Signet Jewelers Limited · NYSE:SIG
Signet Jewelers — Investor Day (August 2008)
111 slides from Signet Jewelers's investor day presentation, Aug 12, 2008
Slide 1: Akron Investor Day
Akron Investor Day 12 August 2008 1
Slide 2: Terry Burman, Group CEO
TERRY BURMAN Group CEO KAY JARED’ JEWELERS The Galleria Of Jewelry SAMUE ERNEST JONES THE JEWE LLER THE DIAMOND & WATCH SPECIALIST
Slide 3: Safe Harbor Statement
Safe Harbor Statement (Private Securities Litigation Reform Act of 1995) These presentations 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
Slide 4: Disclaimer
Disclaimer THIS DOCUMENT COMPRISES AN ADVERTISMENT FOR THE PURPOSES OF PARAGRAPH 3.3.2R OF THE PROSPECTUS RULES MADE UNDER THE FINANCIAL SERVICES AND MARKETS ACT 2000. THIS DOCUMENT IS AN ADVERTISMENT AND NOT A PROSPECTUS AND INVESTORS SHOULD NOT PURCHASE ANY SHARES REFERRED TO IN THIS DOCUMENT EXCE
Slide 5: Program
Program Ö Welcome Ö UK Division – Rob Anderson Ö US Division – Mark Light and US executives Ö Lunch Ö Home Office Tour Ö Travel to Cleveland Ö Store Tours Ö Travel to Cleveland Airport or return to Akron Ö Dinner with management 5 5
Slide 6: Operating Principles
Operating Principles Ö Continuous improvement Ö Excellence in execution Ö Narrow and deep Ö Test before invest Ö Disciplined investment Ö Monitor performance and manage risk 6 6
Slide 7: Group Strategy Overview
Group Strategy Overview Ö Maintain sector leading performance standards on both sides of the Atlantic Ö Increase store productivity Ö Grow new store space in US Ö Maintain a strong balance sheet 7 7
Slide 8: Strong Operationally & Financially
Strong Operationally & Financially Ö Operational strengths Ö more externally qualified staff Ö leading middle market supply chain capability Ö largest marketing budget Ö well located, high quality stores Ö Financial strengths in 2007/08 Ö operating margin: 9.8% Ö fixed charge cover: 1.8x Ö net debt
Slide 9: Measured Growth = Greater Competitive Advantage
Measured Growth = Greater Competitive Advantage Ö Sources Ö superior comp. store sales growth Ö new store space growth Ö Benefits Ö brand recognition/leverage Ö real estate Ö store operations Ö supply chain Ö marketing Ö expense leverage 9 9
Slide 10: Performance in 2008/09
Performance in 2008/09 Ö Challenging economic environment Ö YTD Q2 sales (0.7)%; comp. store sales (3.4)% Ö Objective to at least maintain gross merchandise margin Ö Aim for a broadly stable underlying cost base ex. impact of space growth Ö Focus on inventory management Ö Reduced rate of net space e
Slide 11: Move to US Primary Listing
Move to US Primary Listing Ö Rationale for US primary listing Ö more familiar with business Ö better understanding of US economic environment Ö lower foreign exchange exposure Ö more appropriate peer group Ö Rationale for Bermuda domicile Ö minimise impact on shareholders Ö no adverse tax consequenc
Slide 12: Rob Anderson
ROB ANDERSON CEO, Signet UK “Making existing space work harder” 12 12
Slide 13: UK Brands
UK Brands Sales: £256.7m Sales: £219.4m Stores: 359 Stores: 204 14% of Group sales 12% of Group sales No.1 jeweler in UK No.2 jeweler in UK 13 13
Slide 14: H.Samuel
H.Samuel 2002/03 2007/08 Sales (million) £275.0 £256.7 Stores at y.e. 418 359 Average sales per store (000) £677 £722 Average unit selling price £33 £44 Merchandise mix Gold jewelry 32% 31% Watches 24% 25% Diamond jewelry 16% 22% Gifts 18% 12% Ö No.1 in UK market, 6.9% jewelry market share Ö Only sp
Slide 15: Ernest Jones
Ernest Jones 2002/03 2007/08 Sales (million) £186.0 £219.4 Stores at y.e. 192 204 Average sales per store (000) £1,030 £1,105 Average unit selling price £130 £180 Merchandise mix Gold jewelry 25% 25% Watches 33% 33% Diamond jewelry 33% 34% Ö Leading upper middle market brand in UK, 5.6% jewelry mark
