Outperformed Second Quarter Expectations and
Reaffirms Outlook
Inventories Reduced 4% from Prior Year
and 8% Excluding Acquisitions
HAMILTON, Bermuda, Aug. 31,
2023 /PRNewswire/ -- Signet Jewelers Limited
("Signet") (NYSE:SIG), the world's largest retailer of diamond
jewelry, today announced its results for the 13 weeks ended
July 29, 2023 ("second quarter Fiscal 2024").
"Our team's focus on the consumer enabled us to exceed our
revenue and bottom-line commitments in the quarter while also
advancing our strategic priorities. We remain confident in our
ability to achieve our Fiscal 2024 guidance," said Signet Chief
Executive Officer Virginia C.
Drosos. "Our reimagined merchandise assortment and upcoming
holiday season initiatives will leverage our investments in
innovation, digital capabilities, and data analytics to widen our
competitive advantages. We believe the upcoming multi-year recovery
of engagements remains on track to begin in the fourth quarter of
this year."
"We're reaffirming our full year revenue and non-GAAP operating
income guidance today as we anticipate the current macro trends
will continue and engagements will begin their recovery.
Additionally, we are increasing our EPS guidance to reflect second
quarter share repurchases," said Joan
Hilson, Chief Financial, Strategy and Services Officer. "We
expanded our margin accretive Services capacity this quarter,
advancing our commitment to the jewelry craft, B2B capabilities,
and bringing more repairs in house. This network optimization is
enabled through integration of the Blue Nile Seattle facility and
the acquisition of SJR National Repair. Our cost savings
initiatives of $225 to $250 million are on track, and our core inventory
is healthy at 20% below pre-pandemic levels."
Second Quarter Fiscal 2024 Highlights:
- Sales of $1.6 billion, down
$141.3 million or 8.1% (down
8.2%(1) on a constant currency basis) to Q2 of
FY23.
- Same store sales ("SSS")(2) down 12.0% to Q2 of
FY23.
- GAAP operating income of $90.2
million, down $96.6 million
from Q2 of FY23. Q2 of FY24 includes $4.8
million for integration-related charges for Blue Nile. Q2 of
FY23 included $6.4 million related to
the fair value adjustment of acquired inventory as well as
acquisition-related charges.
- Non-GAAP operating income(1) of $102.7 million, down $90.5
million from Q2 of FY23.
- GAAP diluted earnings per share ("EPS") of $1.38, compared to $2.58 in Q2 of FY23, including $0.09 in integration-related charges for Blue
Nile. Q2 of FY23 included $0.11 in
charges relating to the fair value adjustment of acquired inventory
as well as acquisition-related charges.
- Non-GAAP diluted EPS(1) of $1.55, compared to $2.68 in Q2 of FY23.
- Cash and cash equivalents, at quarter end, of $690.2 million, compared to $851.7 million in Q2 of FY23, reflecting the
acquisition of Blue Nile in Q3 of FY23 and payment of legal
settlements in Q1 of FY24.
- Year-to-date cash used in operating activities of $253.3 million, compared to cash used in first
half of FY23 of $114.9 million,
including approximately $200 million
for the payment of legal settlements in the current year.
- Repurchased $43.3 million, or
approximately 0.7 million shares, during the second quarter.
(1)See
non-GAAP financial measures below.
|
(2)Same
store sales include physical stores and eCommerce sales. Blue Nile
has been excluded.
|
(in millions, except
per share amounts)
|
|
Fiscal 24
Q2
|
|
Fiscal 23
Q2
|
|
YTD Fiscal
2024
|
|
YTD Fiscal
2023
|
Sales
|
|
$ 1,613.6
|
|
$ 1,754.9
|
|
$
3,281.6
|
|
$
3,593.2
|
SSS % change
(1)
|
|
(12.0) %
|
|
(8.2) %
|
|
(13.0) %
|
|
(3.0) %
|
GAAP
|
|
|
|
|
|
|
|
|
Operating
income
|
|
$
90.2
|
|
$
186.8
|
|
$
191.9
|
|
$
187.0
|
Operating
margin
|
|
5.6 %
|
|
10.6 %
|
|
5.8 %
|
|
5.2 %
|
GAAP diluted
EPS
|
|
$
1.38
|
|
$
2.58
|
|
$
3.17
|
|
$
0.90
|
Non-GAAP
(2)
|
|
|
|
|
|
|
|
|
Non-GAAP operating
income
|
|
$
102.7
|
|
$
193.2
|
|
$
209.2
|
|
$
387.8
|
Non-GAAP operating
margin
|
|
6.4 %
|
|
11.0 %
|
|
6.4 %
|
|
10.8 %
|
Non-GAAP diluted
EPS
|
|
$
1.55
|
|
$
2.68
|
|
$
3.33
|
|
$
5.55
|
|
(1) Same
store sales include physical stores and eCommerce sales. Blue Nile
has been excluded.
