Signet Jewelers Limited · NYSE:SIG
Signet Jewelers — Non-Deal Roadshow (June 2009)
96 slides from Signet Jewelers's roadshow presentation, June 2009
Slide 1: Competitive Advantages Reinforcing Sector Leadership
“Competitive Advantages Reinforcing Sector Leadership” June 2009 1
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: World's Largest Specialty Jeweler
World’s Largest Specialty Jeweler Group sales $3,344 million – 76% US / 24% UK Kay Jewelers - #1 mid market brand H.Samuel - #1 in UK Sales: $1,439m Stores: 926 in 50 states Sales: £250m Stores: 352 Jared - #1 Off-Mall “Category Killer” Ernest Jones - #1 UK upper middle market Sales: $726m Stores: 1
Slide 4: Reasons to Invest in Signet
Reasons to Invest in Signet Ö People will continue to buy jewelry Ö bridal, gift giving, self reward Ö Accelerated rationalization in fragmented sector Ö 22,623 firms with sales of $29 billion in US Ö c.5% reduction in US sales capacity in 2008 Ö Sustainable competitive advantages based on: Ö scale
Slide 5: Consistency of Execution
Consistency of Execution Ö Strategic record Ö strict investment disciplines Ö culture of continuous improvement Ö test before investing Ö Ability to implement Ö depth of management experience Ö systems & procedures in place Ö speed of response Ö driven by micro performance 5 5
Slide 6: Financial Strength
Financial Strength Ö Robust coverage ratios in fiscal 2009 Ö interest cover 7.9x Ö fixed charge cover 1.9x Ö net debt / shareholders equity 29.2% Ö Committed borrowing facilities Ö current availability $650 million versus net debt of $471 million at January 31, 2009 Ö term to 2013 and beyond Ö Impro
Slide 7: Improving Free Cash Flow Trend
Improving Free Cash Flow Trend Fiscal Fiscal Consensus $ million 2008 2009 Fiscal 2010 Adjusted net income (1) 333.6 259.8 c.215 Change in operating assets & liabilities (ex new US stores) (74.1) (28.9) c.85 Investing activities (ex new US stores) (79.3) (74.3) c.(45) Investment in new US stores (2)
Slide 8: Group Strategy & Objectives
Group Strategy & Objectives Ö Group Strategy Ö enhance position as strongest middle market specialty retail jeweler Ö focus on profit & cash flow maximization to further strengthen balance sheet Ö reduce business risk Ö Group Objectives in fiscal 2010 Ö $100 million US cost saving program Ö c.$100 m
Slide 9: Q1 Sales Performance
Q1 Sales Performance Ö Total sales Ö US (1.0)% Ö UK (28.0)%, at constant exchange rates (1.7)% Ö Same store sales Ö US (2.6)% • “Valentine’s Day trading was stronger” • “differentiated merchandise performed well” • “Kay achieved an increase in same store sales” Ö UK (4.2)% • H.Samuel (2.0)% • Ernest
Slide 10: Q1 Results
Q1 Results Ö Significant progress made towards achieving financial objectives for fiscal 2010 Ö Gross merchandise margin up in US (+90 bpts) and UK (+40 bpts) Ö Operating income up 14.2% to $52.4m(1) Ö Income before tax up 3.2% to $41.4m(2) Ö Free cash inflow of $181.2m (Q1 fiscal 2009: outflow $3.4
Slide 11: US Jewelry
US Jewelry “Further growth from a proven strategy” 11 11
Slide 12: US Market Characteristics
US Market Characteristics Ö $65.8 billion total jewelry market Ö c.50% world diamond sales Ö $29.2 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 c.75% of sales diamon
Slide 13: Kay
Kay Fiscal 2005 Fiscal 2009 Sales (million) $1,174 $1,439 Stores at y.e. 742 926 Average sales per store (,000) $1,584 $1,536 Average selling price $282 $331 ÖCustomer’s household income $35k to $100k ÖSales c.40% greater than No.2 mid market brand ÖHigh store productivity ÖEvery store has a qualifi
Slide 14: Jared
Jared Fiscal 2005 Fiscal 2009 Sales (million) $415 $726 Stores at y.e. 93 171 Average sales per store (,000) $4,975 $4,491 Average selling price $644 $714 ÖCustomer’s household income $50k to $150k ÖConcept tested 1993 to 1997 ÖThird largest mid market brand ÖNational TV advertising since Christmas
