Signet Jewelers Limited · NYSE:SIG
Signet Jewelers — ICR Xchange Conference 2011
29 slides from Signet Jewelers's conference presentation, Jan 11, 2011
Slide 1: Competitive Advantages Reinforcing Sector Leadership
“Competitive Advantages Reinforcing Sector Leadership” January 2011
Slide 2: Forward Looking Statements & Other Disclosure Matters
Forward Looking Statements & Other Disclosure Matters Forward-Looking Statements - This presentation contains statements which are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, based upon management’s beliefs and expectations
Slide 3: Why Invest in Signet
Why Invest in Signet Ö Record of gaining profitable market share Ö quality of sales associates / customer service / in-store experience and divisional management Ö ability to leverage supply chain leadership Ö development & growth of differentiated branded merchandise Ö high customer awareness drive
Slide 4: Strong Holiday Sales Performance
Strong Holiday Sales Performance Ö Signet 1 Ö 9 weeks total +6.0%, same store +8.1% 1 Ö 48 weeks total +4.8% same store +6.6% Ö US division 1 Ö 9 weeks total +10.4%, same store +11.7% 1 Ö 48 weeks total +8.0%, same store +8.9% Ö UK division 1 Ö 9 weeks total -8.8%, same store -4.2% 1 Ö 48 weeks tota
Slide 5: Significant Earnings Growth Expected
Significant Earnings Growth Expected Expectations for Fiscal 2011 Ö Income before income taxes $287.5 - $302.5 million, up 25% - 31% Ö Diluted earnings per share $2.20 - $2.32, up 20% - 27% Excluding Non-recurring Item1 Ö Income before income taxes $335 - $350 million, up 45% - 52% Ö Diluted earning
Slide 6: World's Largest Specialty Jeweler
World’s Largest Specialty Jeweler Group sales ~$3,400 million – 80% US / 20% UK Kay Jewelers - #1 mid market brand H.Samuel - #1 in UK Sales: about $1,600m Stores: 910 in 50 states Sales: about £240m Stores: 337 Jared - #1 Off-Mall “Category Killer” Ernest Jones - #1 UK upper middle market Sales: ab
Slide 7: Contrast Between US & UK
Contrast Between US & UK 7% Merchandise Mix 9% 8% 28% 10% 29% US UK 75% 2% 32% Diamonds Gold & silver Diamonds Gold & Silver Other jewelry Watches Other jewelry Watches Gifts & other 7
Slide 8: Leader in US Specialty Market
Leader in US Specialty Market Ö US jewelry & watch market sales of $59.6bn1 in 2009 Ö Total specialty jewelry sales of $28.3bn2 in 2009 Ö Kay/Jared3 share 9.1%, up from 5.0% in 1999 Ö twice size of nearest competitor in mid market Ö ~50% of Signet’s US sales in bridal category4 Ö bridal category sal
Slide 9: Bridal Expertise Gives Opportunity to Grow Market Share
Bridal Expertise Gives Opportunity to Grow Market Share Ö Interaction of strategic strengths Ö superior customer service enhancing overall customer experience Ö supply chain advantages Ö ability to offer in-house customer financing Ö Development of exclusive branded merchandise Ö Potential for more
Slide 10: Unique Brands Driving Sales
Unique Brands Driving Sales 10
Slide 11: Growing Differentiated Brands
Growing Differentiated Brands 11
Slide 12: Advantages of Differentiated Brands
Advantages of Differentiated Brands Ö Makes our stores unique destinations Ö Provides sales associates powerful selling proposition Ö Improved merchandise margin & less exposure to competitive discounting Ö Drive awareness & purchase intent with national advertising Ö Leverages strategic supply chai
Slide 13: Largest & Most Effective Marketing Spend in US Jewelry Sector
Largest & Most Effective Marketing Spend in US Jewelry Sector Ö Marketing budget of about $175 million Ö US division has an advertising to sales ratio nearly double that of a typical jeweler1 Ö Scale to effectively use national TV Ö Successful, long running campaigns Ö “Every Kiss Begins With Kay” Ö
Slide 14: Customer Service - Key Strength
Customer Service - Key Strength Ö Well trained and supported sales staff Ö customer service, selling skills & technical knowledge Ö personalized targets and training Ö Well motivated with rewards based on individual and store performance Ö All field management must have been a Signet store manager Ö
Slide 15: Credit – Key Facilitator of Sales
Credit – Key Facilitator of Sales Ö Focus on jewelry sales Ö 50% – 55% of US business transacted using in-house credit Ö Low individual balances & rapid repayment Ö average outstanding balance of ~$1,000 Ö 12% to 14% monthly collection rate Ö credit customers lifetime value is 3.5X greater Ö Swift r