|
(2) See
non-GAAP financial measures below.
|
Second
Quarter Fiscal 2024 Results:
|
|
|
Change
from previous year
|
|
|
Second Quarter
Fiscal 2024
|
Same
store
sales
|
|
Non-same
store sales,
net(2)
|
|
Total sales at
constant
exchange rate
(3)
|
|
Exchange
translation
impact
|
|
Total
sales
as reported
|
|
Total
sales
(in millions)
|
North America
segment
|
(12.2) %
|
|
5.2 %
|
|
(7.0) %
|
|
(0.1) %
|
|
(7.1) %
|
|
$
1,501.1
|
International
segment
|
(8.4) %
|
|
(3.2) %
|
|
(11.6) %
|
|
3.0 %
|
|
(8.6) %
|
|
$ 102.0
|
Other segment
(1)
|
nm
|
|
nm
|
|
nm
|
|
nm
|
|
nm
|
|
$
10.5
|
Signet
|
(12.0) %
|
|
3.8 %
|
|
(8.2) %
|
|
0.1 %
|
|
(8.1) %
|
|
$
1,613.6
|
|
(1) Includes
sales from Signet's diamond sourcing operation.
|
(2) Includes
sales from Blue Nile which was not included in the results for the
full comparable periods presented.
|
(3) See
non-GAAP financial measures below.
|
nm Not
meaningful.
|
By reportable segment:
North America
- Total sales of $1.5 billion, down
7.1% to Q2 of FY23 reflecting an increase of 4.4% in total average
transaction value ("ATV"), driven primarily by lift from Blue Nile
of approximately 5%, on a lower number of transactions.
- SSS declined 12.2% compared to Q2 of FY23.
International
- Total sales of $102.0 million,
down 8.6% to Q2 of FY23 (down 11.6% on a constant currency basis)
reflecting an increase of 3.3% in total ATV on a lower number of
transactions.
- SSS declined 8.4% versus Q2 of FY23.
GAAP gross margin was $610.8
million, down from $664.7
million in Q2 of FY23. GAAP gross margin was 37.9% of sales,
in line with Q2 of FY23 as favorable merchandise margins and a
higher mix of our high margin Services business offset investments
in digital banners and deleveraging of fixed costs such as store
occupancy.
GAAP SG&A was $511.2 million,
up from $477.3 million in Q2 of FY23.
GAAP SG&A was 31.7% of sales, 450 basis points higher versus Q2
of FY23. The increase in SG&A as a percent of sales was due to
approximately 120 basis points from strategic investments to
grow the Company's competitive advantages with the remainder driven
by an advertising shift into Q2 due to the timing of Mother's Day
this year and deleveraging of fixed costs on lower volume.
GAAP operating income was $90.2
million or 5.6% of sales, down $96.6
million to Q2 of FY23.
Non-GAAP operating income was $102.7
million, or 6.4% of sales, compared to $193.2 million, or 11.0% of sales in the prior
year second quarter. Non-GAAP operating income in the current
quarter excluded $4.8 million for
integration-related charges for Blue Nile.
|
|
Second quarter Fiscal
2024
|
|
Second quarter Fiscal
2023
|
GAAP Operating
income in millions
|
|
$
|
|
% of
sales
|
|
$
|
|
% of
sales
|
North America
segment
|
|
$
117.1
|
|
7.8 %
|
|
$
210.1
|
|
13.0 %
|
International
segment
|
|
(7.0)
|
|
(6.9) %
|
|
(2.0)
|
|
(1.8) %
|
Other
segment
|
|
(1.0)
|
|
nm
|
|
1.8
|
|
nm
|
Corporate and
unallocated expenses
|
|
(18.9)
|
|
nm
|
|
(23.1)
|
|
nm
|
Total GAAP operating
income
|
|
$
90.2
|
|
5.6 %
|
|
$
186.8
|
|
10.6 %
|
|
|
Second quarter Fiscal
2024
|
|
Second quarter Fiscal
2023
|
Non-GAAP Operating
income in millions (1)
|
|
$
|
|
% of
sales
|
|
$
|
|
% of
sales
|
North America
segment
|
|
$
129.6
|
|
8.6 %
|
|
$
216.5
|
|
13.4 %
|
International
segment
|
|
(7.0)
|
|
(6.9) %
|
|
(2.0)
|
|
(1.8) %
|
Other
segment
|
|
(1.0)
|
|
nm
|
|
1.8
|
|
nm
|
Corporate and
unallocated expenses
|
|
(18.9)
|
|
nm
|
|
(23.1)
|
|
nm
|
Total Non-GAAP
operating income
|
|
$
102.7
|
|
6.4 %
|
|
$
193.2
|
|
11.0 %
|
(1) See
non-GAAP financial measures below.
|
nm Not
meaningful.
|
The current quarter GAAP income tax expense was $17.2 million compared to income tax expense of
$35.6 million in Q2 of FY23. On
a non-GAAP basis, income tax expense was $20.4 million compared to income tax expense of
$37.3 million in Q2 of FY23.