Slide 16: Industry Leading Performance
Industry Leading Performance Sales Operating EBIT/Total Stores Growth Margin Assets (a) 5 year 5 year 5 year c.a.g.r. average average Signet UK(b) 0.5% 12.6% 25.4% 563 Typical UK 3.5% 7.3% 9.0% 503(d) Specialty Jewelers(c) Total number of specialty jewelry stores in UK c.7,000 (a) Total assets exclu
Slide 17: Long Term Industry Growth
Long Term Industry Growth 5000 4000 g.r. 5.1% c.a. 3000 £m 2000 1000 0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 UK Jewelry and Watch Market Source: UK Office National Statistics 17 17
Slide 18: 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 18 Range of Products 18
Slide 19: UK Growth Strategy
UK Growth Strategy Ö Maintain sector leading operating standards Ö Use scale advantages in fragmented market Ö Make existing space work harder by lifting average transaction values Ö Leverage strong market position Ö utilize access to US best practice Ö enhance selling skills and product knowledge o
Slide 20: Enhancing Customer Service
Enhancing Customer Service Ö Focus on staff training Ö selling skill Ö product knowledge Ö improved coordination with merchandising and marketing Ö Continued development of sales commission Ö Introduction of monthly customer satisfaction tracking system 20 20
Slide 21: Merchandising Competitive Strengths
Merchandising Competitive Strengths Ö Market leadership gives scale advantages Ö Leading direct sourcing capability Ö c.27% of diamonds, c.20% of gold jewelry Ö More focused merchandise selections Ö average sku’s per store down c.12% since 2005 Ö Expansion of exclusive merchandise e.g. Ö Leo & Forev
Slide 22: Development of Key Volume Lines
Development of Key Volume Lines 22 22
Slide 23: Exclusive Merchandise
Exclusive Merchandise WHAT’S YOUR FOREVER MOMENT WIN £1,000 PLUS WE WILL ANNOUNCE YOUR ENGAGEMENT IN fEXIMAGAZINE FOREVER _ DIAMONDS 23 SIGNET 23
Slide 24: Improved Marketing Execution
Improved Marketing Execution Ö Clearer brand positionings Ö ‘H.Samuel helps you say it better’ Ö ‘Only at Ernest Jones’ Ö Stronger promotions Ö diamond focus Ö key volume lines Ö Development of CRM Ö 14 million name database Ö more relevant promotional activity Ö greater ability to test and develop
Slide 25: Valentine's Promotion
25 Valentine’s Promotion ©“ THE LITTLE BOOK OF QO LOVE @\@_ HELPS YOU SAY IT BETTER & SIGNET 25
Slide 26: Optimize Real Estate
Optimize Real Estate Ö Customer oriented store design Ö greatly improved interaction with customer Ö much better merchandise presentation Ö increased visual differentiation Ö supported by training and merchandising initiatives Ö Focus H.Samuel store base on larger centers Ö enhanced service standard
Slide 27: Customer Oriented Design
Customer Oriented Design Before After Liffey Valley 27 27
Slide 28: Enhanced Ernest Jones' Design
Enhanced Ernest Jones’ Design 28 28
Slide 29: Customer Oriented Format
Customer Oriented Format % of store numbers 37% 41% 47% 51% 52% 7% 9% 27% 22% 16% 23% 30% 16% 29% 11% 28% 21% 15% 9% 9% 2006/07 2007/08 Forecast Forecast Forecast 2008/09 2009/10 2010/11 EJ Traditional HS Traditional EJ Customer oriented HS Customer oriented 29 29
Slide 30: Uncertain Trading Environment
Uncertain Trading Environment Ö Pressure on discretionary disposable income Ö Inflationary concerns limiting interest rate cuts Ö Employment stable Ö Increase in sterling cost of gold Ö YTD Q2 comp. store sales up 2.3% 30 30
Slide 31: Management Response
Management Response Ö Tight control of expenses and gross margin Ö stable operating cost base Ö price increases implemented, objective to broadly maintain gross margin Ö Targeted promotional activity to drive footfall Ö Focus on ROCE Ö improve inventory efficiency Ö rationalise real estate Ö invest
Slide 32: Sustainable Competitive Strengths
