Signet Jewelers Limited · NYSE:SIG
Signet Jewelers — FY2009 Earnings Presentation
36 slides from Signet Jewelers's earnings presentation, Mar 25, 2009
Slide 1: Results Presentation Year Ended January 31, 2009
Results Presentation Year Ended January 31, 2009 March 25, 2009
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: Results as Expected Before Goodwill Impairment
Results as Expected Before Goodwill Impairment Ö Exceptional market conditions Ö Same store sales down 8.2% Ö Sales down 8.8%, down 5.7% at constant exchange rates Ö $200.9 million income before income tax, impairment and relisting costs Ö impairment charge of $516.9 million Ö relisting cost $10.5 m
Slide 4: Financial Overview
Financial Overview Fiscal Fiscal 2009 2008 Free cash flow(1) $51.1m $1.4m Movement in net debt $(96.1)m $(141.4)m Interest cover(2) 7.9 x 15.9 x Original fixed charge cover 1.47 x 1.77 x Revised fixed charge cover 1.93 x 2.36 x Gearing(3) 29.2% 21.2% ROCE(3) 9.6% 17.3% (1) Cash flow from operations
Slide 5: 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) 5
Slide 6: 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 7: Receivables
Receivables Ö Net bad debt to total sales 4.9% Ö 100% provision 90 days past due on a recency basis Ö Collection rate of 13.1% per month Ö Acceptance rate down by 300 bpts Ö Further tightening of credit procedures Ö selectively testing increased down payments Ö ceased lending on certain criteria Ö i
Slide 8: 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 9: 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 9
Slide 10: Goodwill Impairment
Goodwill Impairment Ö Fiscal 2008 year end Ö reported under IFRS, $30.6m of purchased goodwill Ö Move to NYSE and adoption of US GAAP, additional purchased goodwill of $486.3m Ö additional purchased goodwill relates to transactions prior to 1991 Ö Fiscal 2009 year end Ö annual review and triggering
Slide 11: Amended Borrowing Agreements
Amended Borrowing Agreements Ö Key amendments Ö fixed charge cover reduced to 1.4x from c1.85x Ö prepay $100m of Notes at par & accrued interest Ö revolver facility reduced to $370 million Ö fees & associated costs of $9.5 million in fiscal 2010 Ö restrictions on shareholder distributions Ö Key feat
Slide 12: Fiscal 2009 Operating Review
Fiscal 2009 Operating Review 12
Slide 13: Competitors Under Pressure
Competitors Under Pressure Sales $m No. of stores 2007 2002 2007 2002 Kaya 1,490 1,011 894 667 Zalesab 1,089 1,004 789 757 Jareda 756 259 154 67 Helzbergd 500 550 268 254 Fred Meyerde 465 475 400 442 Gordon’sab 329 321 282 298 Friedman’scd 300 674 Liquidated 2008 665 Bailey Banks & Biddleab 284 315
Slide 14: Outperformance over Holiday 2008
Outperformance over Holiday 2008 Same Store Sales Gross Margin Signet US (16.1)% c.+250 bpts(1) Zales (inc Canada) (17.9)% -530 bpts Finlay specialty jewelry c.(35.0)% na Blue Nile (US) c.(28.0)%(2) c.-50 bpts(3) Birks & Mayors (US) (28.0)% -590 bpts(3) Shane (32.0)%(4) na Tiffany (US) (35.0)% na (1
Slide 15: US Sales Drivers
US Sales Drivers Ö Support store staff Ö continue training Ö ensure appropriate selection Ö Leverage competitive merchandise advantages Ö develop innovative ranges Ö targeted promotional merchandise Ö quickly respond to changes in buying patterns Ö Focus advertising on key brands and media Ö leading
Slide 16: US Gross Merchandise Margin
US Gross Merchandise Margin Ö Gross merchandise margin up 120 bpts Ö further rise in gold costs Ö prices increased in Q1 Ö more differentiated merchandise Ö measured and well planned promotional activity Ö focus on gross margin dollars Ö Inventory Ö accelerated clearance activity during year Ö quick
Slide 17: US Expense Control
US Expense Control Ö Store operations Ö reduced store staff hours Ö improve in-store operating systems Ö rationalize repair workshops Ö Home office Ö reduced head count through attrition Ö operational efficiencies Ö Lower marketing spend Ö significant cuts in radio advertising Ö eliminated electroni