GAAP diluted EPS was $1.38, down
from $2.58 per diluted share in Q2 of
FY23. GAAP diluted EPS in the current quarter includes $0.09 for integration-related charges for Blue
Nile, $0.08 of restructuring charges
and $0.06 related to asset
impairment. Excluding these charges (and related tax effects),
diluted EPS was $1.55 on a non-GAAP
basis.
GAAP EPS and non-GAAP EPS for the second quarter of Fiscal 2024
include the impact of the preferred shares in the dilutive share
count.
Acquisition
The Company acquired SJR National Repair, a full-service
jewelry and watch repair services business and jewelry retailer,
for approximately $6 million in July. This acquisition
complements the recent transition of Signet's Blue Nile Seattle
Fulfillment Center to a new enterprise-wide repair facility called
Signet Services Washington.
These additions expand the Company's repair network to a total
of more than 260 locations with over 1,800 jewelers. Signet's
national network enables it to keep setting the bar higher
including the ability to now offer Business to Business repair
services, watch repair services and mail-in capabilities, among
other offerings.
Balance Sheet and Statement of Cash Flows Highlights:
Year to date cash used for operating activities was $253.3 million compared to cash used for
operating activities of $114.9
million at this time last year. Cash and cash equivalents
were $690.2 million as of quarter
end, compared to $851.7 million at
the end of Q2 of FY23. The year over year change to cash and cash
equivalents was driven by the acquisition of Blue Nile and payment
of legal settlements which totaled nearly $600 million combined. The Company ended the
second quarter with an Adjusted Debt to Adjusted EBITDAR ratio of
2.3x on a trailing 12-month basis, well below the stated goal of
less than 2.75x, and was 1.8x on an Adjusted Net Debt basis.
Inventory ended the quarter at $2.1
billion, down $96.9 million to
Q2 of FY23 and excluding the acquisition of Blue Nile inventory was
down more than $167 million, or 8%
below Q2 of FY23, driven by Signet's consumer insights to predict
dynamic conditions like the current engagement trough. Compared to
Q2 of FY20, inventory excluding acquisitions is down more than 20%
on higher revenue and clearance inventory is down approximately
50%.
Capital Returns to Shareholders:
Signet's Board of Directors has declared a quarterly cash
dividend on common shares of $0.23
per share for the second quarter of Fiscal 2024, payable
November 24, 2023 to shareholders of
record on October 27, 2023, with an
ex-dividend date of October 26,
2023.
During the first half of Fiscal 2024, Signet repurchased
approximately 1.2 million shares at an average cost per share of
$69.88, or $82.4 million including $43.3 million during the second quarter.
Approximately $718 million remains
under the Company's multi-year authorization.
Third quarter and Full year Fiscal 2024 Guidance:
Forecasted non-GAAP operating income and diluted EPS provided
below excludes potential non-recurring charges, such as
restructuring charges, asset impairments or integration-related
costs associated with the acquisition of Blue Nile. 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 non-GAAP operating income and diluted
EPS to corresponding forecasted GAAP amounts.
Signet's third quarter and full year Fiscal 2024 guidance for
sales, operating income and diluted EPS is provided on a non-GAAP
basis.
|
Third
Quarter
|
|
Fiscal 2024
(2)
|
Total sales
|
$1.36 billion to $1.41
billion
|
|
$7.10 billion to $7.30
billion
|
Operating income
(1)
|
$10 million to $25
million
|
|
$635 million to $675
million
|
Diluted EPS
(1)
|
|
|
$9.55 to
$10.14
|
|
(1) See
description of non-GAAP financial measures below.
|
(2) Fiscal
2024 is a 53-week fiscal year for Signet, ending February 3, 2024,
driven by the retail industry calendar. The additional week will
occur in Q4 of Fiscal 2024
|
The Company's third quarter and full year Fiscal 2024 outlook is
based on the following assumptions:
- The Company continues to expect annual US Jewelry industry
revenues to be down more than the Company's initial expectations of
mid-single digits, driven by the impacts of macroeconomic factors
on consumer spending and continued shift of consumer discretionary
spend. The Company's guidance contemplates annual market share
gains against this total industry performance range.
- Planned capital investments up to $200
million, reflecting investments in banner differentiation,
including stores, Connected Commerce capabilities, and digital and
technology advancement.
- The Company continues to expect headwinds in engagements with
recovery beginning later in Fiscal 2024, and further rebound over
the next three years. Bridal overall, inclusive of engagements,
historically represents nearly 50% of Signet's merchandise
sales.
