Signet Jewelers Limited · NYSE:SIG
Signet Jewelers — Non-Deal Roadshow (January 2010)
90 slides from Signet Jewelers's roadshow presentation, January 2010
Slide 1: Competitive Advantages Reinforcing Sector Leadership
“Competitive Advantages Reinforcing Sector Leadership” January 2010
Slide 2: Safe Harbor Statement
Safe Harbor Statement (Private Securities Litigation Reform Act of 1995) This presentation include statements which are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, based upon management’s beliefs as well as on assumptions m
Slide 3: Why Invest in Signet?
Why Invest in Signet? Ö Market leadership in US & UK Ö Gaining profitable market share in sector undergoing accelerated rationalization Ö Strong balance sheet and cash flow Ö Strengthening significant competitive advantages Ö Effective strategy in tough environment Ö Well positioned for recovery 3
Slide 4: World's Largest Specialty Jeweler
World’s Largest Specialty Jeweler Group sales ~$3,300 million – 78% US / 22% UK Kay Jewelers - #1 mid market brand H.Samuel - #1 in UK Sales: ~$1,500m Stores: 920 in 50 states Sales: ~£250m Stores: 345 Jared - #1 Off-Mall “Category Killer” Ernest Jones - #1 UK upper middle market Sales: ~$720m Store
Slide 5: Effective Strategy in Tough Market
Effective Strategy in Tough Market Ö Enhance position as strongest middle market specialty retail jeweler and gain share Ö Maximize profit & free cash flow Ö Use strong balance sheet as competitive advantage Ö Highly disciplined investment in core activities Ö operational priorities set by returns a
Slide 6: Further Improvement in Sales Trend
Further Improvement in Sales Trend Holiday Fiscal 2010 Year to Date US UK Group US UK Group % % % % % % Same store sales 7.6 (0.8) 5.6 (0.1) (2.2) (0.6) Change in store space (0.6) 0.1 (0.5) 0.7 2.4 1.1 Constant exchange rate 7.0 (0.7) 5.1 0.6 0.2 0.5 Exchange impact - 9.3 2.2 - (10.1) (2.4) As repo
Slide 7: Strengths Driving Share Gains
Strengths Driving Share Gains Ö Excellence in customer service Ö staff training, development and incentivization programs Ö Superior merchandising Ö leading middle market supply chain expertise and merchandising systems Ö ability to successfully develop differentiated ranges Ö High quality real esta
Slide 8: Further Progress in Executing Strategy
Further Progress in Executing Strategy Ö Maximize profit and cash flow Ö expect income before tax of $222.5 million to $232.5 million in fiscal 2010 Ö expected earnings per share of $1.76 to $1.84 Ö Strengthen balance sheet Ö net debt anticipated to be reduced by over $420 million * Ö Reduce busines
Slide 9: Good Progress Against 2010 Financial Objectives
Good Progress Against 2010 Financial Objectives Ö Gross merchandise margin expectations Ö US up about 30 bpts: UK down about 20 bpts Ö Objective • US: at least at last year’s level • UK: little below last year Ö Slightly ahead of US cost reduction program Ö $100 million full year objective* Ö UK cos
Slide 10: Good Progress Against 2010 Financial Objectives
Good Progress Against 2010 Financial Objectives Ö Capital expenditure Ö fiscal 2010 about $49 million (fiscal 2009: $114.9 million) Ö fiscal 2010 target $55 million Ö 20% IRR criteria maintained Ö Inventory Ö anticipated reduction in fiscal 2010 of $160 million to $180 million Ö fiscal 2010 objectiv
