Signet Jewelers Limited · NYSE:SIG
Signet Jewelers — Q2 FY2017 Earnings Presentation
20 slides from Signet Jewelers's earnings presentation, Aug 25, 2016
Slide 1: Second Quarter Fiscal 2017 Results
Second Quarter Fiscal 2017 Results Thursday, August 25, 2016
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 Take-Aways
Key Take-Aways 1. Second quarter financials below expectations contributing to lower annual guidance. 2. Synergies intact for this year and next year; integration proceeding well. 3. Significant company stock repurchase and insider buying. 4. Credit strategic evaluation ongoing – shareholder value c
Slide 4: Financial Analysis: Drivers of shortfall and guidance revisions
Financial Analysis Drivers of shortfall and guidance revisions • Select economic factors (e.g. energy region underperformance) • Select secular factors (e.g. jewelry industry growth below historic norm) • Select company factors (e.g. Jared)
Slide 5: Second Quarter Sales Highlights
Second Quarter Sales Highlights • Ever Us: Solid Q2 results; promising line extensions poised for rollout. • Bracelets and earrings: Bolo, bangles, stackables; studs, climbers, diamond fashion. • Omni-channel influence: Website improvements around responsive design, navigation, search, imagery, spee
Slide 6: Zale Integration Activity On Track
Zale Integration Activity On Track Synergy examples that will help deliver 3-year cumulative synergies of $225M - $250M • In-sourcing repair • 2nd look credit • Discount controls • Media mix and optimization • Cross-selling brands • Centralized real estate and rent savings • Centralized diamond proc
Slide 7: Holiday Season Business Drivers
Holiday Season Business Drivers • Ever Us line extensions • ‘Clienteling’ (a.k.a. system to communicate with customers as key events approach) • Vera Wang Love fashion jewelry • Omni-channel initiatives: Personalization • Bracelet and earring categories enhancements, analytics, email segmentation •
Slide 8: In-House Credit Strategic Review Update
In-House Credit Strategic Review Update • Retain and optimize portfolio. Increase leverage against it while expanding credit reporting and disclosure. Or, • Monetize portfolio. Utilize partner to continue doing business with customers. Preserve economics and free-up working capital for Signet. • Ini
Slide 9: About Leonard Green Strategic Partnership
About Leonard Green Strategic Partnership • Significant vote of confidence in Signet business model from premiere private equity retail industry investor • Transaction not dilutive as proceeds to be used for share repurchase • Gain additional retail expertise on board • Transaction expected to close
Slide 10: Investment Merits of Signet
Investment Merits of Signet Competitive strengths make Signet world’s largest retailer of diamond jewelry with opportunity for LT growth • Strong, trusted, well-known store banners Latest 3 YR CAGR 5 YR CAGR 10 YR CAGR Annual • Omni-channel customer experience and ancillary services Signet $6.6B 18.
Slide 11: Sales Performance
Sales Performance Total sales Change in at constant exchange Total sales Exchange translation same store sales1 rate2 impact Change in total sales (in millions) Kay -0.5% 0.7% 0.0% 0.7% $ 533.5 Jared -7.6% -5.4% 0.0% -5.4% $ 270.1 Regional brands -5.1% -16.9% 0.0% -16.9% $ 35.8 Sterling Jewelers div
Slide 12: Non-GAAP Reconciliation
Non-GAAP Reconciliation (in millions of $ except per share data) Adjustments Purchase Signet Accounting Integration Costs Adjusted Signet Sales 1,373.4 (3.5) - 1,376.9 Cost of sales (908.5) 0.4 - (908.9) Gross margin 464.9 (3.1) - 468.0 SG&A (415.7) (1.3) (5.3) (409.1) Other operating income, net 70
Slide 13: Adjusted Highlights
Adjusted Highlights 2Q Fiscal 2017 2Q Fiscal 2016 Difference Adjusted gross margin 34.0% 35.3% (130) bps Adjusted SG&A 29.7% 29.2% 50 bps Other operating income 5.1% 4.4% 70 bps Adjusted operating income 9.4% 10.5% (110) bps Adjusted earnings per share $1.14 $1.28 ($0.14) Non-GAAP measures. See slid
Slide 14: Adjusted SG&A Expense Deeper Dive
Adjusted SG&A Expense Deeper Dive Second quarter year-over-year changes • Solid management of 415 operating expenses in lower sales environment 410 Adj. SG&A (in mils. of $) 405 413 • Synergy expense 409 savings included 400 395 • “Hard costs” and “soft costs” of responding to 390 dubious accusation
Slide 15: Inventory
Inventory • Inventory of $2.4 billion increased 0.2% over prior year. • Virtually offsetting impact of: • More stores • Sound inventory management • F/X benefit
Slide 16: Sterling Division Credit Metrics
Sterling Division Credit Metrics (in millions except percentages) Q2 2017 Q2 2016 Difference Credit sales $529 $538 ($9) In-house credit participation 63.1% 62.6% 50 bps Average monthly payment collection rate 10.8% 11.3% (50) bps Accounts receivable, net $1,745 $1,599 $146 Interest income from in-h
Slide 17: Sterling Division Allowance Metrics
Sterling Division Allowance Metrics 2Q Fiscal 2017 1Q Fiscal 2017 2Q Fiscal 2016 1Q Fiscal 2016 Total valuation allowance as % of 80 bps 80 bps gross receivables 7.4% difference 6.6% 7.3% difference 6.5% Non-performing receivables1 as % 80 bps 80 bps of gross receivables 4.4% difference 3.6% 4.3% di
Slide 18: Capital Considerations
Capital Considerations Signet moved opportunistically on capital allocation during Q2 • Share buyback. Repurchased 4% of company – 2.8M shares for $250M. • Amend & extend. Revolver increased from $400M to $700M. • Borrowings. Utilized portion of revolver for buyback.
Slide 19: Financial Guidance
Financial Guidance Third Quarter Fiscal 2017 Cumulative Net Synergies Same store sales (5.0%) to (3.0%) Fiscal 2017 (Fiscal 2016 plus Fiscal 2017) $158 million to $175 million EPS $0.06 to $0.15 Fiscal 2018 (Fiscal 2016 plus Fiscal 2017 $225 million to $250 million Adjusted EPS $0.17 to $0.25 plus F
Slide 20: Signet Jewelers, Ltd.
Signet Jewelers, Ltd.