Sustainable Competitive Strengths Ö Over twice size of No.2 operator Ö Strong cash flow Ö EBITDA of £73.6m ($147.1m) in 2007/08 Ö capex of £14.3m ($28.6m) in 2007/08 Ö planned capex of c.£27.5m ($55m) in 2008/09 Ö Significant opportunities to improve operational execution in the medium term 32 32
Slide 33: Mark Light
MARK LIGHT President & CEO, Sterling Jewelers “Further growth from a proven strategy” 33 33
Slide 34: US Management Structure
US Management Structure Mark Light President and Chief Executive Officer Bob Trabucco Bill Montalto EVP & Chief EVP & Chief Financial Officer Operating Officer Bruce Kenny Bob Knapp SVP Store SVP Supply Planning/Real Chain & Estate Distribution Ed Hrabak Mario Weiss Tryna Kochanek Steve Becker Simon
Slide 35: Morning Program
Morning Program Ö Mark Light - US Overview, Competitive Strengths & Investment Programme Ö Tryna Kochanek - Store Operations Ö Ed Hrabak - Merchandising Ö Bob Trabucco - Credit Ö Bill Montalto - IS & Marketing Ö Home Office Tour Ö Credit Ö Distribution Centre & Diamond Room 35 35
Slide 36: Afternoon Program
Afternoon Program Ö Travel to Cleveland Ö Jared Ö Diamonds & Jared Selling System Ö Repair Shop Ö Timepieces Ö Sterling Performance Matrix Ö Mall Ö Merchandising Ö Associate Training System Ö Profit Management Ö Travel to Cleveland Airport or return to Akron Ö Dinner with management 36 36
Slide 37: Our Mission
Our Mission To earn the trust of To conduct To achieve: our customers by ourselves as a delivering: company with: A superior customer Teamwork Return on experience assets Assistance Integrity Continuous improvement Products Communications Services Rewards Value Convenience 37 37
Slide 38: US Business Characteristics in 2007/08
US Business Characteristics in 2007/08 Ö Driven by bridal and gift giving categories Ö 75% of merchandise sales diamond jewelry Ö c.45% bridal related Ö Kay and Regional brands Ö customer’s household income c.$35k-100k Ö average transaction value of c.$330 Ö Jared Ö customer’s household income c.$50
Slide 39: Long Term Industry Growth
Long Term Industry Growth c.50% of world diamond sales (a) 70 60 .r. 5.6% 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 39 39
Slide 40: US Jewelry Market
US Jewelry Market 2002 2006 2007 US Market size $51bn $62bn $65bn Chain Jewelers ($100m+ sales) 14% 15% 15% Independent Jewelers 34% 33% 33% Total speciality 48% 48% 48% Chain Department Stores 13% 12% 11% Mass Merchants 10% 10% 10% TV Home Shopping 4% 5% 5% Other (General, clothing & misc.) 21% 19%
Slide 41: Middle Market Consolidation
Middle Market Consolidation Sales $m 2007 2002 Comment Kaya 1,490 1,011 Sales up 47% Zalesab 1,089 1,004 Inventory clearance and store closures in 2008 Jareda 756 259 Sales tripled, store numbers more than doubled Helzbergd 500 550 Sales down 10%, cut HQ staff by 10% in 2008 Fred Meyerde 465 475 Red
Slide 42: Competitive Advantages
Competitive Advantages Very experienced management Store Merchandising Marketing Real Estate Operations • Closely • Sophisticated • National • Strict criteria, monitored systems television regularly store • GMROI advertising reviewed standards focused • Research • High store • Measurable • Superior
Slide 43: Industry Leading Performance
Industry Leading Performance Sales Operating EBIT/Total Growth Margin Assets (a) 5 year 5 year 5 year c.a.g.r. average average Signet US (b) 9.4% 12.0% 14.9% Zale Corp (c) (0.9)% 4.8% 8.2% Typical US Specialty 4.4% 5.5% 7.7% Jeweler (d) (a) Total assets excludes goodwill (b) To y.e. 2 February 2008
Slide 44: Kay
Kay 2002/03 2007/08 Revenues (million) $1,011 $1,490 Stores at y.e. 676 894 Average revenue per store (000) $1,470 $1,710 Ö Revenue c.40% greater than No.2 brand in market Ö High brand name recognition driven by multi channel marketing using “Every kiss begins with Kay” Öe-commerce launched Fall 200
