Delivers Results In-Line with Expectations
Increases Merchandise Margin Rate and Average
Transaction Value
Reiterates Fiscal 2025 Guidance
Signet Jewelers Limited (“Signet” or the "Company") (NYSE:SIG),
the world's largest retailer of diamond jewelry, today announced
its results for the 13 weeks ended August 3, 2024 (“second quarter
Fiscal 2025”).
"I’d like to thank our Signet team for delivering our fifth
consecutive quarter of sequential same store sales improvement, up
more than 5 points compared to the first quarter of this year and
turning positive third quarter to date. Our strategy to accelerate
new merchandise at the right price points is capturing customer
demand and driving merchandise margin expansion,” said Signet Chief
Executive Officer Virginia C. Drosos. “Both the internal and
external metrics we track indicate increasing engagements as we
head into the back-half of the year. This combined with growth in
new high margin fashion merchandise and services gives us
confidence in delivering our annual guidance."
"Our strategy of balancing new merchandise, competitive pricing,
and sourcing savings drove merchandise margin expansion of 120
basis points and an increase in average transaction value compared
to this time last year,” said Joan Hilson, Chief Financial,
Strategy & Services Officer. “In addition to continuing this
strategy, our fiscal year guidance includes an increase in cost
savings, now up to $200 million for the year, which we believe
provides for flexibility in a competitive environment in the
back-half."
Second Quarter Fiscal 2025 Highlights:
- Sales of $1.5 billion, down $122.6 million or 7.6% (down
7.6%(1) on a constant currency basis) to Q2 of FY24.
- Same store sales (“SSS”)(2) down 3.4% to Q2 of FY24.
- Gross Margins expanded 10 basis points to 38.0% of sales.
- Operating loss of $100.9 million, down from operating income of
$90.2 million in Q2 of FY24, due to $166 million of non-cash
impairment charges substantially related to Digital Banners
goodwill and the Blue Nile trade name.
- Adjusted operating income(1) of $68.6 million, down from $102.7
million in Q2 of FY24.
- Diluted loss per share of $2.28, compared to diluted earnings
per share ("EPS") of $1.38 in Q2 of FY24. The current quarter
diluted loss per share includes $3.73 of non-cash impairment
charges referenced above.
- Adjusted diluted EPS(1) of $1.25, compared to $1.55 in Q2 of
FY24.
- Cash and cash equivalents, at quarter end, of $403.1 million,
compared to $690.2 million in Q2 of FY24.
- Repurchased $39.8 million, or approximately 441,000 common
shares, during the second quarter.
(1)
See the non-GAAP financial measures
section below.
(2)
Same store sales include physical stores
and eCommerce sales. As described further below, Fiscal 2025 Q2
same store sales have been calculated by aligning the sales weeks
of the current quarter to the equivalent sales weeks in the prior
fiscal year period.
(in millions, except per share
amounts)
Fiscal 25 Q2
Fiscal 24 Q2
YTD Fiscal 2025
YTD Fiscal 2024
Sales
$
1,491.0
$
1,613.6
$
3,001.8
$
3,281.6
SSS % change (1) (2)
(3.4
)%
(12.0
)%
(6.2
)%
(13.0
)%
GAAP
Operating (loss) income
$
(100.9
)
$
90.2
$
(51.1
)
$
191.9
Operating margin
(6.8
)%
5.6
%
(1.7
)%
5.8
%
Diluted EPS (loss per share)
$
(2.28
)
$
1.38
$
(3.17
)
$
3.17
Adjusted (3)
Adjusted operating income
$
68.6
$
102.7
$
126.4
$
209.2
Adjusted operating margin
4.6
%
6.4
%
4.2
%
6.4
%
Adjusted diluted EPS
$
1.25
$
1.55
$
2.35
$
3.33
(1)
Same store sales include physical stores
and eCommerce sales.
(2)
The 53rd week in Fiscal 2024 has resulted
in a shift as the current fiscal year began a week later than the
previous fiscal year. As such, same store sales for Fiscal 2025
have been calculated by aligning the sales weeks of the current
quarter and year to date periods to the equivalent sales weeks in
the prior fiscal year. Total reported sales continue to be
calculated based on the reported fiscal periods.
(3)
See non-GAAP financial measures below.
Second Quarter Fiscal 2025 Results:
Change from previous
year
Second Quarter Fiscal 2025
Same store
sales(1)
Non-same store
sales, net
Total sales at
constant exchange rate(2)
Exchange
translation impact
Total sales as
reported
Total sales (in
millions)
North America segment
(3.7
)%
(3.1
)%
(6.8
)%
(0.1
)%
(6.9
)%
$
1,397.6
International segment
1.7
%
(17.5
)%
(15.8
)%
0.6
%
(15.2
)%
$
86.5
Other segment (3)
nm
nm
nm
nm
nm
$
6.9
Signet
(3.4
)%
(4.2
)%
(7.6
)%
—
%
(7.6
)%
$
1,491.0
(1)
As noted above, Fiscal 2025 Q2 same store
sales have been calculated by aligning the sales weeks of the
current quarter to the equivalent sales weeks in the prior fiscal
year period.
(2)
See non-GAAP financial measures below.
(3)
Includes sales from Signet’s diamond
sourcing operation.
nm Not meaningful.
By reportable segment:
North America
- Total sales of $1.4 billion, down $103.5 million or 6.9% to Q2
of FY24 reflecting an increase of 1.6% in total average transaction
value ("ATV"), on a lower number of transactions.
