Signet Jewelers Limited · NYSE:SIG
Signet Jewelers — Non-Deal Roadshow (October 2011)
48 slides from Signet Jewelers's roadshow presentation, October 2011
Slide 1: Competitive Advantages Reinforcing Sector Leadership
“Competitive Advantages Reinforcing Sector Leadership” October 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 Record of gaining profitable market share superior customer experience ability to leverage supply chain leadership development & growth of branded differentiated and exclusive merchandise high customer awareness driven by largest national TV advertising budget and quality of cam
Slide 4: World's Largest Specialty Jeweler
World’s Largest Specialty Jeweler Total sales $3,437.4 million ~80% US / 20% UK Kay Jewelers - #1 mid market brand H.Samuel - #1 in UK Sales: $1,592.9m Stores: 908 in 50 states Sales: $373.4m Stores: 338 Jared - #1 Off-Mall “Category Killer” Ernest Jones - #1 UK upper middle market Sales: $848.3m St
Slide 5: Contrast Between US & UK
Contrast Between US & UK 7% Merchandise Mix 7% 8% 28% 10% 30% US UK 75% 12% 23% Diamonds Gold & silver Diamonds Gold & Silver Other jewelry Watches Other jewelry Watches Gifts & other 5
Slide 6: Q2 Fiscal 2012 Results Highlights
Q2 Fiscal 2012 Results Highlights Same store sales up 9.9% US division +12.2% (Q2 Fiscal 2011 +6.0%) UK division +1.4% (Q2 Fiscal 2011 -0.5%) 12.8% operating margin, +430 bpts record for Q2 Income before taxes $99.8 million, +$45.1 million or +82.4% Diluted eps $0.76, +$0.31 or +68.9% Free cash flow
Slide 7: US Performance
US Performance Changes in Sales Same store Sales ASP1 sales Q2 Fiscal 2012 Kay $367.5m 13.5% 13.5% 12.0% Jared $213.8m 12.6% 12.7% 8.6% Regionals $61.7m 4.0% (4.1)% 13.3% US division $643.0m 12.2% 11.3% 13.5% Operating income, net $104.4m up $43.7 million , +72.0% Operating margin 16.2% + 570 bpts 1
Slide 8: UK Performance
UK Performance Changes in Sales Same store Sales at ASP2 sales CER1 Q2 Fiscal 2012 H.Samuel $81.4m 3.3% 1.9% 6.9% Ernest Jones $73.2m -0.7% -1.8% 5.7% UK division $154.6m 1.4% 0.1% 5.3% Operating income $2.8m down by $1.9 million Fiscal 2011 included $0.9 million disposal gain Operating margin 1.8%
Slide 9: Fiscal 2012 Financial Objectives
Fiscal 2012 Financial Objectives Gain profitable market share Improve gross margin ratio SG&A to sales ratio broadly similar to that of Fiscal 2011 Positive free cash flow of between $175 million and $225 million, up from original target of $150 million to $200 million 9
Slide 10: US Competitive Advantages
US Competitive Advantages Customer service Marketing and advertising Key business initiatives Supply chain Credit 10
Slide 11: US Customer Service - Key Strength
US Customer Service - Key Strength Well trained and supported sales staff continual training in customer service, selling skills & technical knowledge personalized targets and training Appropriate motivation rewards based on individual and store performance Seasoned field management all must have be
Slide 12: Largest & Most Effective Marketing Spend in US Jewelry Sector
Largest & Most Effective Marketing Spend in US Jewelry Sector Further increase in marketing planned US division has an advertising to sales ratio nearly double that of a typical jeweler1 Scale to effectively use national TV Successful, long running campaigns “Every Kiss Begins With Kay” “He Went to
Slide 13: Bridal Expertise Gives Opportunity to Grow Market Share