Slide 15: Signet US Leading Performance
Signet US Leading Performance Operating EBIT/Total Average 2002 to 2007 Margin Assetsa Signet USb 12.0% 14.9% Zale Corpc 5.3% 8.8% Typical US Specialty Jewelerd 5.5% 7.7% Signet US 2008e 6.8% 7.5% Zale Corp 2008f (5.5)% (8.8)% a Total assets excludes goodwill b To y.e. February 2, 2008 c To y.e. Jan
Slide 16: Outperformance of Sector
Outperformance of Sector Q4 Fiscal 09 Q1 Fiscal 10 Same Store Gross Same Store Gross Sales Margin Sales Margin Signet US (16.1)% c.+250 bptsa (2.6)% +90 bpts a Zales (inc Canada) (17.9)% -530 bpts (20.0)% +260 bpts Finlay specialty jewelry c.(35.0)% n/a n/a n/a Blue Nile (US) b c.(28.0)% c.-50 bptsc
Slide 17: Drivers of Outperformance
Drivers of Outperformance Ö Excellence in customer service Ö staff training, development and incentivization programs Ö every store manager a diamontologist Ö Superior merchandising Ö leading middle market supply chain expertise and merchandising systems Ö ability to develop differentiated ranges Ö
Slide 18: Current Trading Environment
Current Trading Environment Ö Extremely challenging retail marketplace Ö lack of consumer confidence Ö highly promotional Ö Jewelry sector & supply chain very fragmented Ö Many competitors and suppliers in weak financial condition Ö Industry consolidation expected to continue at accelerated level 18
Slide 19: Accelerated Consolidation
Accelerated Consolidation Sales $m No. of stores Calendar 2008 2007 2002 2008 2007 2002 Kaya 1,439 1,490 1,011 926 894 676 Zalesab Gordonsab 1,554 { 1,089 329 1,004 321 1,045 { 789 282 757 298 Jareda 726 756 259 171 154 67 Fred Meyerde 410 465 475 386 400 442 Helzbergd 400 500 550 235 268 254 Friedm
Slide 20: US Management Priorities in 2010
US Management Priorities in 2010 Ö Reinforce position as market leader Ö strengthen balance sheet Ö leverage competitive strengths Ö maximise gross merchandise dollars Ö Reduce Risk Ö meaningful expense saving program Ö eliminate space growth Ö Cash generation Ö maximize profit Ö significant invento
Slide 21: US Sales Initiatives
US Sales Initiatives Ö Support store staff Ö maintain focus on training Ö Merchandising Ö offer superior value in unbranded ranges Ö further develop differentiated collections Ö Focus on network television advertising Ö Same store sales down 2.6% in first quarter Ö Valentine’s Day trading stronger t
Slide 22: US Merchandise Margin Initiatives
US Merchandise Margin Initiatives Ö Maximize gross merchandise margin $ Ö continue pricing discipline Ö commodity costs volatile Ö use supply chain expertise Ö benefit of differentiated merchandise Ö Year to date Ö meaningful increase in rate in Q1, +90 bpts Ö wrap around of price increase and benef
Slide 23: US Expense Initiatives
US Expense Initiatives Ö Expense pressures Ö anticipate 1% to 2% inflation Ö negligible net space impact Ö further increase in bad debt Ö variable expenses on above plan sales Ö $100 million expense savings planned Ö store related Ö home office related Ö advertising Ö $32 million achieved in Q1 fisc
Slide 24: US Inventory Initiatives
US Inventory Initiatives Ö Net change in space neutral Ö Elimination of remaining rough inventory Ö Reduce central inventory Ö Focus on GMROI Ö minimize least productive inventory Ö accelerate clearance process Ö Reduce ‘open to buy’ Ö C.$90 million inventory reduction target Ö substantial realignme
Slide 25: Receivables Initiatives
Receivables Initiatives Ö Performance in fiscal 2009 Ö 53.2% of US sales on in-house credit Ö net bad debt to total US sales 4.9% Ö collection rate of 13.1% per month Ö acceptance rate down by 300 bpts Ö closing gross receivables $886 million Ö Further tightening of credit procedures Ö selectively t
Slide 26: 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 26 26