Slide 11: Continued Improvement in Cash Flow & Net Debt
Continued Improvement in Cash Flow & Net Debt Forecast Fiscal 10 Fiscal 09 $m $m Adjusted net income† 260-270 259.8 Decrease / (increase) in operating assets* Over 215 (28.7) Investing activities* ~(35) (74.3) Investment in new US stores ~(30) (105.6) Dividends - (123.8) Issue of shares 1 - Foreign
Slide 12: Outlook for Fiscal 2011
Outlook for Fiscal 2011 Ö Economic environment Ö better than 12 months ago, but still challenging, particularly in the UK Ö Operating strategy largely unchanged Ö focus on reinforcing competitive advantages Ö tight control of gross merchandise margin, costs and inventory Ö disciplined approach to in
Slide 13: Drivers of Medium Term Performance
Drivers of Medium Term Performance Ö Economic environment Ö Maintain disciplined investment Ö little new space growth for at least next 18 months Ö Ability to leverage cost base to improve operating margins Ö Aim to win profitable market share in existing stores to drive sales Ö utilize competitive
Slide 14: Rationalization by Top US Brands
Rationalization by Top US Brands Mid market brands Sales $m No. of stores Calendar 2008 2007 2004 2008 2007 2004 Kay(a) 1,439 1,490 1,174 926 894 832 Zales(ab) Gordons(ab) 1,554(c) { 1,089 329 1,071 314 784 261 789 282 757 287 Jared(a) 726 756 415 171 154 135 Fred Meyer(de) 410 465 475 386 400 436 H
Slide 15: Accelerated Consolidation in US
Accelerated Consolidation in US Ö Until 2008 about a net 400 specialty jewelry firms closed each year Ö Calendar 2008 Ö estimated closure of 1,800 doors* Ö ~(5)% sales capacity* Ö Calendar 2009 Ö further accelerated consolidation Ö projection for 750 to 1,500 closures* Ö Calendar 2010 Ö likely to re
Slide 16: US Jewelry
US Jewelry “Further growth from a proven strategy” 16
Slide 17: US Market Characteristics
US Market Characteristics Ö $60.0 billion total jewelry market Ö ~50% world diamond sales Ö $28.3 billion specialty jewelry market Ö Signet US Ö market leader with 9.0% share Ö 1.5x size of second largest operator Ö sales driven by bridal (45%-50%) and gift giving categories Ö ~75% of sales diamond
Slide 18: Strong Performance Over Holiday Season
Strong Performance Over Holiday Season Holiday Fiscal 2010 Year to Date Same store ASP Same store ASP sales sales Kay 8.4% (9.6)% 4.4% (8.1)% Regional Brands 2.3% (6.8)% (4.5)% (5.4)% Jared 8.6% (4.2)%* (6.9)% (7.8)%* US division 7.6% (0.1)% Space change (0.6)% 0.7% Total sales US division 7.0% 0.6%
Slide 19: Kay
Kay F’cast Fiscal Fiscal Fiscal 2005 2009 2010 Sales (million) $1,174 $1,439 ~$1,500 Stores at y.e. 742 926 920 Average sales per store (‘000) $1,584 $1,536 ~$1,600 Average selling price $282 $331 ~$305 ÖCustomer’s household income $35k to $100k ÖSales ~40% greater than nearest competitor ÖHigh stor
Slide 20: Jared
Jared F’cast Fiscal Fiscal Fiscal 2005 2009 2010 Sales (million) $415 $726 ~$720 Stores at y.e. 93 171 178 Average sales per store (‘000) $4,975 $4,491 ~$4,200 Average selling price $644 $764* ~$707* ÖCustomer’s household income $50k to $150k ÖConcept tested 1993 to 1997 ÖThird largest mid market br
Slide 21: Signet US Leading Performance
Signet US Leading Performance Operating EBIT/Total Total Calendar 2008 Performance Margin Assets(a) Sales Signet US(b) 6.8% 7.5% (6.3)% Zale Corp(c) (6.1)% (9.2)% (15.1)% Typical US Chain Jeweler(d) 2.7% 1.3% (13.2)% 2009 YTD Performance Signet US forecast(e) ~8.5% 10.0% 2.9% (a) Total assets exclud