Bridal Expertise Gives Opportunity to Grow Market Share Outstanding customer experience is based on: superior service great value and selection ability to offer customer financing Branded differentiated merchandise Advertising for bridal category 13
Slide 14: Brands Driving Bridal Sales
Brands Driving Bridal Sales Continuing to roll out exclusive bridal ranges Bridal contributing to growth in ASP 14
Slide 15: Advantages of Branded Differentiated and Exclusive Merchandise
Advantages of Branded Differentiated and Exclusive Merchandise Creates a unique store destination Powerful selling proposition for sales associates Drive awareness & purchase intent as part of national brand advertising Leverages strategic supply chain strengths Improved merchandise margin & less ex
Slide 16: Exclusive & Differentiated Brands
Exclusive & Differentiated Brands Strong performance by branded merchandise Creates a unique store destination Powerful selling proposition for sales associates 16
Slide 17: Supply Chain Strengths
Supply Chain Strengths Expertise, scale and balance sheet strength Greater ability to ‘test before invest’ reduced inventory risk better able to identify ‘winners’ Direct sourcing of polished diamonds 17
Slide 18: Credit – Key Facilitator of US Sales
Credit – Key Facilitator of US Sales Focus on jewelry sales not credit transaction Low individual balances & rapid repayment 50% – 55% of US business transacted using in-house credit Credit customers lifetime value is 3.5X greater 18
Slide 19: US Receivables Performance
US Receivables Performance US net bad Average debt monthly as % collection of total US rate % sales Fiscal 1998 to Fiscal 2008 net bad debt range 2.8% to 3.5% 19
Slide 20: US Real Estate Driven by Kay and Jared
US Real Estate Driven by Kay and Jared Kay Kay/ Change Change Kay off- Jared in Regional in mall1 mall Jared2 total space2 brands Total space2 Jan 2008 789 105 154 1,048 13% 351 1,399 10% Jan 2009 7953 131 171 1,097 7% 3043 1,401 4% Jan 2010 794 129 178 1,101 2% 260 1,361 (1)% Opened 2 2 2 6 - 6 Clo
Slide 21: Key UK Business Drivers
Key UK Business Drivers Sales initiatives Planned investments Challenges in marketplace 21
Slide 22: UK Sales Initiatives
UK Sales Initiatives Strong watch and bridal, including gold rings Test & develop new merchandise increased focus on differentiated brands Expansion of in-store events Continue development of customer relationship marketing Maintain focus on training & driving customer service 22
Slide 23: Planned Investment Program in UK for Fiscal 2012
Planned Investment Program in UK for Fiscal 2012 Upgrade of store portfolio new stores and relocations increased refurbishment program evolution of store designs Infrastructure further enhancements of support systems continue development of websites 23
Slide 24: Signet Capital Investment
Signet Capital Investment Average Fiscal Fiscal Fiscal Target Fiscal 2004 - 2009 2010 2011 Fiscal 2008 2012 Capital $123.6m $114.9m $43.6m $57.5m $110m - Expenditure $130m Depreciation & $87.8m $114.5m $108.9m $97.8m amortization Store remodels Increased space growth Growth-enabling technologies 24
Slide 25: Management Priorities
Management Priorities Continue investment in successful strategies that are driving gains in profitable market share growth-enabling technologies space growth Growth of branded jewelry Be opportunistic where there are possible investments that satisfy our demanding return hurdles 25