- Annual tax rate of approximately 19% excludes additional
discrete items.
- Diluted EPS for Fiscal 2024 includes the repurchase of an
additional 0.7 million shares during Q2 of FY24, the dilutive
effect of the 8.2 million preferred shares and excludes the impact
of any further share repurchases beyond what is reported
today.
Our Purpose and Sustainable Growth:
As a company with a Purpose-inspired business strategy, Signet
is committed to ongoing leadership in Corporate Citizenship &
Sustainability and views Environmental, Social and Governance
("ESG") initiatives as an important growth driver. Signet released
its Fiscal 2023 Corporate Citizenship & Sustainability Report
including a progress report on its 2030 Corporate Sustainability
Goals. The report reflects the Company's commitment to its
Corporate Sustainability framework defined by Love for All People;
Love for our Team; and Love for our Planet and Products. Since the
release of its Corporate Sustainability Goals, approximately two
years ago, the Company has successfully integrated the Inspiring
Brilliance business strategy and long-term corporate sustainability
initiatives into its culture and day to day business
operations.
Conference Call:
A conference call is scheduled for August 31, 2023 at
8:30 a.m. ET and a simultaneous audio
webcast is available at www.signetjewelers.com.
To pre-register for this call, please go to the following
link:
https://emportal.ink/43Hk6my
You will receive your access details via email.
Joining by Telephone without pre-registering:
Canada dial-in number (Local): 1
416 764 8620
Toll Free US Dial-in: 1 888 575 5163
Please press # (pound) to speak with an operator
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 2,800 stores primarily
under the name brands of Kay Jewelers, Zales, Jared, Banter by
Piercing Pagoda, Diamonds Direct, Blue Nile, JamesAllen.com,
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 plan; the negative
impacts that the COVID-19 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 pandemic and the pace at which such
impacts on engagements are expected to recover, and the impacts of
the expiration of government stimulus on overall consumer spending
(including the anticipated expiration of student loan relief);
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 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 execution of
accelerated share repurchases and the payment of related to 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; changes in our credit rating;
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 proposed 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
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 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 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; 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; security breaches and other disruptions to our
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, strikes, protests, riots or terrorism, acts of war
(including the ongoing Russia-Ukraine conflict), 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 2023
Annual Report on Form 10-K filed with the SEC on March 16,
2023 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.
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
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 reports the following non-GAAP financial measures:
non-GAAP operating income, non-GAAP operating margin, non-GAAP
diluted earnings per share ("EPS"), free cash flow, sales changes
on a constant currency basis, and adjusted debt and adjusted net
debt leverage ratios.
Non-GAAP 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
non-GAAP operating margin, defined as non-GAAP operating income as
a percentage of total sales, to further evaluate the effectiveness
and efficiency of the Company's flexible operating model.
Non-GAAP 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 represent the discrete amount that affected the
diluted EPS during the period.
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 in evaluating its overall
liquidity needs and determining appropriate capital allocation
strategies. Free cash flow does not represent the residual cash
flow available for discretionary purposes.
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.
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 sheet, 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. Adjusted EBITDAR
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 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. Management believes these
financial measures are helpful to investors and analysts to analyze
trends in Signet's business and evaluate Signet's performance. The
adjusted debt leverage ratio is a key priority of the Company's
capital allocation strategy used in measuring the Company's
optimized capital structure. The adjusted net debt leverage is
supplemental to this ratio as it is deemed useful to both investors
and management to consider cash on hand available to pay down debt.