Slide 22: Management Actions Driving Holiday Sales
Management Actions Driving Holiday Sales Ö Well trained and motivated staff Ö Increased selection of differentiated ranges Ö Robust, flexible supply chain Ö Additional targeted promotional activity Ö National television impressions broadly similar to last year Ö Increased focus on differentiated mer
Slide 23: In-house Receivables a Competitive Advantage
In-house Receivables a Competitive Advantage Ö Forecast credit metrics for fiscal 2010 Ö participation up 10 bpts Ö approval rate up by about 200 bpts Ö net bad debt to total sales about 5.7% • up about 80 bpts Ö collection rate about 12.9% - down by about 50 bpts Ö Performance driven by macro-econo
Slide 24: Reasons for In-house Credit
Reasons for In-house Credit Ö Important element of jewelry sales transaction Ö Credit risk hidden not eliminated by outsourcing Ö Factors under our control Ö score cards Ö collection strategies Ö customer service Ö Increased competitive sales advantage in current environment 24
Slide 25: Changes in Square Footage
Changes in Square Footage Change Kay Kay in Mall Off Mall Regionals Jared* Total Space Jan 2008 789 105 351 154 1,399 10% Opened 27 † 30 3 17 77 † Closed (21) (4) (50) - (75) Jan 2009 795 131 304 171 1,401 4% Openings 5† 3 1 7 16 † Closures (9) (5) (50) - (64) Jan 2010 791 129 255 178 1,353 (1)% Ope
Slide 26: Profitable Market Share Opportunity
Profitable Market Share Opportunity Ö Fragmented and weak competition Ö Sector rationalization accelerating Ö Signet’s sustainable competitive advantages becoming greater Ö Benefits of market share gain through existing stores Ö improved operational leverage Ö limited additional investment required
Slide 27: UK Jewelry
UK Jewelry “Making existing space work harder” 27
Slide 28: UK Market Characteristics
UK Market Characteristics Ö Market size ~£5.5 billion Ö Signet market share ~10% Ö store base bigger than next 5 UK specialty competitors combined Ö ~60% larger than 3rd largest US mid market jeweler Ö Signet UK’s merchandise mix broader than US 28
Slide 29: Satisfactory Performance Over Holiday Season
Satisfactory Performance Over Holiday Season Holiday Fiscal 2010 Year to Date Same store ASP Same store ASP sales sales H.Samuel (1.5)% 7.8% (1.6)% 7.9% Ernest Jones 0.2% 14.5%* (3.1)% 12.2%* UK division (0.8)% (2.2)% Space change 0.1% 2.4% Total sales UK division (0.7)% 0.2% at constant exchange ra
Slide 30: H.Samuel
H.Samuel Fiscal Fiscal Forecast 2005 2009 Fiscal 2010 Sales (million) £282 £250 ~£250 Stores at y.e. 398 352 345 Average sales per store (‘000) £723 £718 ~£730 Average selling price £37 £48 ~£52 Merchandise mix Gold jewelry 32% 29% ~29% Diamond jewelry 19% 21% ~21% Watches 24% 25% ~24% ÖCustomer’s h
Slide 31: Ernest Jones
Ernest Jones Fiscal Fiscal Forecast 2005 2009 Fiscal 2010 Sales (million) £221 £208 ~£210 Stores at y.e. 204 206 205 Average sales per store (‘000) £1,150 £1,047 ~£1,050 Average selling price £141 £202 ~£226* Merchandise mix Gold jewelry 25% 19% ~21% Diamond jewelry 36% 39% ~34% Watches 31% 33% ~33%
Slide 32: Management Actions Driving Holiday Performance