Slide 26: Q2 Fiscal 2012 Sales Performance
Q2 Fiscal 2012 Sales Performance US UK Total Sales Q2 Fiscal 2012 $m 643.0 154.6 797.6 Sales Q2 Fiscal 2011 $m 577.7 142.0 719.7 Change in sales % % % Same store sales 12.2 1.4 9.9 Space impact (0.9) (1.3) (0.9) Change in total sales at constant 11.3 0.1 9.0 exchange rate1 Exchange translation impac
Slide 27: Q2 Fiscal 2012 Reconciliation
Q2 Fiscal 2012 Reconciliation % of sales Income before tax Q2 Fiscal 2011 $54.7m 7.6% Gross margin movement $57.6m 7.2% Selling, general & admin. expense movement $(20.8)m (4.6)% Other operating income movement $4.8m 0.6% Operating income movement $41.6m 5.2% Net interest movement $3.5m 0.4% Income
Slide 28: SG&A Reconciliation
SG&A Reconciliation Q2 YTD % of Fiscal $m 2011 $m % of Fiscal SG&A 2011 SG&A SG&A Q2 Fiscal 2011 203.7 442.2 Net advertising investment 4.0 2.0% 10.6 2.4% Currency movement 3.5 1.7% 6.1 1.4% 401(k) increase 1.5 0.7% 3.0 0.7% Store staff flex 7.6 3.7% 15.8 3.6% Change in other items 4.2 2.1% 10.6 2.3
Slide 29: Receivables Trend Shows Continued Improvement
Receivables Trend Shows Continued Improvement Net bad Average debt monthly as % collection of total rate % US sales 29
Slide 30: Cash Flow
Cash Flow YTD Fiscal YTD Fiscal 2012 2011 $m $m Net cash provided by operating activities 192.1 254.6 Net cash used in investing activities (38.3) (14.4) Free cash flow1 153.8 240.2 Net cash used in financing activities (15.5) (70.2) Increase in cash and cash equivalents 138.3 170.0 Cash and cash eq
Slide 31: Additional Information
SIGNEI Additional Information
Slide 32: Fiscal 2011 Results Highlights
Fiscal 2011 Results Highlights Same store sales up 6.7% US division +8.9%, Fiscal 2010 +0.2% UK division -1.4%, Fiscal 2010 -2.4% 10.8% operating margin, up 270 bpts Income before taxes and Make Whole $347.91 million, up 50.9% Diluted eps excluding Make Whole $2.661, up 45.4% Free cash flow2 of $315
Slide 33: Signet's Operating Margin Recovery Continues
Signet’s Operating Margin Recovery Continues 11.4% 11.0% 10.8% 9.4% 8.1% 6.5% Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2008 2007 2010 2009 2011 (2.2)% (2.1)% (2.5)% (3.7)% (3.3)% (4.4)% Operating Margin Net Bad Debt Primary drivers to rebuilding operating margin improving store productivity re
Slide 34: US Historic Returns
US Historic Returns 1 ROCE (%) Operating Margin/Bad Debt (%) 12.3 11.5 12.5 9.3 2 8.8 24.5 6.2 21.5 20.6 14.7 14.5 (2) 9.0 -3.0 -2.8 -3.5 -4.9 -4.2 -5.6 07 08 06 10 11 09 06 07 08 09 10 11 20 20 20 20 20 20 20 20 20 20 20 20 Fiscal 2006-201 average: Fiscal 2006-2011 average: 17.5% Operating Margin:
Slide 35: US Average Sales Per Store
US Average Sales Per Store Fiscal Fiscal Fiscal Fiscal Fiscal 2007* 2008 2009 2010 2011 Kay ($’000) 1,798 1,695 1,525 1,570 1,713 Regional brands ($’000) 1,504 1,333 1,151 1,155 1,238 Jared ($’000) 5,649 5,317 4,473 4,029 4,638 Includes only stores operated for the full fiscal year * 53 week year 35
Slide 36: UK Historic Returns
UK Historic Returns1 1 2 2 Fiscal 2006-2011 average: 9.6% Fiscal 2006-2011 average: 27.1% Primary driver of returns is store productivity 1. ROCE excluding goodwill 2. Before goodwill impairment of $108.9m 36
Slide 37: UK Average Sales Per Store
UK Average Sales Per Store Fiscal Fiscal Fiscal Fiscal Fiscal 2007* 2008 2009 2010 2011 H.Samuel (£’000) 695 722 718 712 705 Ernest Jones (£’000) 1,079 1,105 1,047 1,027 1,041 Includes only stores operated for the full fiscal year * 53 week year 37
