties that meet certain minimum requirements under its counterparty risk assessment process. As of May 1, 2021, Signet believes that this credit risk did not materially change the fair value of the foreign currency or commodity contracts.
The following table summarizes the fair value and presentation of derivative instruments in the condensed consolidated balance sheets:
Fair value of derivative assets
(in millions) Balance sheet location May 1, 2021 January 30, 2021 May 2, 2020
Derivatives designated as hedging instruments:
Foreign currency contracts
Other current assets $ 0.1  $ —  $ — 
Total derivative assets
0.1  —  — 
Derivatives not designated as hedging instruments:
Foreign currency contracts
Other current assets 0.1  0.1  0.1 
Total derivative assets
$ 0.2  $ 0.1  $ 0.1 
Fair value of derivative liabilities
(in millions) Balance sheet location May 1, 2021 January 30, 2021 May 2, 2020
Derivatives designated as hedging instruments:
Foreign currency contracts
Other current liabilities $ (0.3) $ (0.3) $ — 
Commodity contracts
Other current liabilities   (0.1) — 
(0.3) (0.4) — 
Derivatives not designated as hedging instruments:
Foreign currency contracts
Other current liabilities (0.5) —  (0.3)
Total derivative liabilities
$ (0.8) $ (0.4) $ (0.3)

Derivatives designated as cash flow hedges
The following table summarizes the pre-tax gains (losses) recorded in AOCI for derivatives designated in cash flow hedging relationships:
(in millions) May 1, 2021 January 30, 2021 May 2, 2020
Foreign currency contracts
$ (0.6) $ (0.7) $ — 
Commodity contracts
(0.4) (0.4) 6.2 
Gains (losses) recorded in AOCI
$ (1.0) $ (1.1) $ 6.2 
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The following tables summarize the effect of derivative instruments designated as cash flow hedges on OCI and the condensed consolidated statements of operations:
Foreign currency contracts
13 weeks ended