Slide 16: Supply Chain Strengths
Supply Chain Strengths Ö Scale and expertise Ö leading market share Ö balance sheet strength Ö buying and merchandise systems Ö proven ability to execute Ö Direct sourcing of polished diamonds Ö Greater ability to ‘test before invest’ Ö reduced inventory risk Ö better able to identify ‘winners’ 16
Slide 17: UK Division
UK Division Ö Market leader, ~1.7 times size of nearest competitor Ö # 1 & 2 specialty jewelry websites in UK Ö High return on capital and historic operating margins Ö Tightly managing costs and merchandising margin in a tough environment Ö Good cash flow generation Ö Operating margin in Fiscal 2011
Slide 18: UK Sustainable Competitive Advantages
UK Sustainable Competitive Advantages Ö Leading staff training & development recognized by National Association of Goldsmiths Ö Direct sourcing supply chain capability, merchandising expertise and buying scale Ö 14 million name database for customer relationship marketing Ö Utilization of US best pr
Slide 19: Why Invest In Signet
Why Invest In Signet Ö Opportunity to gain profitable market share Ö bridal market expertise Ö further development of differentiated brands Ö utilize national television advertising Ö superior customer service Ö Supply chain strengths means able to manage commodity cost fluctuation Ö Strong financia
Slide 20: Signet's Financial Strength
Signet’s Financial Strength Y/e January Fiscal 2009 Fiscal 2010 Forecast Fiscal 2011 Sales growth (8.7)% (1.6)% ytd 4.8%1 Operating margin 6.5%2 8.1% 10.5% - 11.0% Adjusted diluted EPS $1.472 $1.83 $2.54 - $2.662 Free cash flow3 $51.1m2 $471.9m $275m - $300m2 Net (debt) / cash4 $(470.7)m $(7.9)m $22
Slide 21: Gross Margin Performance
Gross Margin Performance Ye January Fiscal 2009 Fiscal 2010 Forecast Fiscal 2011 Gross Margin 32.0% 32.6% 35.8% – 36.3% Movement in +0.9% +0.2% +0.9% – 1.1% merchandise margin Ö Increasing merchandise margin Ö supply chain flexibility, merchandising initiatives, and price increases enable commodity
Slide 22: US Net Bad Debt to Sales Performance Moving Back Towards Historic Levels
US Net Bad Debt to Sales Performance Moving Back Towards Historic Levels Fiscal 2010: 5.6% 6.0 5.0 4.0 Net bad 3.0 debt as % 2.0 Fiscal 1998 -2008: range 2.7% to 3.4% of US total sales 1.0 Fiscal 2011: forecast range 4.1% to 4.3% 0.0 8 9 0 1 2 3 4 5 6 7 al 8 st ca 09 0 11 sc 99 sc 99 sc 00 sc 00 sc
Slide 23: Strategic Capital Investment
Strategic Capital Investment Average Fiscal Fiscal Forecast Fiscal 2004 - 2008 2009 2010 Fiscal 2011 Capital $123.6m $114.9m $43.6m $57.5m-$62.5m Expenditure Depreciation $87.8m $114.5m $108.9m $90m-$100m Ö Demanding investment hurdle rate Ö Capital expenditure restricted during downturn Ö Looking t
Slide 24: Signet's Operating Margin Recovery Continues
Signet’s Operating Margin Recovery Continues 11.4% 11.0% 10.5-11.0% 9.4% 8.1% Fiscal 2011 6.5% Forecast Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2008 2007 2010 2009 (2.2)% (2.1)% (2.5)% (3.7)% (3.3-3.5)% (4.4)% Operating Margin Net Bad Debt Primary drivers to rebuilding operating margin Öimproving st
Slide 25: Outlook for Fiscal 2012
Outlook for Fiscal 2012 Ö Focus on further strengthening competitive advantages Ö Tight control of gross merchandise margin Ö Intelligent investment in cost base to drive sales growth Ö increased marketing spend planned Ö investment in sales associates Ö Support sales growth with strategic additions
Slide 26: Regulation G
Regulation G JEWELERS
Slide 27: Correction of Immaterial Error
Correction of Immaterial Error During the third quarter of Fiscal 2011, Signet changed its accounting for extended service plans. Previously, revenue from the sale of extended service plans was deferred, net of direct costs arising from the sale, and was recognized in proportion to the historical ac
Slide 28: Exchange Translation Impact on Sales
Exchange Translation Impact on Sales Signet 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”. Management conside
Slide 29: Impact of Non-recurring Item
Impact of Non-recurring Item On November 26, 2010, Signet incurred a $47.5m non-recurring ‘Make Whole’ payment arising from the prepayment in full of its private placement notes. Management considers it useful to exclude this significant, unusual and non-recurring item to analyze and explain changes