Slide 27: Reduce US Space Growth
Reduce US Space Growth Change Kay Kay in Mall Off Mall Regionals Jared Total Space Jan 2007 772 60 341 135 1,308 11% Opened 23 45 21 19 108 Closed (6) - (11) - (17) 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 (fo
Slide 28: US Capital Expenditure Initiatives
US Capital Expenditure Initiatives Fiscal Fiscal Fiscal $ million 2010 plan 2009 2008 New stores 14.9 39.0 60.1 Other stores 7.7 17.3 28.0 Other 13.0 20.4 23.0 Total 35.6 76.7 111.1 Ö New store capex down 62% in fiscal 2010 Ö Consistent historic investment Ö delay refits where appropriate Ö defer ce
Slide 29: 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 30: UK Jewelry
UK Jewelry “Making existing space work harder” 30 30
Slide 31: UK Market Characteristics
UK Market Characteristics Ö Market size c.£5.5 billion Ö Signet market share c.10% Ö bigger than next 5 UK specialty competitors combined Ö c.60% larger than 3rd largest US mid market jeweler Ö Signet UK’s merchandise mix broader than US 31 31
Slide 32: H.Samuel
H.Samuel Fiscal 2005 Fiscal 2009 Sales (million) £282 £250 Stores at y.e. 398 352 Average sales per store (,000) £723 £718 Average selling price £37 £48 Merchandise mix Gold jewelry 32% 30% Diamond jewelry 19% 22% Watches 24% 26% ÖCustomer’s household income £15k to £40k ÖLeading middle market brand
Slide 33: Ernest Jones
Ernest Jones Fiscal 2005 Fiscal 2009 Sales (million) £221 £208 Stores at y.e. 204 206 Average sales per store (,000) £1,150 £1,047 Average selling price £141 £202 Merchandise mix Gold jewelry 25% 25% Diamond jewelry 36% 33% Watches 31% 35% ÖCustomer’s household income £30k to £50k ÖLeading upper mid
Slide 34: Industry Leader in UK
Industry Leader in UK Average 2002 to 2007 Operating Margin EBIT/Total Assetsa Signet UKb 12.7% 23.5% Typical UK Specialty 7.1% 10.3% Jewelersc Signet UK 2008d 8.8% 20.8% a Total assets excludes goodwill b To y.e. February 2, 2008 c Based on latest Companies House filings for 5 largest specialty jew
Slide 35: UK Sales Outlook
UK Sales Outlook Ö Very challenging trading environment Ö Initiatives in fiscal 2010 Ö focus on training and improving customer service Ö increase key volume lines Ö expand customer relationship marketing Ö Q1 same store sales down 4.2% Ö H.Samuel down 2.0% Ö Ernest Jones down 6.7% Ö Outlook remains
Slide 36: UK Fiscal 2010 Objectives
UK Fiscal 2010 Objectives Ö Gross merchandise margin somewhat below fiscal 2009 Ö mix, higher cost of gold and weakness of pound Ö increase prices Ö utilize buying scale & expertise Ö Stable cost base Ö major reduction exercise in fiscal 2007 Ö greater inflationary pressures than US Ö 150 fewer cent
Slide 37: 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 38: Regulation G
Regulation G JEWELERS 38
Slide 39: 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 40: 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 41: Fiscal 2010 Q1 Sales
Fiscal 2010 Q1 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
Slide 42: Fiscal 2010 Q1 Results
Fiscal 2010 Q1 Results 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 b
Slide 43: Appendix
Appendix JEWELERS 43
Slide 44: Group Financial Performance
Group Financial Performance Page Group Financial Performance 1 Sales Growth 2 Operating Margin Movement Before Impairment & Relisting Costs 2 Operating & Investing Cash Flows 3 Movement in Net Debt 3 Group Comp. Performance 4 Group Financial Performance 4 Group Financial Performance 5 Capital Expend
Slide 45: 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) 45 45
Slide 46: 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 47: Operating & Investing Cash Flows
Operating & Investing Cash Flows Fiscal 2009 2008 Adjusted net income 259.8 333.6 Change in operating assets and liabilities Underlying (ex US space growth) 20.7 (72.1) US space growth (66.5) (118.8) Forex impact on currency swaps (49.6) (1.9) (95.4) (192.8) Net cash from operating activities 164.4