The adjusted debt and adjusted net debt leverage ratios are
presented on a trailing twelve-month ("TTM") basis, which uses
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)
|
|
July 29,
2023
|
|
July 30,
2022
|
Net cash used in
operating activities
|
|
$
(253.3)
|
|
$
(114.9)
|
Purchase of property,
plant and equipment
|
|
(55.4)
|
|
(58.2)
|
Free cash
flow
|
|
$
(308.7)
|
|
$
(173.1)
|
Non-GAAP operating
income
|
|
|
13 weeks
ended
|
26 weeks
ended
|
(in millions)
|
July 29,
2023
|
|
July 30,
2022
|
|
July 29,
2023
|
|
July 30,
2022
|
Total GAAP operating
income
|
$
90.2
|
|
$
186.8
|
|
$
191.9
|
|
$
187.0
|
Litigation charges
(1)
|
—
|
|
—
|
|
(3.0)
|
|
190.0
|
Acquisition and
integration-related costs (2)
|
4.8
|
|
6.4
|
|
12.6
|
|
10.8
|
Restructuring charges
(3)
|
4.2
|
|
—
|
|
4.2
|
|
—
|
Asset impairments
(3)
|
3.5
|
|
—
|
|
3.5
|
|
—
|
Total non-GAAP
operating income
|
$
102.7
|
|
$
193.2
|
|
$
209.2
|
|
$
387.8
|
North America
segment non-GAAP operating income
|
|
|
13 weeks
ended
|
26 weeks
ended
|
(in millions)
|
July 29,
2023
|
|
July 30,
2022
|
|
July 29,
2023
|
|
July 30,
2022
|
North America segment
GAAP operating income
|
$
117.1
|
|
$
210.1
|
|
$
241.8
|
|
$
234.9
|
Litigation charges
(1)
|
—
|
|
—
|
|
(3.0)
|
|
190.0
|
Acquisition and
integration-related costs (2)
|
4.8
|
|
6.4
|
|
12.6
|
|
10.8
|
Restructuring charges
(3)
|
4.2
|
|
—
|
|
4.2
|
|
—
|
Asset impairments
(3)
|
3.5
|
|
—
|
|
3.5
|
|
—
|
North America segment
non-GAAP operating income
|
$
129.6
|
|
$
216.5
|
|
$
259.1
|
|
$
435.7
|
Non-GAAP income tax
provision
|
|
|
13 weeks
ended
|
|
26 weeks
ended
|
(in
millions)
|
July 29,
2023
|
|
July 30,
2022
|
|
July 29,
2023
|
|
July 30,
2022
|
GAAP income tax expense
(benefit)
|
$
17.2
|
|
$
35.6
|
|
$
26.7
|
|
$
(19.6)
|
Litigation charges
(1)
|
—
|
|
—
|
|
(0.8)
|
|
47.7
|
Pension settlement loss
(6)
|
—
|
|
0.2
|
|
4.1
|
|
25.2
|
Acquisition and
integration-related costs (2)
|
1.2
|
|
1.5
|
|
3.1
|
|
2.6
|
Restructuring charges
(3)
|
1.1
|
|
—
|
|
1.1
|
|
—
|
Asset impairments
(3)
|
0.9
|
|
—
|
|
0.9
|
|
—
|
Non-GAAP income tax
expense
|
$
20.4
|
|
$
37.3
|
|
$
35.1
|
|
$
55.9
|
Non-GAAP effective
tax rate
|
|
|
13 weeks
ended
|
|
July 29,
2023
|
|
July 30,
2022
|
GAAP effective tax
rate
|
18.6 %
|
|
19.7 %
|
Acquisition and
integration-related costs (2)
|
0.4 %
|
|
0.1 %
|
Restructuring charges
(3)
|
0.3 %
|
|
— %
|
Asset impairments
(3)
|
0.2 %
|
|
— %
|
Non-GAAP effective tax
rate
|
19.5 %
|
|
19.8 %
|
Non-GAAP diluted
EPS
|
|
|
13 weeks
ended
|
26 weeks
ended
|
|
July 29,
2023
|
|
July 30,
2022
|
|
July 29,
2023
|
|
July 30,
2022
|
GAAP diluted
EPS
|
$
1.38
|
|
$
2.58
|
|
$
3.17
|
|
$
0.90
|
Litigation charges
(1)
|
—
|
|
—
|
|
(0.06)
|
|
3.82
|
Pension settlement loss
(6)
|
—
|
|
0.02
|
|
—
|
|
2.67
|
Acquisition and
integration-related costs (2)
|
0.09
|
|
0.11
|
|
0.24
|
|
0.22
|
Restructuring charges
(3)
|
0.08
|
|
—
|
|
0.08
|
|
—
|
Asset impairments
(3)
|
0.06
|
|
—
|
|
0.06
|
|
—
|
Dilution effect
(4)
|
—
|
|
—
|
|
—
|
|
(0.53)
|
Tax impact of items
above (5)
|
(0.06)
|
|
(0.03)
|
|
(0.16)
|
|
(1.53)
|
Non-GAAP diluted
EPS
|
$
1.55
|
|
$
2.68
|
|
$
3.33
|
|
$
5.55
|
Adjusted debt and
adjusted net debt leverage ratios
|
|
|
As of
|
(in millions)
|
July 29,
2023
|
|
July 30,
2022
|
Adjusted debt and
adjusted net debt:
|
|
|
|
Current portion of
long-term debt
|
$
147.5
|
|
$
—
|
Long-term
debt
|
—
|
|
147.2
|
Redeemable Series A
Convertible Preference Shares
|
654.7
|
|
653.0
|
Adjustments:
|
|
|
|
5x Rent
expense
|
2,232.0
|
|
2,212.5
|
Adjusted
debt
|
$
3,034.2
|
|
$
3,012.7
|
Less: Cash and cash