Slide 18: UK Sales Drivers
UK Sales Drivers Ö Support store staff Ö focus on development and execution of training Ö Leverage competitive merchandise advantages Ö strong watch performance Ö expand key volume lines Ö Focused advertising Ö expand customer relationship marketing Ö Continued roll out of customer oriented stores 1
Slide 19: UK Gross Merchandise Margin
UK Gross Merchandise Margin Ö Gross merchandise margin in line with fiscal 2008 Ö commodity cost pressures increased Ö price rises implemented Ö merchandise mix • strong watch category • key volume lines Ö Increased promotional stance Ö Strong January ‘sale’ 19
Slide 20: Operating Strategy for Fiscal 2010
Operating Strategy for Fiscal 2010 20
Slide 21: Management Priorities in 2010
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 inventory
Slide 22: 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 exclusive collections Ö Focus on network television advertising Ö Same store sales down 2.7% in first 7 weeks Ö Valentine’s Day trading stronger than t
Slide 23: 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 further develop exclusive merchandise Ö Year to date Ö meaningful increase Ö wrap around of price and merchandise mix changes Ö Target is to
Slide 24: 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 $100 million expense savings planned Ö store related Ö home office related Ö advertising Ö $13 million one-off benefit from change in vacation policy 24
Slide 25: US Inventory Initiatives
US Inventory Initiatives Ö Net change in space neutral Ö Elimination of remaining rough inventory Ö Minimize non-productive inventory Ö Focus on GMROI Ö be responsive to consumer buying patterns Ö accelerate clearance process Ö Reduce ‘open to buy’ Ö C.$90 million inventory reduction target 25
Slide 26: 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 (for
Slide 27: 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 2009 Ö Consistent historic investment Ö delay refits where appropriate Ö defer ce
Slide 28: 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 28
Slide 29: UK Sales Initiatives
UK Sales Initiatives Ö Maintain focus on training Ö Merchandising Ö increase key volume lines Ö further strengthen relationship with key watch vendors Ö Expand customer relationship marketing Ö First 7 weeks same store sales down 3.8% Ö H.Samuel down 0.8% Ö Ernest Jones down 7.1% Ö little impact fro
Slide 30: UK Margin Initiatives
UK Margin Initiatives Ö Pressure on gross merchandise margin Ö gold cost increases Ö currency impact Ö mix changes Ö Action taken Ö increase prices Ö work closely with suppliers to utilize buying scale and expertise Ö Y.t.d. gross merchandise margin up slightly Ö Full year gross merchandise margin e
Slide 31: UK Expense Initiatives
UK Expense Initiatives Ö Higher fixed expense base Ö Major reduction exercise in 2006 Ö Inflationary pressures Ö Increased pension costs Ö Staff expense savings Ö 150 fewer central positions Ö reduce store staff hours Ö Lower marketing expenditure Ö only 2.8% of sales in fiscal 2009 Ö UK expense bas
Slide 32: UK Capital Expenditure Initiatives
UK Capital Expenditure Initiatives Fiscal Fiscal Fiscal £ million 2010 plan 2009 2008 Stores 8.1 18.4 9.3 Other 2.6 3.8 6.2 Total 10.7 22.2 15.5 Ö H.Samuel Ö customer oriented stores substantially completed and require less frequent refits Ö Ernest Jones Ö focus on most productive stores 32
Slide 33: Strong Cash Flow Generation
Strong Cash Flow Generation Ö Lower net income Ö Decrease in working capital Ö targeted c.$100 million inventory reduction Ö lower receivables balanced by expected slower collection rate Ö Capital expenditure about $55 million Ö Target debt reduction of $175 million to $225 million before exchange i
Slide 34: Regulation G
Regulation G SIGNET JEWELERS
Slide 35: 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 36: 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