- SSS declined 3.7% compared to Q2 of FY24.
International
- Total sales of $86.5 million, down $15.5 million or 15.2% to Q2
of FY24 (down 15.8% on a constant currency basis) reflecting a
decrease of 13.4% in total ATV driven by the previously announced
sale of prestige watch locations, as well as a lower number of
transactions.
- SSS increased 1.7% compared to Q2 of FY24.
Gross margin was $566.3 million, down from $610.8 million in Q2
of FY24. Gross margin was 38.0% of sales, 10 basis points
improvement to Q2 of FY24 driven by a 120 basis point merchandise
margin improvement from a higher mix of Services and Fashion
revenue, partially offset by deleveraging of fixed costs such as
store occupancy.
SG&A was $498.4 million, down from $511.2 million in Q2 of
FY24. SG&A was 33.4% of sales, 170 basis points higher versus
Q2 of FY24. The change in SG&A as a percentage of sales was
primarily driven by deleverage of fixed costs.
Operating loss was $100.9 million or (6.8)% of sales, compared
to operating income of $90.2 million, or 5.6% of sales in Q2 of
FY24. The operating loss was due to the impairment charges at the
Digital Banners referenced above. The impairment of the Digital
Banners was substantially caused by the on-going challenges from
the Blue Nile integration, the lag in engagement recovery, and to a
much lesser degree, impacts from market declines in lab created
diamond pricing. Notably, Digital Banners bridal penetration of
over 80% is more than four times the industry average.
Adjusted operating income was $68.6 million, or 4.6% of sales,
compared to $102.7 million, or 6.4% of sales in Q2 of FY24.
Second quarter Fiscal
2025
Second quarter Fiscal
2024
Operating (loss) income in
millions
$
% of sales
$
% of sales
North America segment
$
(77.2
)
(5.5
)%
$
117.1
7.8
%
International segment
(4.2
)
(4.9
)%
(7.0
)
(6.9
)%
Other segment
(2.6
)
nm
(1.0
)
nm
Corporate and unallocated expenses
(16.9
)
nm
(18.9
)
nm
Total operating (loss) income
$
(100.9
)
(6.8
)%
$
90.2
5.6
%
Second quarter Fiscal
2025
Second quarter Fiscal
2024
Adjusted operating income in millions
(1)
$
% of sales
$
% of sales
North America segment
$
90.1
6.4
%
$
129.6
8.6
%
International segment
(2.0
)
(2.3
)%
(7.0
)
(6.9
)%
Other segment
(2.6
)
nm
(1.0
)
nm
Corporate and unallocated expenses
(16.9
)
nm
(18.9
)
nm
Total adjusted operating income
$
68.6
4.6
%
$
102.7
6.4
%
(1) See non-GAAP financial measures
below.
nm Not meaningful.
The current quarter income tax expense was $1.6 million compared
to income tax expense of $17.2 million in Q2 of FY24. Adjusted
income tax expense was $13.3 million compared to $20.4 million in
Q2 of FY24.
Diluted loss per share was $2.28, down from diluted EPS of $1.38
in Q2 of FY24. Diluted loss per share in the current quarter
primarily includes $3.73 of asset impairment charges. Excluding
these charges (and related tax effects), diluted EPS was $1.25 on
an adjusted basis.
The preferred shares had no impact on either diluted loss per
share or adjusted diluted EPS for the second quarter of Fiscal
2025.
Balance Sheet and Statement of Cash Flows Highlights:
Year to date cash used in operating activities was $114.4
million compared to cash used in operating activities of $253.3
million in Q2 of FY24. Cash and cash equivalents were $403.1
million as of quarter end, compared to $690.2 million in Q2 of FY24
due to $689 million of cash outlays to redeem preferred shares and
retire unsecured notes over the last 12 months. Inventory ended the
quarter at $2.0 billion, down $116.7 million or 5.6% to Q2 of FY24,
driven by Signet's demand planning efforts and life cycle
management.
In May, Leonard Green Partners elected to redeem 100,000 of the
remaining 312,500 preferred shares for approximately $129.0
million, bringing the total number of preferred shares retired to
412,500. As of today, 212,500 preferred shares remain
outstanding.
The Company ended the second quarter with an Adjusted Debt to
Adjusted EBITDAR ratio of 2.0x on a trailing 12-month basis, well
below the stated goal of at or below 2.5x, and was 1.7x on an
Adjusted Net Debt basis. Net Debt to Adjusted EBITDA was (0.2)x on
a trailing 12-month basis.
Subsequent to quarter end, the Company completed a three-year
extension of its asset backed loan facility, now scheduled to
mature on August 23rd, 2029. The agreement also amends the total
facility to $1.2 billion to align with Signet’s lower inventory
base. The Company believes this facility will cover liquidity needs
for the next 5 years at attractive terms, providing flexibility on
capital priorities which include retiring the remainder of the
convertible preferred shares.
Capital Returns to Shareholders:
Signet's Board of Directors has declared a quarterly cash
dividend on common shares of $0.29 per share for the third quarter
of Fiscal 2025, payable November 22, 2024 to shareholders of record
on October 25, 2024, with an ex-dividend date of October 25,
2024.
In the second quarter Signet repurchased approximately 441,000
common shares at an average cost per share of $90.35, or $39.8
million. The Company had approximately $813.8 million in share
repurchase authorization remaining at the end of the second
quarter.