equivalents
|
690.2
|
|
851.7
|
Adjusted net
debt
|
$
2,344.0
|
|
$
2,161.0
|
|
|
|
|
TTM Adjusted
EBITDAR
|
$
1,332.1
|
|
$
1,547.5
|
|
|
|
|
Adjusted debt
leverage ratio
|
2.3x
|
|
1.9x
|
|
|
|
|
Adjusted net debt
leverage ratio
|
1.8x
|
|
1.4x
|
|
26 weeks
ended
|
|
52 week period
ended
|
|
52 week period
ended
|
(in millions)
|
July 29,
2023
|
|
July 30,
2022
|
|
July 31,
2021
|
|
January 28,
2023
|
|
January 29,
2022
|
|
July 29,
2023
|
|
July 30,
2022
|
Calculation:
|
A
|
|
B
|
|
C
|
|
D
|
|
E
|
|
A + D - B
|
|
B + E - C
|
Adjusted
EBITDAR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
172.5
|
|
$
61.9
|
|
$ 363.0
|
|
$
376.7
|
|
$
769.9
|
|
$
487.3
|
|
$
468.8
|
Income taxes
|
26.7
|
|
(19.6)
|
|
23.0
|
|
74.5
|
|
114.5
|
|
120.8
|
|
71.9
|
Interest (income)
expense, net
|
(7.4)
|
|
7.8
|
|
8.3
|
|
13.5
|
|
16.9
|
|
(1.7)
|
|
16.4
|
Depreciation and
amortization
|
86.7
|
|
79.8
|
|
83.7
|
|
164.5
|
|
163.5
|
|
171.4
|
|
159.6
|
Amortization of
unfavorable contracts
|
(0.9)
|
|
(0.9)
|
|
(2.4)
|
|
(1.8)
|
|
(3.3)
|
|
(1.8)
|
|
(1.8)
|
Share-based
compensation
|
25.2
|
|
22.9
|
|
25.5
|
|
42.0
|
|
45.8
|
|
44.3
|
|
43.2
|
Other non-operating
(income)
expense, net (6)
|
0.1
|
|
136.9
|
|
(0.2)
|
|
140.2
|
|
2.1
|
|
3.4
|
|
139.2
|
Other accounting
adjustments (7)
|
17.3
|
|
200.8
|
|
(2.2)
|
|
245.5
|
|
4.7
|
|
62.0
|
|
207.7
|
Adjusted
EBITDA
|
$
320.2
|
|
$
489.6
|
|
$ 498.7
|
|
$
1,055.1
|
|
$
1,114.1
|
|
$
885.7
|
|
$
1,105.0
|
Rent expense
|
220.5
|
|
220.6
|
|
221.4
|
|
446.5
|
|
443.3
|
|
446.4
|
|
442.5
|
Adjusted
EBITDAR
|
$
540.7
|
|
$
710.2
|
|
$ 720.1
|
|
$
1,501.6
|
|
$
1,557.4
|
|
$
1,332.1
|
|
$
1,547.5
|
Footnotes to Non-GAAP Reconciliation Tables
(1)
|
Fiscal 2024 includes a
credit to income related to the adjustment of the prior litigation
accrual. Fiscal 2023 includes charges for settlement of a
previously disclosed litigation matter.
|
(2)
|
Acquisition and
integration-related costs include integration costs, primarily
severance and retention, exit and disposal costs, and system
decommissioning costs incurred for the integration of Blue Nile in
Fiscal 2024. 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. Fiscal 2023 included the impact of the fair value
step-up for inventory from Diamonds Direct which was recorded to
cost of sales, as well as professional fees for direct
transaction-related costs incurred for the acquisition of Blue
Nile.
|
(3)
|
Restructuring and asset
impairment charges were incurred as a result of the Company's
rationalization of store footprint and reorganization of certain
centralized functions in the second quarter of Fiscal
2024.
|
(4)
|
The adjusted diluted
weighted average common shares outstanding for the 26 weeks ended
July 30, 2022 includes the dilutive effect of the 8.0 million
preferred shares which were excluded from the calculation of GAAP
diluted EPS for the same period, as their effect was
antidilutive.
|
(5)
|
The 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.
|
(6)
|
Non-operating expenses
includes primarily pre-tax pension settlement charges of $132.8
million and $133.7 million during the 26 weeks ended July 30,
2022, and 52 weeks ended January 28, 2023, respectively.
|
(7)
|
Other accounting
adjustments are inclusive of those items described within footnotes
1 through 3 above. Additional accounting adjustments include
certain asset impairment charges, charges in connection with the
Company's transformation plan, as well as the gains associated with
the sale of customer in-house finance receivables as previously
disclosed in prior periods.