Slide 48: 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 48 48
Slide 49: 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 50: 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 51: 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 52: 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 53: 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 54: US Jewelry Division
US Jewelry Division Page Summary Financials 7 Merchandise Mix 7 Diamond Supply Chain 8 Test Before We Invest - Merchandise 8 Average Retail Price of Merchandise Sold 9 Average Sales Per Store 9 Growth in US Stores 10 In-house Credit Requirements 10 Receivables Profile 11 Receivables Performance 11 5
Slide 55: 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 income - $m 264.2 295.9 318.9 265.2 171.6 (2) Operatin
Slide 56: US Merchandise Mix
US Merchandise Mix Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007 2008 2009 % % % % % Diamonds & diamond 72 74 75 75 75 jewelry Gold jewelry 8 7 7 7 7 Other jewelry 13 12 11 11 11 Watches 7 7 7 7 7 Total 100 100 100 100 100 Excluding repairs, warranties and other miscellaneous sales 56 56
Slide 57: US Diamond Supply Chain
US Diamond Supply Chain 75% of US merchandise mix Rough Polished Manufactured Retailers Mines T T r r a Cutters & a Sightholders d polishers d Manufacturers Wholesalers e e r r s s Contract Manufacture Complete Signet 57 57
Slide 58: Test Before We Invest
“Test Before We Invest” Leo Diamond LeVian Peerless & Hearts Desire 2000 Selected Jared stores Selected Jared stores 2001 All Jared & 300 malls All Jared & 50 malls 2002 All stores All Jared & 200 malls Styles expanded 2003 Additional cuts tested All Jared & 300 malls Tested LeVian galas 2004 Increa
Slide 59: Average Retail Price of Merchandise Sold ($)
Average Retail Price of Merchandise Sold ($) Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007 2008 2009 Kay 282 305 317 327 331 Regionals 304 324 332 343 346 Jared 644 697 719 747 714 59 59
Slide 60: Average Sales Per Store
Average Sales Per Store Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2007* 2008 2009 Kay ($’000) 1,584 1,665 1,815 1,710 1,536 Jared ($’000) 4,975 5,453 5,676 5,341 4,491 Regionals ($’000) 1,533 1,514 1,517 1,344 1,160 Includes only stores operated for the full financial year * 53 week year 60 60
Slide 61: 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,
Slide 62: In-house Credit Requirement
In-house Credit Requirement Ö High bridal participation c.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
Slide 63: 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 64: 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 65: US Jewelry Market
US Jewelry Market Page Long Term Industry Growth 12 US Jewelry Sector Performance 13 US Jewelry Market 13 Fewer Specialty Jewelry Firms 14 Sales Per Store 14 Consolidation in US Market 15 65 65
Slide 66: Long Term Industry Growth
Long Term Industry Growth c.50% of world diamond salesa 70 60 .r. 5.5% 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 66 66
Slide 67: US Jewelry Sector Performance
US Jewelry Sector Performance 16% 12% 8% Growth p.a. 4% 0% -4% 99 02 03 04 05 06 07 08 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 68: US Jewelry Market
US Jewelry Market 2003 2006 2007 2008(a) US Market size $53bn $63bn $65bn $66bn Chain Jewelers ($100m+ sales) 14% 15% 15% 13% Independent Jewelers 36% 33% 32% 30% Total specialty 50% 48% 47% 43% Chain Department Stores 12% 12% 11% 10% Mass Merchants 10% 10% 11% 12% TV Home Shopping 4% 5% 5% 4% Other
Slide 69: Fewer Specialty Jewelry Firms
Fewer Specialty Jewelry Firms 35,000 c.-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 69 69
Slide 70: 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 70 70