Third Quarter and Full Year Fiscal 2025 Guidance:
Third Quarter
Total sales
$1.345 billion to $1.380
billion
Same store sales
(1.0%) to +1.5%
Adjusted operating income (1)
$8 million to $25 million
Adjusted EBITDA (1)
$55 million to $72 million
(1) See description of non-GAAP financial
measures below.
Forecasted adjusted operating income and
adjusted EBITDA exclude potential non-recurring charges, such as
restructuring charges, asset impairments or integration-related
costs. However, given the potential impact of non-recurring charges
to the GAAP operating income, we cannot provide forecasted GAAP
operating income or the probable significance of such items without
unreasonable efforts. As such, we do not present a reconciliation
of forecasted adjusted operating income or adjusted EBITDA to
corresponding forecasted GAAP amounts.
Fiscal 2025
Total sales
$6.66 billion to $7.02
billion
Same store sales
(4.5%) to +0.5%
Adjusted operating income (1)
$590 million to $675 million
Adjusted EBITDA (1)
$780 million to $865 million
Adjusted diluted EPS (1)
$9.90 to $11.52
(1) See description of non-GAAP financial
measures below.
Forecasted adjusted operating income,
adjusted EBITDA and adjusted diluted EPS provided above exclude
potential non-recurring charges, such as restructuring charges,
asset impairments or integration-related costs. However, given the
potential impact of non-recurring charges to the GAAP operating
income and diluted EPS, we cannot provide forecasted GAAP operating
income or diluted EPS or the probable significance of such items
without unreasonable efforts. As such, we do not present a
reconciliation of forecasted adjusted operating income, adjusted
EBITDA and adjusted diluted EPS to corresponding forecasted GAAP
amounts.
The Company's Fiscal 2025 guidance is based on the following
assumptions:
- Engagements to increase by up to 5% in Fiscal 2025; however,
Signet's guidance accommodates a range of engagements from (5%) to
+5%. The Company's Q3 to-date engagement units are positive year on
year.
- Fashion sales to be more robust based on recent trends and a
modest improvement in the Digital Banners combine to offset the
slower than expected engagement recovery.
- Up to $200 million in cost savings initiatives in Fiscal 2025,
up from our previous expectations of $150 million to $180
million.
- Capital expenditures of approximately $160 million to $180
million.
- Annual tax rate of 19% to 20% excludes potential discrete
items.
- Up to $1.1 billion allocated to retirement of debt, redemption
of preferred shares and open-market common share repurchases in
Fiscal 2025.
- Approximately $225 million in non-comparable sales headwinds
reflecting over $100 million from the 53rd week in Fiscal 2024,
approximately $75 million in the UK from the sale of previously
announced prestige watch locations in the UK and up to 30 Ernest
Jones store closures, and approximately $50 million from total
store closures in North America in Fiscal 2024 and Fiscal
2025.
- Net square footage decline of 1% to flat for the year.
Our Purpose and Sustainable Growth:
Signet’s banner, Zales, continued their partnership with the
Black College Football Hall of Fame (BCFHOF) as the official
jeweler, further strengthening their support for Historically Black
Colleges and Universities (HBCUs). Zales exclusively created
ceremonial rings for the Hall of Fame inductees. The 2024 inductees
were presented their custom rings in June at the induction ceremony
for the College Football Hall of Fame in Atlanta, Georgia. In
addition to the rings, Zales participated in the Hall of Fame
Classic kick-off reception and career fair, which took place in
late August at the Pro Football Hall of Fame, in Canton, Ohio,
furthering its commitment to be an inclusive employer of
choice.
Conference Call:
A conference call is scheduled for September 12, 2024 at 8:30
a.m. ET and a simultaneous audio webcast is available at
www.signetjewelers.com.
The call details are: Toll Free – North America +1 800 549 8228
Local – Toronto +1 289 819 1520 Conference ID 97777 Registration
for the listen-only webcast is available at the following link:
https://events.q4inc.com/attendee/463875715
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. As a Purpose-driven and sustainability-focused
company, Signet is a participant in the United Nations Global
Compact and adheres to its principles-based approach to responsible
business. Signet operates approximately 2,700 stores primarily
under the name brands of Kay Jewelers, Zales, Jared, Banter by
Piercing Pagoda, Diamonds Direct, Blue Nile, James Allen, Rocksbox,
Peoples Jewellers, H. Samuel, and Ernest Jones. Further information
on Signet is available at www.signetjewelers.com. See also
www.kay.com, www.zales.com, www.jared.com, www.banter.com,
www.diamondsdirect.com, www.bluenile.com, www.jamesallen.com,
www.rocksbox.com, www.peoplesjewellers.com, www.hsamuel.co.uk,
www.ernestjones.co.uk.