Management Actions Driving Holiday Performance Ö Further improvements in customer service Ö Merchandise successes Ö H.Samuel: charm bracelets and diamonds Ö Ernest Jones: charm bracelets and prestige watches Ö Leverage of marketing scale Ö utilization of 10 second TV advertising spots by H.Samuel Ö
Slide 33: Industry Leader in UK
Industry Leader in UK Ö Sustainable advantages in fragmented market Ö leading staff training & development recognized by National Association of Goldsmiths Ö scale, direct sourcing supply chain capability & merchandising expertise Ö ability to use television advertising & 14 million name database fo
Slide 34: Signet's Strengths
Signet’s Strengths Ö Sector leader in US & UK Ö Sustainable competitive advantages Ö Proven record of outperforming competitors Ö Structural adjustment within sector accelerating Ö Financial dynamics changing Ö gaining market share through existing stores Ö reduced investment in new stores Ö focus o
Slide 35: Regulation G
Regulation G JEWELERS
Slide 36: Fiscal 2009 Sales
Fiscal 2009 Sales The Group has historically used constant exchange rates to compare period-to-period changes in certain financial data. This is referred to as ‘at constant exchange rates’ throughout this presentation and constitutes a “non GAAP financial measure”. The Group considers this to be a u
Slide 37: Fiscal 2009 Operating Loss
Fiscal 2009 Operating Loss The Group has historically used constant exchange rates to compare period-to-period changes in certain financial data. This is referred to as ‘at constant exchange rates’ throughout this presentation and constitutes a “non GAAP financial measure”. The Group considers this
Slide 38: Fiscal 2010 Holiday Sales
Fiscal 2010 Holiday Sales The Group has historically used constant exchange rates to compare period-to-period changes in certain financial data. This is referred to as ‘at constant exchange rates’ throughout this presentation and constitutes a “non GAAP financial measure”. The Group considers this t
Slide 39: Net Debt
Net Debt Net debt is a “non GAAP financial measure”. Management considers it to be a useful additional measure for analyzing and explaining changes and trends in Signet’s financial position. It is calculated as set out below: At January 31, 2009 $million Long-term debt 380.0 Loans & overdrafts 187.5
Slide 40: Appendix
Appendix JEWELERS
Slide 41: Group Financial Performance
Group Financial Performance Page Sales Growth 2 Operating Margin Movement Before Impairment & Relisting Costs 2 Movement in Net Debt 3 Group Comp. Performance 3 Group Financial Performance 4 Group Financial Performance 4 Capital Expenditure, Depreciation & Amortisation 5 Amended Credit Facilities 5
Slide 42: Sales Growth
Sales Growth US UK Group % % % Same store sales (9.7) (3.3) (8.2) Change in space 3.4 (0.5) 2.5 At constant exchange rates (6.3) (3.8) (5.7) Exchange translation - (12.0) (3.1) Total sales growth (6.3) (15.8) (8.8) 42
Slide 43: Operating Margin Movement Before Impairment and Relisting Costs
Operating Margin Movement Before Impairment and Relisting Costs US % UK % Group % Fiscal 2008 margin 9.8 11.4 9.8(1) Gross merchandise margin 1.2 - 0.9 Expense deleverage (3.8) (2.6) (3.5) New space (0.4) - (0.3) Fiscal 2009 margin 6.8 8.8 6.9(1) (1) Included unallocated costs, principally Group exp
Slide 44: Movement in Net Debt