Slide 71: 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 72: Jared
Jared Page Jared Investment Model 16 Jared Locations 16 Jared Development 17 Growing Off-mall Presence 17 Test Before We Invest 18 72 72
Slide 73: Jared Investment Model
Jared Investment Model Ö Investment – c.$4.0m per store Ö First full year sales – c.$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 c.$5.6m in year 5 Ö store contribution rate similar to mall stores 73 73
Slide 74: Jared Locations
Jared Locations Existing stores Opened in fiscal 2009 74 74
Slide 75: 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 76: 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% 04 05 06 07 08 9* 4 5 6 7 8 9 20 20 20 20 20 00 00 00 00 00 00 00 al al al al al al 2 l2 l2 l2 l2 l2
Slide 77: 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 78: Brand Reviews
Brand Reviews Page Kay 19 Jared 19 Regional Brands 20 78 78
Slide 79: Kay
Kay Fiscal Fiscal 2004 2009 Sales (million) $1,080 $1,439 Stores at y.e. 717 926 Average sales per store (,000) $1,528 $1,536 ÖSales c.40% greater than No.2 brand in market Öhigh store productivity ÖEvery store has a qualified diamontologist ÖSuccessful development of off-mall formats Öincrease mark
Slide 80: Jared
Jared Fiscal Fiscal 2004 2009 Sales (million) $323 $726 Stores at y.e. 79 171 Average sales per store (,000) $4,573 $4,491 Ö Concept tested 1993 to 1997 Ö Rolled out over last 10 years to be third largest mid market brand Ö National network TV advertising commenced Christmas 2007 Ö At maturity store
Slide 81: Regional Brands
Regional Brands Fiscal Fiscal 2004 2009 Sales (million) $464 $371 Stores at y.e. 307 304 Average sales per store (,000) $1,532 $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 82: Real Estate
Real Estate Page Typical Mall Layout 21 In-Line v. Corner Location 21 Typical Power Strip 22 Typical Lifestyle Centre 22 82 82
Slide 83: 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 83 83
Slide 84: In-Line v. Corner Location
In-Line v. Corner Location Mall Mall Mall Display cases 84 84
Slide 85: Typical Power Strip
Typical Power Strip od ng Us ble s & th Kay Sp cks uy Go orti Ba s R B No rne Di nd ys st d & MAJOR ROAD Ba yo Be Be To Be Kay * * t t an D an RE ur ur nk sta sta JA Ba Re Re MAJOR ROAD Specialty retailers * Note: Kay and Jared are unlikely to be sited in the same power strip mall 85 85
Slide 86: Typical Lifestyle Centre
Typical Lifestyle Centre m tr o ma ds ne r Ci No Pedestrian area Kay MAJOR ROAD & rnes ble No Ba Pedestrian Pedestrian area area MAJOR ROAD Specialty Restaurants Health & Beauty retailers 86 86
Slide 87: UK Jewelry
UK Jewelry Page UK Summary Financials 23 Comp. Store Sales Growth 24 Store Count 24 Customer Oriented Format 25 Average Sales per Store 25 Average Retail Price 26 Merchandise Mix (HS) 26 Merchandise Mix (EJ) 27 UK Retail Market Map 27 87 87
Slide 88: 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 89: 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 2004/05 2005/06 2006/07 2007/08 2008/09 2004/05 2005/06 2006/07 2007/08 2008/09 89 89
Slide 90: 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 90 90
Slide 91: Customer Oriented Format
Customer Oriented Format 7% 9% 15% 18% % of store numbers 23% 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 91 91
Slide 92: 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 92 92
Slide 93: 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 93 93
Slide 94: 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 94 94
Slide 95: 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 95 95
Slide 96: UK Retail Market Map
UK Retail Market Map (ex. independents) £250 Goldsmiths Fraser Hart HIGH Ernest Jones Estimated Average Beaverbrooks Transaction H.Samuel Value Argos LOW F. Hinds Asda Warren James £0 FEW MANY 96 Range of Products 96