Slide 45: Jared
Jared 2002/03 2007/08 Revenue (million) $259 $756 Stores at y.e. 67 154 Average revenue per store (000) $4,277 $5,341 Ö No. 1 off-mall middle market jewelry chain Ö National network TV advertising for Xmas 2007 Ö National radio advertising planned 2008/09 Ö E-commerce in fall 2008 Ö Only c.44% of st
Slide 46: Jared Performance
Jared Performance Actual 2007/08 Average of 6+ years $6.4m s to re s a le s $ m A v e ra g e 1% 3% 5 20% 18% 6% 19 24 18 14 12 12 12 15 13 8 7 stores stores stores stores stores stores stores stores stores stores stores 0 ar ar ar ar ar ar ar ar r d s ea c te ar ye ye ye ye ye ye ye ye ty ye o je h
Slide 47: Regional Brands
Regional Brands 2002/03 2007/08 Revenue (million) $461 $460 Stores at y.e. 307 351 Average revenue per store (000) $1,536 $1,344 Ö Limit openings to areas with marketing support Ö Review stores applying strict ROCE and return on marketing standard Ö Acquisition less likely in current market 47 47
Slide 48: Regionals – Attractive Returns
Regionals – Attractive Returns Revenue per store $'000 1,710 1,368 1,344 1,164 1,017 Kay1 Zales2 Regionals1 Gordons2 Industry3 2007/08 1 y.e. 2 February 2008 2 y.e. 31 July 2007 3 y.e. 31 December 2007 48 48
Slide 49: High Quality Real Estate
High Quality Real Estate Ö Strict investment criteria Ö operational Ö pre tax 20% IRR over 5 years Ö Real estate leased Ö majority of investment is working capital Ö Consistently applied for more than 10 years Ö refined every year based on experience Ö Identify and test new opportunities Ö Long term
Slide 50: 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 50 50
Slide 51: Typical Power Strip
Typical Power Strip od ng Us th Kay Sp cks uy rs Go orti Ba s R de B Di nd ys st r d & MAJOR ROAD Bo yo Be Be To Be Kay * * t t an D an RE ur ur nk sta sta JA Ba Re Re MAJOR ROAD Speciality retailers * Note: Kay and Jared are unlikely to be sited in the same power strip mall 51 51
Slide 52: 4% - 5% Space Growth Planned in 2008/09
4% - 5% Space Growth Planned in 2008/09 Expected 2 Store 3 February February numbers 2008 Openings Closings 2009 Potential Kay Mall 789 25 † 14 800 850+ Off-mall 92 23 5 110 500+ Outlet centres 10 8 - 18 100+ Metropolitan 3 - - 3 5-10 Kay Total 894 56 19 931 1,460+ Regionals 351 3 41 † 313 700+ Jare
Slide 53: Attractions of Non-mall Locations
Attractions of Non-mall Locations Ö Increasingly popular with consumers Ö Expanded customer base Ö Wider availability of real estate for Kay Ö Increasingly competing with independent jewelers Ö Greater store operational leverage Ö Continued divisional leverage 53 53
Slide 54: Growing Off-mall Presence
Growing Off-mall Presence % of Space Growth % of Total Space 24% 27% 29% 44% 32% 33% 35% 50% 59% 62% 78% 1% 66% 1% 2% 4% 6% 10% 10% 12% 38% 11% 15% 75% 72% 40% 69% 64% 29% 31% 61% 23% 22% 55% 18% -9% 4 5 6 7 8 s t 04 05 06 07 08 s t 03 /0 04 /0 05 /0 06 /0 07 /0 ca 0 3/ 0 4/ 0 5/ 0 6/ 0 7/ ca 20 20
Slide 55: Current Environment
Current Environment Ö Challenging marketplace Ö YTD Q2 total revenue (0.9)% Ö YTD Q2 comps. (5.2)%, Ö High level of clearance activity by competitors Ö Potential gross margin pressure from commodity costs Ö Consumer under increased financial stress Ö Acceleration of sector consolidation due to ratio
Slide 56: Management Action
Management Action Ö Balance strategy with short term execution Ö Realign costs where appropriate Ö protect competitive advantages Ö broadly stable underlying cost base Ö Tight control of inventory Ö Increased prices mid February / March Ö Very closely monitor receivables performance Ö Vigorously app
Slide 57: Tryna Kochanek
Tryna Kochanek SVP Field Operations, Sterling Jewelers “Our people make the difference” 57 57
Slide 58: Importance of Service