This release contains statements which are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements are 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, results of operations, financial condition,
liquidity, prospects, growth, strategies and the industry in which
we operate. The use of the words "expects," "intends,"
"anticipates," "estimates," "predicts," "believes," "should,"
"potential," "may," "preliminary," "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: difficulty or delay in
executing or integrating an acquisition, including Diamonds Direct
and Blue Nile; executing other major business or strategic
initiatives, such as expansion of the services business or
realizing the benefits of our restructuring plans; the impact of
the Israel-Hamas conflict on the operations of our quality control
and technology centers in Israel; the negative impacts that public
health crisis, disease outbreak, epidemic or pandemic has had, and
could have in the future, on our business, financial condition,
profitability and cash flows, including without limitation risks
relating to shifts in consumer spending away from the jewelry
category, trends toward more experiential purchases such as travel,
disruptions in the dating cycle caused by the COVID-19 pandemic and
the pace at which such impacts on engagements are expected to
recover, and the Company’s ability to capture market share of the
bridal category upon the recovery of engagements; general economic
or market conditions, including impacts of inflation or other
pricing environment factors on our commodity costs (including
diamonds) or other operating costs; a prolonged slowdown in the
growth of the jewelry market or a recession in the overall economy;
financial market risks; a decline in consumer discretionary
spending or deterioration in consumer financial position;
disruptions in our supply chain; our ability to attract and retain
labor; our ability to optimize our transformation strategies;
changes to regulations relating to customer credit; disruption in
the availability of credit for customers and customer inability to
meet credit payment obligations, which has occurred and may
continue to deteriorate; our ability to achieve the benefits
related to the outsourcing of the credit portfolio, including due
to technology disruptions and/or disruptions arising from changes
to or termination of the relevant outsourcing agreements, as well
as a potential increase in credit costs due to the current interest
rate environment; deterioration in the performance of individual
businesses or of our market value relative to its book value,
resulting in further impairments of long-lived assets or intangible
assets or other adverse financial consequences; the volatility of
our stock price; the impact of financial covenants, credit ratings
or interest volatility on our ability to borrow; our ability to
maintain adequate levels of liquidity for our cash needs, including
debt obligations, payment of dividends, planned share repurchases
(including future Preferred Share conversions, execution of
accelerated share repurchases and the payment of related excise
taxes) and capital expenditures as well as the ability of our
customers, suppliers and lenders to access sources of liquidity to
provide for their own cash needs; potential regulatory changes;
future legislative and regulatory requirements in the US and
globally relating to climate change, including any new climate
related disclosure or compliance requirements, such as those
recently issued in the state of California or adopted by the SEC;
exchange rate fluctuations; the cost, availability of and demand
for diamonds, gold and other precious metals, including any impact
on the global market supply of diamonds due to the ongoing
Israel-Hamas conflict, the potential sale or divestiture of the De
Beers Diamond Company and its diamond mining operations by parent
company Anglo-American plc, and the ongoing Russia-Ukraine conflict
or related sanctions; stakeholder reactions to disclosure regarding
the source and use of certain minerals; scrutiny or detention of
goods produced in certain territories resulting from trade
restrictions; seasonality of our business; the merchandising,
pricing and inventory policies followed by us and our ability to
manage inventory levels; our relationships with suppliers including
the ability to continue to utilize extended payment terms and the
ability to obtain merchandise that customers wish to purchase; the
failure to adequately address the impact of existing tariffs and/or
the imposition of additional duties, tariffs, taxes and other
charges or other barriers to trade or impacts from trade relations;
the level of competition and promotional activity in the jewelry
sector; our ability to optimize our multi-year strategy to gain
market share, expand and improve existing services, innovate and
achieve sustainable, long-term growth; the maintenance and
continued innovation of our OmniChannel retailing and ability to
increase digital sales, as well as management of digital marketing
costs; changes in consumer attitudes regarding jewelry and failure
to anticipate and keep pace with changing fashion trends; changes
in the costs, retail prices, supply and consumer acceptance of, and
demand for gem quality lab-created diamonds and adequate
identification of the use of substitute products in our jewelry;
ability to execute successful marketing programs and manage social
media; the ability to optimize our real estate footprint, including
operating in attractive trade areas and accounting for changes in
consumer traffic in mall locations; the performance of and ability
to recruit, train, motivate and retain qualified team members -
particularly in regions experiencing low unemployment rates;
management of social, ethical and environmental risks; ability to
deliver on our environmental, social and governance goals; the
reputation of Signet and its banners; inadequacy in and disruptions
to internal controls and systems, including related to the
migration to new information technology systems which impact
financial reporting; risks associated with the Company’s use of
artificial intelligence; security breaches and other disruptions to
our or our third-party providers’ information technology
infrastructure and databases; an adverse development in legal or
regulatory proceedings or tax matters, including any new claims or
litigation brought by employees, suppliers, consumers or
shareholders, regulatory initiatives or investigations, and ongoing
compliance with regulations and any consent orders or other legal
or regulatory decisions; failure to comply with labor regulations;
collective bargaining activity; changes in corporate taxation
rates, laws, rules or practices in the US and other jurisdictions
in which our subsidiaries are incorporated, including developments
related to the tax treatment of companies engaged in Internet
commerce or deductions associated with payments to foreign related
parties that are subject to a low effective tax rate; risks related
to international laws and Signet being a Bermuda corporation; risks
relating to the outcome of pending litigation; our ability to
protect our intellectual property or assets including cash which
could be affected by failure of a financial institution or
conditions affecting the banking system and financial markets as a
whole; changes in assumptions used in making accounting estimates
relating to items such as extended service plans; or the impact of
weather-related incidents, natural disasters, organized crime or
theft, increased security costs, strikes, protests, riots or
terrorism, acts of war (including the ongoing Russia-Ukraine and
Israel-Hamas conflicts), or another public health crisis or disease
outbreak, epidemic or pandemic on our business.
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”
and “Forward-Looking Statements” sections of Signet’s Fiscal 2024
Annual Report on Form 10-K filed with the SEC on March 21, 2024 and
quarterly reports on Form 10-Q and the “Safe Harbor Statements” in
current reports on Form 8-K 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.
Non-GAAP Financial Measures
In addition to reporting the Company's financial results in
accordance with generally accepted accounting principles ("GAAP"),
the Company reports certain financial measures on a non-GAAP basis.