|
Condensed
Consolidated Statements of Operations (Unaudited)
|
|
|
|
13 weeks
ended
|
|
26 weeks
ended
|
(in millions, except
per share amounts)
|
|
July 29,
2023
|
|
July 30,
2022
|
|
July 29,
2023
|
|
July 30,
2022
|
Sales
|
|
$
1,613.6
|
|
$
1,754.9
|
|
$
3,281.6
|
|
$
3,593.2
|
Cost of
sales
|
|
(1,002.8)
|
|
(1,090.2)
|
|
(2,038.8)
|
|
(2,204.8)
|
Gross
margin
|
|
610.8
|
|
664.7
|
|
1,242.8
|
|
1,388.4
|
Selling, general and
administrative expenses
|
|
(511.2)
|
|
(477.3)
|
|
(1,041.6)
|
|
(1,010.4)
|
Other operating
expense, net
|
|
(9.4)
|
|
(0.6)
|
|
(9.3)
|
|
(191.0)
|
Operating
income
|
|
90.2
|
|
186.8
|
|
191.9
|
|
187.0
|
Interest income
(expense), net
|
|
1.8
|
|
(3.4)
|
|
7.4
|
|
(7.8)
|
Other non-operating
income (expense), net
|
|
0.3
|
|
(2.4)
|
|
(0.1)
|
|
(136.9)
|
Income before income
taxes
|
|
92.3
|
|
181.0
|
|
199.2
|
|
42.3
|
Income taxes
|
|
(17.2)
|
|
(35.6)
|
|
(26.7)
|
|
19.6
|
Net income
|
|
$
75.1
|
|
$
145.4
|
|
$
172.5
|
|
$
61.9
|
Dividends on redeemable
convertible preferred shares
|
|
(8.6)
|
|
(8.6)
|
|
(17.2)
|
|
(17.2)
|
Net income
attributable to common shareholders
|
|
$
66.5
|
|
$
136.8
|
|
$
155.3
|
|
$
44.7
|
|
|
|
|
|
|
|
|
|
Earnings per common
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
1.47
|
|
$
2.95
|
|
$
3.43
|
|
$
0.94
|
Diluted
|
|
$
1.38
|
|
$
2.58
|
|
$
3.17
|
|
$
0.90
|
Weighted average common
shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
45.2
|
|
46.4
|
|
45.3
|
|
47.6
|
Diluted
|
|
54.3
|
|
56.3
|
|
54.5
|
|
49.7
|
|
|
|
|
|
|
|
|
|
Dividends declared per
common share
|
|
$
0.23
|
|
$
0.20
|
|
$
0.46
|
|
$
0.40
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
|
(in
millions)
|
|
July 29,
2023
|
|
January 28,
2023
|
|
July 30,
2022
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
690.2
|
|
$
1,166.8
|
|
$ 851.7
|
Accounts
receivable
|
|
16.8
|
|
14.5
|
|
35.6
|
Other current
assets
|
|
177.0
|
|
165.9
|
|
199.4
|
Income
taxes
|
|
9.5
|
|
9.6
|
|
118.5
|
Inventories
|
|
2,093.9
|
|
2,150.3
|
|
2,190.8
|
Total current
assets
|
|
2,987.4
|
|
3,507.1
|
|
3,396.0
|
Non-current
assets:
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
553.5
|
|
586.5
|
|
566.5
|
Operating lease
right-of-use assets
|
|
1,060.2
|
|
1,049.3
|
|
1,113.1
|
Goodwill
|
|
754.1
|
|
751.7
|
|
486.4
|
Intangible assets,
net
|
|
406.5
|
|
407.4
|
|
312.8
|
Other assets
|
|
287.9
|
|
281.7
|
|
254.7
|
Deferred tax
assets
|
|
37.8
|
|
36.7
|
|
34.9
|
Total assets
|
|
$
6,087.4
|
|
$
6,620.4
|
|
$
6,164.4
|
Liabilities,
Redeemable convertible preferred shares, and Shareholders'
equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Current portion of
long-term debt
|
|
$
147.5
|
|
$
—
|
|
$
—
|
Accounts
payable
|
|
570.7
|
|
879.0
|
|
689.5
|
Accrued expenses and
other current liabilities
|
|
386.7
|
|
638.7
|
|
598.5
|
Deferred
revenue
|
|
358.3
|
|
369.5
|
|
326.9
|
Operating lease
liabilities
|
|
332.2
|
|
288.2
|
|
281.3
|
Income
taxes
|
|
56.9
|
|
72.7
|
|
23.9
|
Total current
liabilities
|
|
1,852.3
|
|
2,248.1
|
|
1,920.1
|
Non-current
liabilities:
|
|
|
|
|
|
|
Long-term
debt
|
|
—
|
|
147.4
|
|
147.2
|
Operating lease
liabilities
|
|
832.3
|
|
894.7
|
|
925.8
|
Other
liabilities
|
|
98.3
|
|
100.1
|
|
101.3
|
Deferred
revenue
|
|
869.0
|
|
880.1
|
|
873.9
|
Deferred tax
liabilities
|
|
166.7
|
|
117.6
|
|
175.2
|
Total
liabilities
|
|
3,818.6
|
|
4,388.0
|
|
4,143.5
|
Commitments and
contingencies
|
|
|
|
|
|
|
Redeemable Series A