Importance of Service Ö Sales associate critical to every transaction Ö recruit the best and the brightest Ö final 2 feet of supply chain vital Ö Customer seeking reassurance Ö important emotional purchase Ö lacking product knowledge Ö fear of the unknown Ö every product under lock and key Ö Build t
Slide 59: Continuous Improvement
Continuous Improvement Ö Restructured repair function Ö footfall driver Ö improved customer service Ö better productivity Ö increased gross and operating margin Ö C.16,000 staff in 1,423 stores Ö staff numbers increased 25.4% over last 3 years Ö all store managers qualified diamontologists Ö 6,699 t
Slide 60: Recruitment a Priority
Recruitment a Priority Ö Source of candidates Ö store and district managers Ö internet applications Ö career advancement register Ö Right attitude, not experience Ö test before hiring Ö Attractive employer within sector Ö All senior field management have to have been a Sterling store manager 60 60
Slide 61: Best Training in the Industry
Best Training in the Industry Ö Consistent development of all staff, at all levels Ö Training needs identified twice a year Ö customer feedback Ö associate requirements Ö management priorities Ö Integrated with merchandising and marketing Ö Specialist training team creates materials Ö Return on inve
Slide 62: Clear Measurable Objectives
Clear Measurable Objectives Ö Daily store standards Ö store staff “controllables” Ö clear performance expectations Ö individual standards integrated into divisional goals Ö Monitoring Ö overnight reports provided to store staff and District Manager Ö Coaching Ö store manager coaches staff Ö peer sup
Slide 63: Strong Team Incentives
Strong Team Incentives Ö Historically 20% - 25% of field payroll performance based Ö Sales associate commission Ö based on own and store performance Ö encourages team work Ö Manager profit bonus Ö profit based bonus Ö monthly store operating statement Ö training to be profit business managers Ö Dist
Slide 64: Sterling Performance Matrix
Sterling Performance Matrix Ö Helps field operations identify, understand, prioritize and schedule tasks Ö Increased gross margin through greater process monitoring and compliance Ö Improved productivity of district and store managers Ö Better feedback and problem resolution Ö Enhanced workload opti
Slide 65: Profit Focused
Profit Focused Ö High element of performance related pay Ö Realign store staff hours to reflect trading environment Ö flex part time hours Ö retain well trained staff Ö remain focused on staff development Ö Improved repair function Ö Sterling Performance Matrix 65 65
Slide 66: Our People Make the Difference
“Our People Make the Difference” Ö Tools to succeed Ö superior training Ö focus on customers due to store procedures Ö good merchandise selection Ö consistency of quality Ö better value proposition Ö Clear objectives, feedback and strong incentives Ö Excellent career opportunities Ö Above-average re
Slide 67: Ed Hrabak
Ed Hrabak SVP Merchandising, Sterling Jewelers “Supply chain & merchandising initiatives” 67 67
Slide 68: Mission
Mission Ö General Ö right product, right price, right place, right time Ö development of exclusive ranges Ö gross margin management Ö pursue supply chain opportunities Ö Critical to Jewelry Ö importance of commodities • quality control as each diamond is unique Ö optimise inventory investment as lar
Slide 69: GMROI Focused
GMROI Focused Ö Utilize “Pull” merchandise methodology Ö jewelry category has slow changes in fashion Ö test and run every product/program Ö rapid response to emerging trends Ö merchandising of stores reflects local demographic and regional variations Ö maximizes sales, minimizes mistakes Ö Develop
Slide 70: Three Distinct Sections