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 and liquidity. 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 condensed
consolidated 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.
The Company previously referred to certain non-GAAP measures as
non-GAAP operating income, non-GAAP operating margin and non-GAAP
diluted EPS. Beginning in Fiscal 2025, these non-GAAP measures are
now referred to as adjusted operating income, adjusted operating
margin and adjusted diluted EPS, respectively. There have been no
changes to how these non-GAAP measures are defined or reconciled to
the most directly comparable GAAP measures.
The Company reports the following non-GAAP financial measures:
sales changes on a constant currency basis, free cash flow,
adjusted operating income, adjusted operating margin, adjusted
diluted earnings per share ("EPS"), adjusted earnings before
interest, income taxes, depreciation and amortization (“adjusted
EBITDA”) and adjusted EBITDAR, and the debt and net debt leverage
ratios, including on an adjusted basis.
The Company provides the year-over-year change in total sales
excluding the impact of foreign currency fluctuations to provide
transparency to performance and enhance investors’ understanding of
underlying business trends. The effect from foreign currency,
calculated on a constant currency basis, is determined by applying
current year average exchange rates to prior year sales in local
currency.
Free cash flow is a non-GAAP measure defined as the net cash
provided by (used in) operating activities less purchases of
property, plant and equipment. Management considers this metric to
be helpful in understanding how the business is generating cash
from its operating and investing activities that can be used to
meet the financing needs of the business. Free cash flow is an
indicator frequently used by management to evaluate its overall
liquidity needs and determine appropriate capital allocation
strategies. Free cash flow does not represent the residual cash
flow available for discretionary purposes.
Adjusted operating income is a non-GAAP measure defined as
operating income excluding the impact of certain items which
management believes are not necessarily reflective of normal
operational performance during a period. Management finds the
information useful when analyzing operating results to
appropriately evaluate the performance of the business without the
impact of these certain items. Management believes the
consideration of measures that exclude such items can assist in the
comparison of operational performance in different periods which
may or may not include such items. Management also utilizes
adjusted operating margin, defined as adjusted operating income as
a percentage of total sales, to further evaluate the effectiveness
and efficiency of the Company’s flexible operating model.
Adjusted diluted EPS is a non-GAAP measure defined as diluted
EPS excluding the impact of certain items which management believes
are not necessarily reflective of normal operational performance
during a period. Management finds the information useful when
analyzing financial results in order to appropriately evaluate the
performance of the business without the impact of these certain
items. In particular, management believes the consideration of
measures that exclude such items can assist in the comparison of
performance in different periods which may or may not include such
items. The Company estimates the tax effect of all non-GAAP
adjustments by applying a statutory tax rate to each item. The
income tax items are used to estimate adjusted income tax expense
and represent the discrete amount that affected the diluted EPS
during the period.
Adjusted EBITDA is a non-GAAP measure, defined as earnings
before interest and income taxes, depreciation and amortization,
share-based compensation expense, other non-operating expense, net
and certain non-GAAP accounting adjustments. Adjusted EBITDAR takes
this adjusted EBITDA and further excludes minimum fixed rent
expense for properties occupied under operating leases. Adjusted
EBITDA and Adjusted EBITDAR are considered important indicators of
operating performance as they exclude the effects of financing and
investing activities by eliminating the effects of interest,
depreciation and amortization costs and certain accounting
adjustments.
The debt and net debt leverage ratios are non-GAAP measures
calculated by dividing Signet’s debt or net debt by adjusted
EBITDA. Debt as used in these ratios is defined as current or
long-term debt recorded in the condensed consolidated balance sheet
plus Preferred Shares. Net debt as used in these ratios is debt
less the cash and cash equivalents on hand as of the balance sheet
date. The adjusted debt and adjusted net debt leverage ratios are
non-GAAP measures calculated by dividing Signet’s adjusted debt or
adjusted net debt by adjusted EBITDAR. Adjusted debt is a non-GAAP
measure defined as debt recorded in the condensed consolidated
balance sheets, plus Preferred Shares, plus an adjustment for
operating leases (5x annual rent expense). Adjusted net debt, a
non-GAAP measure, is adjusted debt less the cash and cash
equivalents on hand as of the balance sheet dates. Management
believes these financial measures are helpful to investors and
analysts to analyze trends in Signet’s business and evaluate
Signet’s performance. The debt and adjusted debt leverage ratios
are key to the Company’s capital allocation strategy as measures of
the Company’s optimized capital structure. The net debt and
adjusted net debt leverage ratios are supplemental to the debt and
adjusted debt ratios as both investors and management find it
useful to consider cash and cash equivalents available to pay down
debt. These ratios are presented on a trailing twelve-month (“TTM”)
basis, which uses either adjusted EBITDA or adjusted EBITDAR
calculated on the prior four fiscal quarters.
The following information provides reconciliations of the most
comparable financial measures calculated and presented in
accordance with GAAP to presented non-GAAP financial measures.