Movement in Net Debt Fiscal 2009 2008 Opening net debt (374.6) (233.2) Free cash flow 51.1 1.4 Net shareholder distribution(1) (123.7) (146.9) (447.2) (378.7) Foreign exchange impact (23.5) 4.1 Closing net debt (470.7) (374.6) (1) Dividends, share repurchases and equity issued 44
Slide 45: Group Comp. Performance
Group Comp. Performance Group Comp. Sales 5.0 4.8 2.4 -0.7 -8.2 Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007 2008 2009 US Comp. Sales UK Comp. Sales 3.0 7.1 1.2 2.0 5.9 6.2 -8.2 -3.3 -1.7 -9.7 Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007 2008 2009 Fiscal Fiscal Fiscal Fiscal Fiscal 2005 20
Slide 46: Group Financial Performance
Group Financial Performance Sales $m Operating Margin % 3,665.3 13.2 3,559.2 3,344.3 11.7 3,154.1 11.4 3,004.8 9.8 6.9 (1) Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007* 2008 2009 2005 2006 2007* 2008 2009 Income Before Tax, $m Earnings per share, $ 2.96 2.74 2
Slide 47: Group Financial Performance
Group Financial Performance (2) (1) Dividend per share ,$ ROCE % 26.3 22.3 22.4 17.3 1.43 1.45 1.45 1.12 1.19 9.6 Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007* 2008 2009 2005 2006 2007* 2008 2009 Net Debt, $m Gearing % 29.2 470.7 374.6 21.2 233.2 13.9 157.9 17
Slide 48: Capital Expenditure, Depreciation & Amortisation
Capital Expenditure, Depreciation & Amortisation Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007 2008 2009 $m $m $m $m $m Capital expenditure US 77.6 88.4 101.1 111.1 76.7 UK 53.5 48.2 23.3 29.3 38.2 Total 131.1 136.6 124.4 140.4 114.9 Depreciation and amortisation US 45.2 51.3 61.3 72.1 84.0 UK 3
Slide 49: Amended Credit Facilities
Amended Credit Facilities 2006 Private Placement (7, 10 & 12 year maturities) $280m 2008 Bank Facility Agreement (5 year) $370m $650m Amended fixed charge covenant 1.4:1 Equivalent under original definition 1.1:1 Fiscal 2009 Gross debt $(567.5)m Cash and cash equivalents $96.8m Net debt at January 3
Slide 50: Fiscal 2010 YTD
Fiscal 2010 YTD Quarter 3 Year to Date 2010 2009 2009 2010 2009 2009 $m CER GAAP $m CER GAAP $m $m $m $m Sales 613.7 615.1 629.3 2,087.1 2,121.0 2,220.7 Operating (loss)/income (3.1) (12.8) (14.2) 95.9 71.3 69.2 Interest expense (7.4) (9.4) (9.4) (26.5) (21.9) (22.1) (Loss)/income before (10.5) (22.
Slide 51: US Jewelry Division
US Jewelry Division Page Summary Financials 7 Merchandise Mix 7 Diamond Supply Chain 8 Test Before We Invest - Merchandise 8 Regional Brands 9 Average Retail Price of Merchandise Sold 9 Average Sales Per Store 10 Growth in US Stores 10 In-house Credit Requirements 11 Receivables Profile 11 Receivabl
Slide 52: US Summary Financials
US Summary Financials Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007 2008 2009 Sales - $m 2,060.5 2,308.8 2,652.1 2,705.7 2,536.1 Comp. store sales growth 5.9% 7.1% 6.2% (1.7)% (9.7)% Total sales growth 10.4% 12.1% 14.9% 2.0% (6.3)% Operating (2) income - $m 264.2 295.9 318.9 265.2 171.6 Operatin
Slide 53: US Merchandise Mix
US Merchandise Mix Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007 2008 2009 % % % % % Diamonds & diamond 72 74 75 75 75 jewelry Gold jewelry 8 7 7 7 7 Other jewelry 13 12 11 11 11 Watches 7 7 7 7 7 Total 100 100 100 100 100 Excluding repairs, warranties and other miscellaneous sales 53
Slide 54: US Diamond Supply Chain