Three Distinct Sections Ö IMPACT - Responsible for Inventory Management, Planning, Analysis and Control Ö Organised into 15 Category Management Teams Ö Merchandising - Responsible for product sourcing Ö due to demographic differences, separate buying groups for the Mall and Jared stores Ö costing Ö
Slide 71: Category Management Teams
Category Management Teams Ö Buyer Ö product sourcing Ö Inventory Analyst Ö identify trends by department, class and sku via attribute clusters Ö business analysis, sales forecasting and allocation Ö Inventory Planner Ö controlling open-to-buy and receipt of goods Ö monitoring gross margin and invent
Slide 72: Disciplined Execution
Disciplined Execution Ö Combination of bottom-up and top-down planning Ö sales, margin, and inventory Ö consignment and owned inventory Ö built by location type as well as by comp./non-comp. Ö store by store merchandising Ö integrated into financial plan at SKU / category level and store level Ö Per
Slide 73: Advantage of Store Merchandising
Advantage of Store Merchandising Ö Each individual store’s customers more likely to find desired merchandise Ö “Core” programs are replenished SKU for SKU Ö Complemented by merchandise at Attribute Cluster level Ö “Random” product rounds out assortment Ö Quick identification of trends Ö rapid replen
Slide 74: Detailed Understanding of Cost
Detailed Understanding of Cost Ö Every sku has a “BOM” line sheet with: Ö metal cost Ö mounting weight and cost Ö casting and finishing labor costs Ö diamond/gemstone content and costs Ö Benefits of specialist team Ö stay abreast of worldwide manufacturing enhancements Ö negotiates low component and
Slide 75: Gross Margin Pressures
Gross Margin Pressures Ö Mix changes driving sales and lower margin Ö Increased pricing visibility due to the internet Ö Diamonds - c.50% of cost of goods sold in 2007/08 Ö polished diamond prices little changed in 2006/07 & 2007/08 Ö increasing pressure from higher rough prices Ö Gold - c.20% of co
Slide 76: Gross Margin Initiatives
Gross Margin Initiatives Ö Supply chain improvements Ö partner with lowest cost suppliers on worldwide basis Ö use operational stability and financial strength Ö invest in new expertise Ö Development of exclusive merchandise Ö Store operations initiatives Ö enhanced execution through better systems
Slide 77: US Diamond Supply Chain
US Diamond Supply Chain 75% of 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 Rough Diamond Initiative Contract Manufacture Complete Signet 77 77
Slide 78: Advantages of Direct Sourcing Polished Diamonds
Advantages of Direct Sourcing Polished Diamonds Ö Cost savings on our largest input cost Ö Quality assurance Ö Accounts for c.50% diamond sourcing, limited by: Ö manufacturers matching cost savings Ö complex designs Ö testing of new items Ö higher risk fashion ranges 78 78
Slide 79: Rough Diamond Sourcing
Rough Diamond Sourcing Ö Why develop? Ö ensure supply in changing marketplace Ö maintain consistency of quality Ö achieve cost savings Ö Critical success factors Ö development of expertise, systems & procedures Ö creation of strategic partnership Ö prove ability to execute Ö achieve return on invest
Slide 80: Development of Rough Capability
Development of Rough Capability 2005/06 Ö Commenced Trial 2006/07 Ö Validated economics and ability to execute 2007/08 Ö Establish function with specialist management Ö c.10% of polished diamond requirement Ö Set up dedicated contract cutting capability 2008/09 Ö Further significant increase in roug
Slide 81: Development of Exclusive Ranges
Development of Exclusive Ranges 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 200
Slide 82: Leo Diamonds
Leo Diamonds 82 82
Slide 83: Peerless Diamonds
Peerless Diamonds SIGNET 83
Slide 84: Hearts Desire
Hearts Desire HEARTS DESIRE” IDEAL-CUT 84
Slide 85: LeVian Chocolate Diamonds