Free cash flow
26 weeks ended
(in millions)
August 3, 2024
July 29, 2023
Net cash used in operating activities
$
(114.4
)
$
(253.3
)
Purchase of property, plant and
equipment
(51.3
)
(55.4
)
Free cash flow
$
(165.7
)
$
(308.7
)
Adjusted operating income
13 weeks ended
26 weeks ended
(in millions)
August 3, 2024
July 29, 2023
August 3, 2024
July 29, 2023
Total operating (loss) income
$
(100.9
)
$
90.2
$
(51.1
)
$
191.9
Asset impairments (1)
166.2
3.5
168.1
3.5
Restructuring charges (2)
1.2
4.2
5.8
4.2
Loss on divestitures, net (3)
1.2
—
2.5
—
Integration-related expenses (4)
0.9
4.8
1.1
12.6
Litigation charges (5)
—
—
—
(3.0
)
Total adjusted operating income
$
68.6
$
102.7
$
126.4
$
209.2
North America segment adjusted operating income
13 weeks ended
26 weeks ended
(in millions)
August 3, 2024
July 29, 2023
August 3, 2024
July 29, 2023
North America segment operating (loss)
income
$
(77.2
)
$
117.1
$
6.0
$
241.8
Asset impairments (1)
166.2
3.5
167.4
3.5
Restructuring charges (2)
0.2
4.2
0.8
4.2
Integration-related expenses (4)
0.9
4.8
1.1
12.6
Litigation charges (5)
—
—
—
(3.0
)
North America segment adjusted operating
income
$
90.1
$
129.6
$
175.3
$
259.1
International segment adjusted operating loss
13 weeks ended
26 weeks ended
(in millions)
August 3, 2024
July 29, 2023
August 3, 2024
July 29, 2023
International segment operating loss
$
(4.2
)
$
(7.0
)
$
(17.2
)
$
(13.9
)
Restructuring charges (2)
1.0
—
5.0
—
Asset impairments (1)
—
—
0.7
—
Loss on divestitures, net (3)
1.2
—
2.5
—
International segment adjusted operating
loss
$
(2.0
)
$
(7.0
)
$
(9.0
)
$
(13.9
)
Adjusted income tax provision
13 weeks ended
26 weeks ended
(in millions)
August 3, 2024
July 29, 2023
August 3, 2024
July 29, 2023
Income tax expense
$
1.6
$
17.2
$
8.1
$
26.7
Asset impairments (1)
10.8
0.9
11.3
0.9
Restructuring charges (2)
0.4
1.1
1.5
1.1
Loss on divestitures, net (3)
0.3
—
0.6
—
Integration-related expenses (4)
0.2
1.2
0.2
3.1
Pension settlement loss
—
—
—
4.1
Litigation charges (5)
—
—
—
(0.8
)
Adjusted income tax expense
$
13.3
$
20.4
$
21.7
$
35.1
Adjusted effective tax rate
13 weeks ended
August 3, 2024
July 29, 2023
Effective tax rate
(1.7
)%
18.6
%
Asset impairments (1)
18.5
%
0.2
%
Restructuring charges (2)
0.7
%
0.3
%
Loss on divestitures, net (3)
0.5
%
—
%
Integration-related expenses (4)
0.3
%
0.4
%
Adjusted effective tax rate
18.3
%
19.5
%
Adjusted diluted EPS
13 weeks ended
26 weeks ended
August 3, 2024
July 29, 2023
August 3, 2024
July 29, 2023
Diluted EPS
$
(2.28
)
$
1.38
$
(3.17
)
$
3.17
Asset impairments (1)
3.73
0.06
3.77
0.06
Restructuring charges (2)
0.03
0.08
0.13
0.08
Loss on divestitures, net (3)
0.03
—
0.06
—
Integration-related expenses (4)
0.02
0.09
0.02
0.24
Litigation charges (5)
—
—
—
(0.06
)
Tax impact of items above (6)
(0.26
)
(0.06
)
(0.30
)
(0.16
)
Deemed dividend on redemption of Preferred
Shares (7)
—
—
1.91
—
Dilution effect (8)
(0.02
)
—
(0.07
)
—
Adjusted diluted EPS
$
1.25
$
1.55
$
2.35
$
3.33
Adjusted EBITDA and adjusted EBITDAR
26 weeks ended
53 week period ended
52 week period ended
53 week period ended
52 week period ended
(in millions)
August 3, 2024
July 29, 2023
July 30, 2022
February 3, 2024
January 28, 2023
August 3, 2024
July 29, 2023
Calculation:
A
B
C
D
E
A + D - B
B + E - C
Net (loss) income
$
(46.4
)
$
172.5
$
61.9
$
810.4
$
376.7
$
591.5
$
487.3
Income taxes
8.1
26.7
(19.6
)
(170.6
)
74.5
(189.2
)
120.8
Interest (income) expense, net
(11.0
)
(7.4
)
7.8
(18.7
)
13.5
(22.3
)
(1.7
)
Depreciation and amortization
74.5
86.7
79.8
161.9
164.5
149.7
171.4
Amortization of unfavorable contracts
(0.9
)
(0.9
)
(0.9
)
(1.8
)
(1.8
)
(1.8
)
(1.8
)
Other non-operating (income) expense, net
(9)
(1.8
)
0.1
136.9
0.4
140.2
(1.5
)
3.4
Share-based compensation
18.3
25.2
22.9
41.1
42.0
34.2
44.3
Other accounting adjustments (10)
177.5
17.3
200.8
21.3
245.5
181.5
62.0
Adjusted EBITDA
$
218.3
$
320.2
$
489.6
$
844.0
$
1,055.1
$
742.1
$
885.7
Rent expense
218.3
220.5
220.6
439.8
446.5
437.6
446.4
Adjusted EBITDAR
$
436.6
$
540.7
$
710.2
$
1,283.8
$
1,501.6
$
1,179.7
$
1,332.1
Debt and net debt leverage ratios
As of
(in millions)
August 3, 2024
July 29, 2023
Debt and net
debt:
Current portion of long-term debt
$
—
$
147.5
Redeemable Series A Convertible Preference
Shares
223.1
654.7
Debt
$
223.1
$
802.2
Less: Cash and cash equivalents
403.1
690.2
Net debt
$
(180.0
)
$
112.0
TTM Adjusted EBITDA
$
742.1
$
885.7
Debt leverage ratio
0.3x
0.9x
Net debt leverage ratio
-0.2x
0.1x
Adjusted debt and adjusted net debt leverage ratios
As of
(in millions)
August 3, 2024
July 29, 2023
Adjusted debt and
adjusted net debt:
Current portion of long-term debt
$
—
$
147.5
Redeemable Series A Convertible Preference
Shares
223.1
654.7
Adjustments:
TTM 5x rent expense
2,188.0
2,232.0
Adjusted debt
$
2,411.1
$
3,034.2
Less: Cash and cash equivalents
403.1
690.2
Adjusted net debt
$
2,008.0
$
2,344.0
TTM Adjusted EBITDAR
$
1,179.7
$
1,332.1
Adjusted debt leverage ratio
2.0x
2.3x
Adjusted net debt leverage
ratio
1.7x
1.8x
Footnotes to Non-GAAP Reconciliation Tables
(1)
Primarily includes asset impairment
charges related to goodwill and indefinite-lived intangible
assets.