Convertible Preference Shares
|
|
654.7
|
|
653.8
|
|
653.0
|
Shareholders'
equity:
|
|
|
|
|
|
|
Common
shares
|
|
12.6
|
|
12.6
|
|
12.6
|
Additional paid-in
capital
|
|
220.0
|
|
259.7
|
|
245.6
|
Other
reserves
|
|
0.4
|
|
0.4
|
|
0.4
|
Treasury shares at
cost
|
|
(1,596.4)
|
|
(1,574.7)
|
|
(1,494.4)
|
Retained
earnings
|
|
3,238.0
|
|
3,144.8
|
|
2,868.3
|
Accumulated other
comprehensive loss
|
|
(260.5)
|
|
(264.2)
|
|
(264.6)
|
Total shareholders'
equity
|
|
1,614.1
|
|
1,578.6
|
|
1,367.9
|
Total liabilities,
redeemable convertible preferred shares and shareholders'
equity
|
|
$
6,087.4
|
|
$
6,620.4
|
|
$
6,164.4
|
Condensed
Consolidated Statements of Cash Flows (Unaudited)
|
|
|
|
26 weeks
ended
|
(in
millions)
|
|
July 29,
2023
|
|
July 30,
2022
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
172.5
|
|
$
61.9
|
Adjustments to
reconcile net income to net cash used in operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
86.7
|
|
79.8
|
Amortization of
unfavorable contracts
|
|
(0.9)
|
|
(0.9)
|
Share-based
compensation
|
|
25.2
|
|
22.9
|
Deferred
taxation
|
|
47.8
|
|
(11.0)
|
Pension settlement
loss
|
|
0.2
|
|
132.8
|
Other non-cash
movements
|
|
6.6
|
|
3.1
|
Changes in operating
assets and liabilities, net of acquisitions:
|
|
|
|
|
Increase in accounts
receivable
|
|
(2.4)
|
|
(15.7)
|
Increase in other
assets
|
|
(24.8)
|
|
(4.9)
|
Decrease (increase) in
inventories
|
|
65.0
|
|
(146.6)
|
Decrease in accounts
payable
|
|
(300.0)
|
|
(221.2)
|
(Decrease) increase in
accrued expenses and other liabilities
|
|
(257.1)
|
|
95.3
|
Change in operating
lease assets and liabilities
|
|
(31.8)
|
|
(3.6)
|
(Decrease) increase in
deferred revenue
|
|
(24.8)
|
|
2.3
|
Change in income tax
receivable and payable
|
|
(15.5)
|
|
(99.9)
|
Pension plan
contributions
|
|
—
|
|
(9.2)
|
Net cash used in
operating activities
|
|
(253.3)
|
|
(114.9)
|
Investing
activities
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
(55.4)
|
|
(58.2)
|
Acquisitions
|
|
(6.0)
|
|
(1.9)
|
Other investing
activities, net
|
|
0.5
|
|
(14.9)
|
Net cash used in
investing activities
|
|
(60.9)
|
|
(75.0)
|
Financing
activities
|
|
|
|
|
Dividends paid on
common shares
|
|
(19.4)
|
|
(18.3)
|
Dividends paid on
redeemable convertible preferred shares
|
|
(16.4)
|
|
(16.4)
|
Repurchase of common
shares
|
|
(82.4)
|
|
(291.0)
|
Other financing
activities, net
|
|
(45.6)
|
|
(41.4)
|
Net cash used in
financing activities
|
|
(163.8)
|
|
(367.1)
|
Cash and cash
equivalents at beginning of period
|
|
1,166.8
|
|
1,418.3
|
Decrease in cash and
cash equivalents
|
|
(478.0)
|
|
(557.0)
|
Effect of exchange rate
changes on cash and cash equivalents
|
|
1.4
|
|
(9.6)
|
Cash and cash
equivalents at end of period
|
|
$
690.2
|
|
$
851.7
|
Real Estate Portfolio:
Signet has a diversified real estate portfolio. On July 29,
2023, Signet had 2,761 stores totaling 4.2 million square feet of
selling space. Compared to year-end Fiscal 2023, store count
decreased by 47 and square feet of selling space decreased
1.1%.
Store count by
segment
|
January 28,
2023
|
|
Openings
|
|
Closures
|
|
July 29,
2023
|
North America
segment
|
2,475
|
|
7
|
|
(28)
|
|
2,454
|
International
segment
|
333
|
|
5
|
|
(31)
|
|
307
|
Signet
|
2,808
|
|
12
|
|
(59)
|
|
2,761
|
View original
content:https://www.prnewswire.com/news-releases/signet-jewelers-reports-second-quarter-fiscal-2024-results-301914292.html
SOURCE Signet Jewelers Ltd.