LeVian Chocolate Diamonds 85 85
Slide 86: Jane Seymour "Open Hearts"
Jane Seymour “Open Hearts” 86 86
Slide 87: Ideal Partner for Branding
Ideal Partner for Branding Ö Commitment to testing and development of merchandising programs Ö Training of sales associates Ö Ability to provide marketing support Ö Critical mass Ö Established supplier relationships Ö Proven track record in branding Ö Consistency of strategy & execution Ö Growth rec
Slide 88: LeVian Boutique Collection
LeVian Boutique Collection Ö 55 Stores – two tiers of inventory Ö Larger fashion collection with higher price points Ö Added men’s diamond jewelry Ö Added gold jewelry collection Ö Up to 27ft jewelry space 88 88
Slide 89: Price Increases
Price Increases Ö Extensive analysis and planning Ö increases vary SKU by SKU Ö implemented in late February and March Ö improved overall pricing architecture Ö Additional targeted promotional Ö Objective is at least to maintain merchandise gross margin percentage at 2007/08 level 89 89
Slide 90: Encouraging Results
Encouraging Results Ö Results are being closely monitored by merchandise category Ö Competitors under greater financial pressure to increase prices Ö larger operators increased most prices Ö cash realisation a priority for some Ö Jewelry CPI up 9% in April – June quarter Ö Remain on course to achiev
Slide 91: Provide Competitive Advantage to Field Staff
Provide Competitive Advantage to Field Staff Ö Superior quality of diamonds Ö Better matched stones Ö Consistent quality in each SKU Ö Consistent replenishment Ö Up to date merchandise Ö Distinctive merchandise Ö Appropriately targeted merchandise 91 91
Slide 92: Superior Merchandising
Superior Merchandising Ö Culture of delivering better value to the customer Ö Expertise of our people Ö Tried and tested systems and procedures Ö Excellence in execution Ö Continuous improvement 92 92
Slide 93: Bob Trabucco
Bob Trabucco EVP, Chief Financial Officer, Sterling Jewelers “We sell jewelry, not credit” 93 93
Slide 94: Why Have An In-house Credit Operation?
Why Have An In-house Credit Operation? Ö Important element of the sales transaction Ö sales enabler not a sales driver Ö Outsourcing alters not eliminates risk Ö manage in context of our business priorities Ö Greater control as we set Ö score cards Ö collection strategies Ö customer service standard
Slide 95: Nature of Credit Operation
Nature of Credit Operation Ö C.50% of sales Ö Included in IRR calculation for store investment Ö Not separate profit center Ö Centralized credit function since 1994 Ö automated use of third party information sources to verify application Ö where referral, experienced authorizers use additional revie
Slide 96: Receivables Performance
Receivables Performance 10.0 15.0 9.0 8.0 12.0 7.0 6.0 9.0 Net bad 5.0 Average debt monthly as % 4.0 6.0 collection of credit 3.0 rate % sales 2.0 3.0 1.0 0.0 0.0 19 8 19 9 20 0 20 1 20 2 20 3 20 4 20 5 20 6 20 7 8 /9 /9 /0 /0 /0 /0 /0 /0 /0 /0 /0 97 98 99 00 01 02 03 04 05 06 07 19 96 96
Slide 97: Measured Actions
Measured Actions Ö Weaker consumer reflected in all KPI’s Ö some increase in credit participation, more applications and more rejections Ö no isolated areas of extreme weakness Ö Steps taken Ö tightened certain scorecard criteria Ö moved to more innovative and aggressive collection strategies Ö cont
Slide 98: Bill Montalto
Bill Montalto EVP, Chief Operating Officer, Sterling Jewelers “Sector leading execution” 98 98
Slide 99: Information Technology & Systems
Information Technology & Systems Ö Competitive advantage built on superior systems Ö Sustainable competitive advantage Ö scale to invest in projects Ö solutions tailored to Signet’s needs Ö ability to negotiate sector exclusivities Ö Best in jewelry category Ö benchmark against other retailers 99 99