(2)
Restructuring charges were incurred
primarily as a result of the Company’s rationalization of its store
footprint and reorganization of certain centralized functions.
(3)
Includes net losses from the previously
announced divestiture of the UK prestige watch business.
(4)
Fiscal 2025 includes severance and
retention expenses related to the integration of Blue Nile which
were recorded to SG&A. Fiscal 2024 includes primarily severance
and retention, exit and disposal, and system decommissioning costs
incurred for the integration of Blue Nile. The 13 and 26 weeks
ended July 29, 2023 includes $0.1 million and $1.4 million,
respectively, recorded to cost of sales, and $4.7 million and $11.2
million, respectively, recorded to SG&A.
(5)
Includes a credit to income related to the
adjustment of a prior litigation accrual recognized in Fiscal
2023.
(6)
The Fiscal 2024 tax effect includes a
$0.07 impact of the other comprehensive income recognized in
earnings from the release of the remaining tax benefit associated
with the buy-out of the UK pension completed in the first quarter
of Fiscal 2024.
(7)
The Company recorded a deemed dividend to
net (loss) income attributable to common shareholders of $85.1
million in the first quarter of Fiscal 2025, which represents the
excess of the conversion value of the Preferred Shares over their
carrying value upon redemption, and includes $1.5 million of
related expenses.
(8)
Adjusted diluted EPS for the 13 and 26
weeks ended August 3, 2024 was calculated using 44.9 million and
47.9 million diluted weighted average common shares outstanding,
respectively. The additional dilutive shares were excluded from the
calculation of GAAP diluted EPS as their effect was
antidilutive.
(9)
For the 26 weeks ended July 30, 2022 and
52 weeks ended January 28, 2023 non-operating expenses primarily
includes pre-tax pension settlement charges of $132.8 million and
$133.7 million, respectively.
(10)
Other accounting adjustments are inclusive
of those items described within footnotes 1 through 5 above.
Additional accounting adjustments include litigation charges;
acquisition and integration-related expenses, including the impact
of the fair value step-up for inventory from Diamonds Direct and
Blue Nile, as well as direct transaction-related and integration
costs, primarily professional fees and severance, incurred related
to the acquisition of Blue Nile; and certain asset impairments as
previously disclosed in prior periods.
Condensed Consolidated Statements of Operations
(Unaudited)
13 weeks ended
26 weeks ended
(in millions, except per share
amounts)
August 3, 2024
July 29, 2023
August 3, 2024
July 29, 2023
Sales
$
1,491.0
$
1,613.6
$
3,001.8
$
3,281.6
Cost of sales
(924.7
)
(1,002.8
)
(1,863.1
)
(2,038.8
)
Gross margin
566.3
610.8
1,138.7
1,242.8
Selling, general and administrative
expenses
(498.4
)
(511.2
)
(1,013.8
)
(1,041.6
)
Asset impairments, net
(166.2
)
(3.8
)
(168.6
)
(5.6
)
Other operating expense, net
(2.6
)
(5.6
)
(7.4
)
(3.7
)
Operating (loss) income
(100.9
)
90.2
(51.1
)
191.9
Interest income, net
2.4
1.8
11.0
7.4
Other non-operating income (expense),
net
1.6
0.3
1.8
(0.1
)
(Loss) income before income taxes
(96.9
)
92.3
(38.3
)
199.2
Income taxes
(1.6
)
(17.2
)
(8.1
)
(26.7
)
Net (loss) income
$
(98.5
)
$
75.1
$
(46.4
)
$
172.5
Dividends on redeemable convertible
preferred shares
(3.0
)
(8.6
)
(95.2
)
(17.2
)
Net (loss) income attributable to common
shareholders
$
(101.5
)
$
66.5
$
(141.6
)
$
155.3
Earnings (loss) per common share:
Basic
$
(2.28
)
$
1.47
$
(3.17
)
$
3.43
Diluted
$
(2.28
)
$
1.38
$
(3.17
)
$
3.17
Weighted average common shares
outstanding:
Basic
44.5
45.2
44.6
45.3
Diluted
44.5
54.3
44.6
54.5
Dividends declared per common share
$
0.29
$
0.23
$
0.58
$
0.46
Condensed Consolidated Balance Sheets (Unaudited)
(in millions)
August 3, 2024
February 3, 2024
July 29, 2023
Assets
Current assets:
Cash and cash equivalents
$
403.1
$
1,378.7
$
690.2
Inventories
1,977.2
1,936.6
2,093.9
Income taxes
9.2
9.4
9.5
Other current assets
186.2
211.9
193.8
Total current assets
2,575.7
3,536.6
2,987.4
Non-current assets:
Property, plant and equipment, net
470.5
497.7
553.5
Operating lease right-of-use assets
956.2
1,001.8
1,060.2
Goodwill
631.5
754.5
754.1
Intangible assets, net
358.9
402.8
406.5
Other assets
320.3
319.3
287.9
Deferred tax assets
300.7
300.5
37.8
Total assets
$
5,613.8
$
6,813.2
$
6,087.4
Liabilities, Redeemable convertible
preferred shares, and Shareholders’ equity
Current liabilities:
Current portion of long-term debt
$
—
$
147.7
$
147.5
Accounts payable
547.6
735.1
570.7
Accrued expenses and other current
liabilities
363.1
400.2
386.7
Deferred revenue
347.8
362.9
358.3
Operating lease liabilities
250.9
260.3
332.2
Income taxes
17.6
69.8
56.9
Total current liabilities
1,527.0
1,976.0
1,852.3
Non-current liabilities:
Operating lease liabilities
793.5
835.7
832.3
Other liabilities
90.5
96.0
98.3
Deferred revenue
874.0
881.8
869.0
Deferred tax liabilities
188.5
201.7
166.7
Total liabilities
3,473.5
3,991.2
3,818.6
Commitments and contingencies
Redeemable Series A Convertible Preference
Shares
223.1
655.5
654.7
Shareholders’ equity:
Common shares
12.6
12.6
12.6
Additional paid-in capital
165.2
230.7
220.0
Other reserves
0.4
0.4
0.4
Treasury shares at cost
(1,659.7
)
(1,646.9
)
(1,596.4
)
Retained earnings
3,664.6
3,835.0
3,238.0
Accumulated other comprehensive loss
(265.9
)
(265.3
)
(260.5
)
Total shareholders’ equity
1,917.2
2,166.5
1,614.1
Total liabilities, redeemable convertible
preferred shares and shareholders’ equity
$
5,613.8
$
6,813.2
$
6,087.4
Condensed Consolidated Statements of Cash Flows
(Unaudited)
26 weeks ended
(in millions)
August 3, 2024
July 29, 2023
Operating activities
Net (loss) income
$
(46.4
)
$
172.5
Adjustments to reconcile net (loss) income
to net cash used in operating activities:
Depreciation and amortization
74.5
86.7
Amortization of unfavorable contracts
(0.9
)
(0.9
)
Share-based compensation
18.3
25.2
Deferred taxation
(13.1
)
47.8
Asset impairments, net
168.6
5.6
Other non-cash movements
3.1
1.2
Changes in operating assets and
liabilities:
Inventories
(41.4
)
65.0
Other assets
33.2
(27.2
)
Accounts payable
(193.3
)
(300.0
)
Accrued expenses and other liabilities
(36.1
)
(257.1
)
Change in operating lease assets and
liabilities
(6.8
)
(31.8
)
Deferred revenue
(22.1
)
(24.8
)
Income tax receivable and payable
(52.0
)
(15.5
)
Net cash used in operating activities
(114.4
)
(253.3
)
Investing activities
Purchase of property, plant and
equipment
(51.3
)
(55.4
)
Other investing activities, net
(5.9
)
(5.5
)
Net cash used in investing activities
(57.2
)
(60.9
)
Financing activities
Dividends paid on common shares
(23.1
)
(19.4
)
Dividends paid on redeemable convertible
preferred shares
(14.4
)
(16.4
)
Repurchase of common shares
(47.2
)
(82.4
)
Repurchase of redeemable convertible
preferred shares
(541.0
)
—
Repayment of Senior Notes
(147.8
)
—
Other financing activities, net
(28.4
)
(45.6
)
Net cash used in financing activities
(801.9
)
(163.8
)
Cash and cash equivalents at beginning of
period
1,378.7
1,166.8
Decrease in cash and cash equivalents
(973.5
)
(478.0
)
Effect of exchange rate changes on cash
and cash equivalents
(2.1
)
1.4
Cash and cash equivalents at end of
period
$
403.1
$
690.2
Real Estate Portfolio:
Signet has a diversified real estate portfolio. On August 3,
2024, Signet operated 2,668 stores totaling 4.1 million square feet
of selling space. Compared to year-end Fiscal 2024, store count
decreased by 30 and square feet of selling space decreased
0.6%.
Store count by segment
February 3, 2024
Openings
Closures
August 3, 2024
North America segment
2,411
3
(13
)
2,401
International segment
287
—
(20
)
267
Signet
2,698
3
(33
)
2,668
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240912263568/en/
Investors: Rob Ballew Senior Vice President, Investor
Relations robert.ballew@signetjewelers.com or
investorrelations@signetjewelers.com Media: Colleen Rooney
Chief Communications & ESG Officer +1-330-668-5932
colleen.rooney@signetjewelers.com
Signet Jewelers (NYSE:SIG)
Historical Stock Chart
From Oct 2024 to Nov 2024
Signet Jewelers (NYSE:SIG)
Historical Stock Chart
From Nov 2023 to Nov 2024
