Signet Jewelers Limited · NYSE:SIG
Signet Jewelers — Q1 2018 Earnings Presentation
25 slides from Signet Jewelers's earnings presentation, May 25, 2017
Slide 1: First Quarter Fiscal 2018 Results & Strategic Outsourcing of Credit Portfolio
First Quarter Fiscal 2018 Results & Strategic Outsourcing of Credit Portfolio Thursday, May 25, 2017
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: Key Takeaways
Key Takeaways Announced first phase of strategic outsourcing of credit portfolio, designed to maintain Signet’s full spectrum of credit options and net sales First quarter results negatively impacted by continued retail headwinds, further exacerbated by a delay in tax refunds and the later timin
Slide 4: First Quarter Fiscal 2018 Summary
First Quarter Fiscal 2018 Summary Same store sales decline partially attributable (330 bps) to later timing of Mother's Day o Higher-priced bridal jewelry and diamond fashion jewelry outperformed other merchandise categories, with Ever Us delivering sales growth o e-commerce and Piercing Pagoda ha
Slide 5: Progress on OmniChannel Initiatives
Progress on OmniChannel Initiatives Investing in digital and OmniChannel capabilities to enhance customer experience Q1 Achievements Fiscal 2018 Opportunity Sequential improvements driven by Search engine optimization and content stabilization of Sterling division e- enhancements starting in Q2
Slide 6: Mother's Day Holiday Update
Mother’s Day Holiday Update Solid sales performance across store brands and merchandise categories Increased promotional activity relative to last year Targeted, simpler promotions resonated well with customers More focused marketing with fewer, stronger messages and integrated digital eleme
Slide 7: FY 2018 Growth Initiatives
FY 2018 Growth Initiatives OmniChannel Customer Experience Product Innovation Ongoing website enhancements Build on existing consumer trends and preferences (e.g. earrings, bracelets) Invest in additional e-commerce technology Invest in test and expansion Increase digital marketing investm
Slide 8: First Quarter Sales Performance
First Quarter Sales Performance Total sales Non-same at constant Exchange Same store store sales, exchange translation Total Total sales sales1 net2 rate impact sales (in mill. $) Kay (13.5 )% 2.7 % (10.8)% — % (10.8 )% 565.8 Jared (10.3 )% 1.4 % (8.9)% — % (8.9 )% 273.4 Regional brands (21.4 )% (9.
Slide 9: Income Statement Highlights
Income Statement Highlights (Percentage of Sales) 1Q Fiscal 2018 1Q Fiscal 2017 Difference Gross margin 35.0% 38.0% (300) bps SG&A 32.3% 29.3% 300 bps Other operating income 5.5% 4.7% 80 bps Operating income 8.2% 13.4% (520) bps Earnings per share $1.03 $1.87 ($0.84) 9
Slide 10: Inventory
Inventory Inventory of $2.43 billion, down 3.2% to prior year, roughly in-line with full year fiscal 2018 guidance Prudent inventory management, particularly Zale brands with a prominence on key collections Significantly reduced underperforming collections in favor of greater emphasis on highe
Slide 11: Sterling Division Credit and Allowance Metrics
Sterling Division Credit and Allowance Metrics (in millions except percentages) 1Q FY18 1Q FY17 Difference Credit sales $529 $605 ($76) In-house credit participation 60.7% 61.7% (100) Bps Accounts receivable $1,811 $1,771 $40 Average monthly payment collection rate 11.4% 12.3% (90) Bps Interest inco
Slide 12: Financial Guidance
Financial Guidance Fiscal 2018 Same store sales Down low-to-mid single-digit % EPS $7.00 to $7.40 Effective tax rate 24% to 25% Weighted average common shares 74 million to 75 million Capital expenditures $260 million to $275 million Net square footage change -1% to 0% FY guidance excludes the imp
Slide 13: Strategic Outsourcing of Credit Portfolio
STRATEGIC OUTSOURCING OF CREDIT PORTFOLIO 13
Slide 14: Strategic Priorities for Credit Portfolio Evaluation
Strategic Priorities for Credit Portfolio Evaluation 1 Eliminate material credit risk from balance sheet 2 Substantially maintain net sales 3 Enhance our credit and customer experience 4 Minimize potential disruption while optimizing our business model 5 Create value for our shareholders, including
Slide 15: Strategic Outsourcing of Credit Portfolio Overview
Strategic Outsourcing of Credit Portfolio Overview Strategic, phased approach designed to maintain Signet’s full spectrum of retail financing options and net sales through long-term partnerships¹ Phase I Phase 2 Alliance Data to purchase prime-only credit quality accounts Signet intends to fully
Slide 16: Value-Enhancing Transaction
Value-Enhancing Transaction Outsourcing credit business delivers benefits for all Signet stakeholders Compelling Economics to Signet Benefits to Stakeholders Structured to substantially maintain net sales¹ Continue to receive full spectrum of credit offerings and quality services Drives EPS ac
Slide 17: Credit Operations Transition
Credit Operations Transition Detailed integration planning activities underway to facilitate a smooth transition of credit operations to strategic partners with minimal impact on the business Employees: The majority of employees supporting Signet’s current credit operations in Akron, OH, will be t
Slide 18: Full Spectrum of Financing Coverage
Full Spectrum of Financing Coverage Share of FY17 Credit Tier Phase 1 Servicing Phase 1 Funding Credit Sales (%)² Prime 65% Near/Non- 28% Prime Lower Tier 7% Note: Not scaled to the actual size of the portfolio. ¹Signet will not offer credit insurance as a part of its credit offering after closing,
Slide 19: Primary Program – Alliance Data
Primary Program – Alliance Data Alliance Data, through its card services business and subsidiaries, will provide all key functions of the Primary Program Alliance Data Partnership Overview Alliance Data’s Card Services business, a subsidiary of Purchase existing prime-only credit quality account
Slide 20: Secondary Program – Genesis
Secondary Program – Genesis Five-year partnership with Genesis to service non-prime accounts receivable Genesis Financial Solutions Partnership Overview Leading provider of retail financing programs focused on Signet to retain the existing receivables on its balance non-prime consumer credit pro
Slide 21: Lease-Purchase Program – Progressive Leasing
Lease-Purchase Program – Progressive Leasing Progressive Leasing will provide Lease-Purchase Program to customers not eligible for Primary and Secondary Programs Progressive Leasing Overview Partnership Terms Owned by Aaron’s ($2.5 billion market cap) Progressive to serve as lease-purchase partn
Slide 22: Financial Impact
Financial Impact Pro Forma Financials No material impact on net sales¹ Annualized EBIT Impact A slight decline in EBIT from the transaction Transaction expected to be EPS accretive in first full year of Impact operations assuming October 2017 close and at current share Net Bad Debt Expense and
Slide 23: Pro Forma Capital Allocation
Pro Forma Capital Allocation Strong balance sheet that provides flexibility to fund business strategy Committed to maintaining an investment grade profile Adjusted leverage ratio goal between 3.0x to 3.5x Repay $600 million securitization facility Distribute 70%-80% of free cash flow in fo
Slide 24: Strategic Vision 2020
Strategic Vision 2020 Signet aims to be the world's premier jeweler connecting with customers, earning their trust with every interaction Customer First OmniChannel Experience Maximize business directed to mid-market consumers everywhere 1 Grow in the Mid Market we do business. Be destination for br
Slide 25: Signet Jewelers Ltd.
Signet Jewelers Ltd.