Slide 38: US Jewelry & Watch Market in 2010
US Jewelry & Watch Market in 2010 Total US jewelry & watch market up 5.7% to $61.5 billion1 6% below peak of $65.3 billion in 2007 US specialty jewelry market up 3.8% to $26.7 billion2 14% below peak of $31.0 billion in 2007 About 22,800 specialty jewelry stores3 a net decline of about 1,000 stores
Slide 39: US Long Term Industry Growth
US Long Term Industry Growth US Jewelry and Watch Market1 ~40% of world diamond sales2 70 60 rm 4.9% 50 . lo ng te .r c.a.g $bn 40 30 20 10 0 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 • Specialty sales • Non-specialty sales 1. US Department of Commerce
Slide 40: US Jewelry Sector Performance
US Jewelry Sector Performance 14% 10% Growth p.a. 6% 2% -2% -6% -10% 2001(a) 2002 2003 2004 2005 2006 2007 2008 2009 2010 Furniture & Household excl. Electricals Electricals & Electronics Clothing Jewelry & Watches Signet US (a) Excludes Marks & Morgan acquisition Source: US Bureau of Economic Analy
Slide 41: Growth in US Market Share
Growth in US Market Share1 2000 2005 2008 2009 2010 Signet 5.8% 8.0% 8.6% 9.9% 10.3% Zale2 7.3% 7.6% 5.5% 5.4% 5.2% Tiffany 4.1% 5.0% 5.2% 5.2% 5.6% Blue Nile 0.2% 0.7% 0.9% 1.0% 1.1% Finlay2 nil nil 1.0% Liquidated - Friedman 1.5% 1.2% Liquidated - - Whitehall 1.4% 1.0% Liquidated - - 1. Share of U
Slide 42: Rationalization of Top US Brands
Rationalization of Top US Brands Mid market brands Sales $m No. of stores Status Calendar 2004 2010 2004 2010 Kay 1,1741 1,5931 832 908 Profitable Zales2 1,0711 { 9631 757 675 { Loss making Gordons2 3141 287 192 Jared1 4152 8481 135 180 Profitable Fred Meyer3 4754 3504 436 361 Part of Kroger Helzber
Slide 43: Fewer US Specialty Jewelry Stores
Fewer US Specialty Jewelry Stores 30,000 ~(1.9)% pa 25,000 Number of stores 20,000 15,000 10,000 5,000 0 01 02 03 04 05 06 07 08 09 10 20 20 20 20 20 20 20 20 20 20 Source: US Bureau of Labor Statistics, August 2011. 43
Slide 44: UK Retail Market Map
UK Retail Market Map (ex. independents) £250 Leslie Davies Goldsmiths Ernest Jones HIGH Beaverbrooks H Samuel Estimated Fraser Hart Average Transaction Value Warren Argos James LOW F. Hinds £0 FEW MANY RANGE OF PRODUCTS 44
Slide 45: Regulation G Disclosures
Regulation G Disclosures JEWELERS
Slide 46: Fiscal 2011 Adjusted Earnings
Fiscal 2011 Adjusted Earnings Adjusted earnings in a non-GAAP measure and excludes the Make Whole Payment, a significant, unusual and non-recurring item. Signet considers this to be a useful measure for analysing its results. The impact of the re-calculation of net financial items, income before inc
Slide 47: Exchange Translation Impact on Q2 Fiscal 2012 Results
Exchange Translation Impact on Q2 Fiscal 2012 Results Signet has historically used constant exchange rates to compare period-to-period changes in certain financial data. Management considers this a useful measure for analyzing and explaining changes and trends in Signet’s results. The impact of the
Slide 48: Free Cash Flow
Free Cash Flow Free cash flow is a “non-GAAP financial measure” defined as the net cash provided by operating activities less net cash flows used in investing activities. Management considers that it is helpful in understanding how the business is generating cash from its operating and investing act