Slide 100: Major Projects
Major Projects Ö New ‘pick’ system Ö Predictive dialer system for credit department Ö Successfully launched e-commerce Ö Enhanced marketing campaign management system Ö E-mail promotions, electronic gift and promotion cards Ö Introduction of in-store screen based 100 PIN pads 100
Slide 101: Sterling Performance Matrix
Sterling Performance Matrix Ö Opportunity identified in 2005 Ö Test system in 2006 Ö Roll-out program completed in 2007 Ö Requirements: Ö broadband communications in all stores Ö training of, district and regional managers, and home office departments Ö Continued development 101 101
Slide 102: Leverage of Broadband Communications
Leverage of Broadband Communications ÖEnhancement to the Jared selling system ÖImproved data capture in-store ÖDevelopment of in-store electronic ordering Ö opportunity to offer extended selection Ö additional customer service functions 102 102
Slide 103: Repair-Brand Equity
“Repair-Brand Equity” Ö Repairs create trust, generates footfall and builds relationship Ö Enhanced execution Ö repair standards by store Ö improved take-in process Ö increased productivity Ö better task management Ö Improved margins Ö Established 6 month customer warrantee Ö Part of Customer Satisf
Slide 104: Customer Satisfaction Index
Customer Satisfaction Index Ö Tested in 2005 Ö Implemented in all stores in 2006 Ö Provides objective and consistent measurement of performance across 12 criteria store-by-store Ö Helps set priorities for developing training materials Ö Overall score part of monthly store standards Ö Objective measu
Slide 105: Marketing Leadership
Marketing Leadership Ö “Every kiss begins with Kay” Ö largest marketing budget in sector Ö consistent message over time and across media Ö “He went to Jared” Ö nearly double typical advertising / sales support Ö established clear brand identity Ö Regional brands Ö very well established local identit
Slide 106: Scale to Use National Advertising
Scale to Use National Advertising 250 8 200 7 Advertising spend, $m 6 150 5 % revenue 4 100 3 2 50 1 0 0 2002 2003 2004 2005 2006 2007 2002 2003 2004 2005 2006 2007 Sterling: Advertising gross of vendor contributions Zale Corp: y.e. July, advertising net of vendor contributions, including Canada Typ
Slide 107: Proven Power of TV Advertising
Proven Power of TV Advertising Ö Kay comp. store sales growth over 5% pa higher than regional brands Ö Acceleration in Jared sales growth when TV introduced Ö Benefit of national versus local TV advertising Ö provides greater marketing leverage Ö brand name recognition in new markets Ö better progra
Slide 108: Building Kay Marketing Leverage
Building Kay Marketing Leverage Ö Grow Kay in malls Ö Develop new Kay formats Ö off-mall Ö outlet centers Ö e-commerce Ö Uniformity of proposition Ö core merchandise Ö pricing Ö guarantees and warranties 108 108
Slide 109: Growth of Jared TV Markets
Growth of Jared TV Markets Sales $m Markets 2002/03 256.9 10 2003/04 321.0 22 2004/05 413.7 33 2005/06 539.2 45 2006/07 Christmas 2006: 658.2 local network 56 national cable 210 2007/08 Full year national 756.4 210 cable Christmas 2007: national network 2008/09 Full year national 210 cable and netwo
Slide 110: Realign Marketing Spend
Realign Marketing Spend Ö Adjust by marginal productivity of spend Ö Concentrate on national TV advertising Ö Increase promotional cadence Ö opportunistic purchases from vendors Ö category promotions Ö expansion of e-communication Ö greater use of promotional cards and electronic coupons Ö 20 promot
Slide 111: The Common Themes
The Common Themes Ö Quality People Ö Category Leading Systems: Ö store and repair systems Ö merchandising Ö supply chain capability Ö credit operations Ö Excellence in Execution Ö Continuous Improvement 111 111