US Diamond Supply Chain 75% of US merchandise mix Rough Polished Manufactured Retailers Mines T T r r a Cutters & a Sightholders d polishers d Manufacturers Wholesalers e e r r s s Contract Manufacture Complete Signet 54
Slide 55: Test Before We Invest
“Test Before We Invest” Leo Diamond LeVian Peerless & Hearts Desire 2000 Selected Jared stores Selected Jared stores 2001 All Jared & 300 malls All Jared & 50 malls 2002 All stores All Jared & 200 malls Styles expanded 2003 Additional cuts tested All Jared & 300 malls Tested LeVian galas 2004 Increa
Slide 56: Regional Brands
Regional Brands Fiscal Fiscal 2005 2009 Sales (million) $461 $371 Stores at y.e. 321 304 Average sales per store (‘000) $1,533 $1,160 Ö New markets not meeting sales expectations Ö Review stores applying strict ROCE and return on marketing standard Ö More likely than Kay to be closed as leases expir
Slide 57: Average Retail Price of Merchandise Sold ($)
Average Retail Price of Merchandise Sold ($) Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007 2008 2009 Kay 282 305 317 327 331 Regionals 304 324 332 343 346 Jared 644 697 719 747 714* * Excluding Pandora range 57
Slide 58: Average Sales Per Store
Average Sales Per Store Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007* 2008 2009 Kay ($’000) 1,584 1,665 1,815 1,710 1,536 Regionals ($’000) 1,533 1,514 1,517 1,344 1,160 Jared ($’000) 4,975 5,453 5,676 5,341 4,491 Includes only stores operated for the full financial year * 53 week year 58
Slide 59: Growth in US Stores
Growth in US Stores Kay & Jared* Total Space Cumulative Regionals increase space increase Jan 2000 799 28 827 +10% +10% Jan 2001 956 43 999 +26% +39% Jan 2002 970 55 1,025 +6% +47% Jan 2003 983 67 1,050 +6% +56% Jan 2004 1,024 79 1,103 +7% +67% Jan 2005 1,063 93 1,156 +8% +80% Jan 2006 1,111 110 1,2
Slide 60: In-house Credit Requirement
In-house Credit Requirement Ö High bridal participation ~45-50% Ö Characteristics of bridal customer Ö young Ö limited, if any, credit history Ö high level of financial commitments as setting up home, or Ö older customer making anniversary purchase Ö Young consumer not typical bank credit customer Ö
Slide 61: US Receivables Profile
US Receivables Profile Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007 2008 2009 Average outstanding $792 $841 $957 $997 $1,028 balance Average monthly 14.8% 14.5% 14.6% 13.9% 13.1% collection rate Credit sales as % of 51.2% 51.6% 51.7% 52.6% 53.2% sales Net bad debt as % of 5.5% 5.8% 5.3% 6.5% 9.
Slide 62: US Receivables Performance
US Receivables Performance 10.0 15.0 9.0 8.0 12.0 7.0 6.0 9.0 5.0 4.0 6.0 3.0 Net bad 2.0 3.0 Average debt 1.0 monthly as % 0.0 0.0 collection of credit rate % sc 997 sc 998 sc 999 sc 000 sc 001 sc 002 sc 003 sc 004 sc 005 sc 006 sc 007 sc 008 09 sales 20 1 1 1 2 2 2 2 2 2 2 2 2 al al al al al al al
Slide 63: US Jewelry Market
US Jewelry Market Page Long Term Industry Growth 13 US Jewelry Sector Performance 13 US Jewelry Market 14 Fewer Specialty Jewelry Firms 14 Sales Per Store 15 Consolidation in US Market 15 63
Slide 64: Long Term Industry Growth
Long Term Industry Growth ~50% of world diamond sales(a) 70 60 .r. 5. 0% 50 c.a.g $bn 40 30 20 10 0 81 83 85 87 89 91 93 95 97 99 01 03 05 07 19 19 19 19 19 19 19 19 19 19 20 20 20 20 US Jewelry and Watch Market(b) Sources: (a) IDEX (b) US Department of Commerce 64
Slide 65: US Jewelry Sector Performance
US Jewelry Sector Performance 16% 12% 8% Growth p.a. 4% 0% 99 02 04 05 07 03 06 08 ) ) -4% (a (a 19 20 20 20 20 20 20 20 00 01 20 20 -8% Furniture & Household excl. Electricals Electricals & Electronics Clothing Jewelry & Watches Signet US (a) Excludes Marks & Morgan acquisition Source: US Departmen
Slide 66: US Jewelry Market
US Jewelry Market 2003 2006 2007 2008 US Market size $51bn $60bn $62bn $60bn Chain Jewelers ($100m+ sales) 14% 16% 17% 15% Independent Jewelers 36% 34% 32% 32% Total specialty 50% 50% 49% 47% Chain Department Stores 12% 12% 11% 10% Mass Merchants 10% 10% 11% 11% TV Home Shopping 4% 4% 4% 4% Other (G
Slide 67: Fewer Specialty Jewelry Firms
Fewer Specialty Jewelry Firms 35,000 ~(1.7)% pa 30,000 Num ber of firm s 25,000 20,000 15,000 2008 10,000 (5.1)% 5,000 0 87 99 91 93 95 97 99 01 03 05 07 19 19 19 19 19 19 19 20 20 20 20 Source: Jewelers Board of Trade 67
Slide 68: Sales Per Store
Sales Per Store Sales per store $'000 1,606 1,251 1,017 Kay/ Zales/ Industry3 Regionals 1 Gordons2 2007/08 1 y.e. February 2, 2008 2 y.e. July 31, 2008 3 y.e. December 31, 2007 68
Slide 69: Consolidation in US Market
Consolidation in US Market Estimated US Specialty Jewelry(1) Market Share 1998 2006 2007 2008 Signet US(2) 4.9% 8.8% 8.8% 9.0% Zale Corp. US(2) 6.4% 7.3% 6.4% 5.8% Chains ranked 3-7(3) 8.4% 10.0% 10.3% 10.4% Chains ranked 8-15(3) 5.4% 6.2% 6.6% 5.9% Other specialty jewelers 74.9% 67.6% 67.9% 68.9% (
Slide 70: Jared
Jared Page Jared Investment Model 16 Jared Locations 17 Jared Development 17 Growing Off-mall Presence 18 Test Before We Invest 18 70
Slide 71: Jared Investment Model
Jared Investment Model Ö Investment – ~$4.0m per store Ö First full year sales – ~$3.4m Ö Year 5 sales – $5m to $6m Ö At maturity, EBIT% similar to mall stores Ö 67 Jared stores over 5 years old Ö achieved average sales of ~$5.6m in year 5 Ö store contribution rate similar to mall stores 71
Slide 72: Jared Locations
Jared Locations Existing stores Opened in fiscal 2009 72
Slide 73: Jared Development
Jared Development Ö 1994: 3 test stores opened Ö 1996 revised format opened in Denver Ö 1997: 3 further test stores opened Ö 1998: 8 stores opened Ö 1999 to 2004: 12-15 stores opened p.a. Ö 2005: 18 stores opened Ö 2006: 25 stores opened Ö 2007: 19 stores opened Ö 2008: 17 stores opened Ö 2009: 7 st
Slide 74: Growing Off-mall Presence
Growing Off-mall Presence % of Space Growth % of Total Space 44% 40% 50% 24% 27% 59% 29% 32% 33% 66% 62% 36% 1% 1% 2% 4% 6% 7% 10% 34% 12% 38% 15% 75% 72% 11% 69% 64% 61% 57% 40% 29% 26% 23% 22% 18% 4 5 6 7 8 * 4 5 6 7 8 9 2 00 2 00 2 00 2 00 2 00 0 09 00 00 00 00 00 00 al al al al al l2 2 2 2 2 2 2
Slide 75: Test Before We Invest
“Test Before We Invest” Stage Jared Kay off-mall Kay outlet Test initial 1993 – 1998 2002-2005 2006 & 2007 concept 15 store test Test c.10 p.a. Test up to 5 p.a. Initial 1999 – 2004 2006 – 21 stores 2008 – Test 8 roll-out 12 to 15 stores p.a. 2007 – 40 stores 2008 – 18 stores Investment 2004: 28 sto
Slide 76: Real Estate
Real Estate Page Typical Mall Layout 19 In-Line v. Corner Location 20 Typical Power Strip 20 Typical Lifestyle Centre 21 76
Slide 77: Typical Mall Layout
Typical Mall Layout No. 1 Department Food entrance store court Dept Dept store store Best locations Good locations Department OK locations store Poor locations 77
Slide 78: In-Line v. Corner Location
In-Line v. Corner Location Mall Mall Mall Display cases 78
Slide 79: Typical Power Strip
Typical Power Strip od ng Us ble s & Sp c k s Be & th Kay y Go orti Bu a s R No rne dB Di nd ys st MAJOR ROAD Ba yo Be Be To Kay * * nt nt D a a RE ur ur nk st a st a JA Ba Re Re MAJOR ROAD Specialty retailers * Note: Kay and Jared are unlikely to be sited in the same power strip mall 79
Slide 80: Typical Lifestyle Centre
Typical Lifestyle Centre m tro ma s ne rd Ci No Pedestrian area MAJOR ROAD Kay & rnes ble No Ba Pedestrian Pedestrian area area MAJOR ROAD Specialty Restaurants Health & Beauty retailers 80
Slide 81: UK Jewelry
UK Jewelry Page Summary Financials 22 Comp. Store Sales Growth 22 Store Count 23 Customer Oriented Format 23 Average Sales per Store 24 Average Retail Price 24 Merchandise Mix (HS) 25 Merchandise Mix (EJ) 25 Retail Market Map 26 81
Slide 82: UK Summary Financials
UK Summary Financials Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007 2008 2009 Sales - £m 507.7 469.6 482.5 479.8 461.8 Comp. store sales growth 3.0% (8.2)% 1.2% 2.0% (3.3)% Total sales growth 2.7% (7.3)% 2.7% (0.6)% (3.8)% Operating income - £m 78.5 49.3 53.2 54.7 40.9(2) Operating 15.5% 10.5% 1
Slide 83: Comp. Store Sales Growth
Comp. Store Sales Growth H.Samuel Ernest Jones 4.5 1.9 0.7 1.3 2.9 -8.7 -2.6 1.7 -7.5 -4.0 Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 83
Slide 84: UK Store Count
UK Store Count Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007 2008 2009 H.Samuel 398 386 375 359 352 Ernest Jones 204 207 206 204 206 Total 602 593 581 563 558 84
Slide 85: Customer Oriented Format
Customer Oriented Format 7% 9% 15% 18% 23% % of store numbers 37% 41% 45% 46% 48% 29% 28% 22% 19% 15% 27% 22% 18% 17% 14% Fiscal Fiscal Fiscal Forecast Forecast 2007 2008 2009 fiscal 2010 fiscal 2011 HS Traditional EJ Traditional HS Customer oriented EJ Customer oriented 85
Slide 86: UK Average Sales per Store
UK Average Sales per Store Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007* 2008 2009 H.Samuel (£’000) 723 681 695 722 718 Ernest Jones (£’000) 1,150 1,065 1,079 1,105 1,047 Average sales per store excluding VAT. Includes only stores operated for the full financial year * 53 week year 86
Slide 87: Average Retail Price of Merchandise Sold (£)
Average Retail Price of Merchandise Sold (£) Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007 2008 2009 H.Samuel 37 38 42 44 48 Ernest Jones 141 148 163 180 202 87
Slide 88: UK Merchandise Mix
UK Merchandise Mix H.Samuel Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007 2008 2009 % % % % % Gold jewelry 32 32 31 31 30 Watches 24 24 24 25 26 Diamond jewelry 19 20 21 22 22 Other jewelry 9 9 10 10 10 Gifts and other 16 15 14 12 12 Total 100 100 100 100 100 88
Slide 89: UK Merchandise Mix
UK Merchandise Mix Ernest Jones Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007 2008 2009 % % % % % Gold jewelry 25 25 25 25 25 Watches 31 30 31 33 35 Diamond jewelry 36 36 35 34 33 Other jewelry 5 6 6 6 5 Gifts and other 3 3 3 2 2 Total 100 100 100 100 100 89
Slide 90: UK Retail Market Map
UK Retail Market Map (ex. independents) £250 Leslie Davies Beaverbrooks Ernest Jones HIGH Goldsmiths H Samuel Estimated Average Transaction Value Argos Warren James LOW F. Hinds Half Price Supermarkets Jewellers £0 FEW MANY RANGE OF PRODUCTS 90