Signet Jewelers Limited · NYSE:SIG
Signet Jewelers — Non-Deal Roadshow (April 2010)
92 slides from Signet Jewelers's roadshow presentation, April 2010
Slide 1: Competitive Advantages Reinforcing Sector Leadership
“Competitive Advantages Reinforcing Sector Leadership” April 2010 1
Slide 2: Safe Harbor Statement
Safe Harbor Statement (Private Securities Litigation Reform Act of 1995) 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 as well a
Slide 3: Why Invest in Signet?
Why Invest in Signet? Ö Market leadership in US & UK Ö Effective strategy in tough environment Ö Strengthening significant competitive advantages Ö Gaining profitable market share in sector undergoing accelerated rationalization Ö Strong balance sheet and cash flow Ö Well positioned for recovery 3 3
Slide 4: World's Largest Specialty Jeweler
World’s Largest Specialty Jeweler Group sales $3,290.7 million – 78% US/22% UK Kay Jewelers - #1 mid market brand H.Samuel - #1 in UK Sales: $1,508.2 m Stores: 923 in 50 states Sales: £247.8m Stores: 347 Jared - #1 Off-Mall “Category Killer” Ernest Jones - #1 UK upper middle market Sales: $722.5m St
Slide 5: Effective Strategy in Tough Market
Effective Strategy in Tough Market Ö Same store sales down 0.4% (Q4: up 5.2%) Ö US up 0.2% (Q4: up 7.4%) Ö UK down 2.4% (Q4: down 1.5%) Ö Income before taxes $241.8m Ö fiscal 2009: $(326.5)m, underlying $200.9m (1) Ö underlying increase 14.0% (1) Ö Basic earnings per share $1.92 Ö fiscal 2009: $(4.6
Slide 6: Consistent Gains in US Market Share
Consistent Gains in US Market Share 1999 2004 2007 2008 2009 Signet 4.9% 7.5% 9.0% 9.0% 9.4% Zale(1,2,3) 6.4% 7.8% 6.5% 5.8% 5.1% Tiffany(1) 2.8% 3.9% 4.9% 5.2% 4.7% Blue Nile(1) 0.1% 0.6% 1.0% 0.9% 1.0% Finlay(1,2) nil nil 0.7% 1.1% Liquidated Friedman(1) 1.2% 1.5% na Liquidated - Whitehall(1) 1.1%
Slide 7: Strengths Driving Share Gains
Strengths Driving Share Gains Ö Excellence in customer service Ö staff training, development and incentivization programs Ö High quality real estate Ö strict operational and financial criteria applied over time Ö Significant brand equity and awareness Ö consistent high level of customer satisfaction
Slide 8: Developed Differentiated Ranges
Developed Differentiated Ranges 8 8
Slide 9: Broadly Maintain Successful Strategy in Fiscal 2011
Broadly Maintain Successful Strategy in Fiscal 2011 Ö Enhance position as strongest middle market specialty retail jeweler Ö take advantage of capacity reduction Ö many firms less able to compete Ö focus on sustainable competitive advantages Ö Reduce business risk Ö aim to improve store productivity
Slide 10: Free Cash Flow Objective Fiscal 2011
Free Cash Flow Objective Fiscal 2011 Ö Fiscal 2011 free cash inflow objective of between $150 million and $200 million Ö limited scope for a further substantial reduction in working capital Ö Uncertain cash flow impact from amendments to Truth in Lending Act Ö Capital expenditure planned to be ~$80
Slide 11: First Weeks Trading Update
First 7 Weeks Trading Update Ö Encouraging start to the year Ö uncertain economic outlook, particularly in the UK Ö consumer expenditure remains constrained Ö US same store sales up 7.8% Ö Jared performing especially strongly Ö weakened competition Ö UK same store sales down 0.1% Ö better performanc
Slide 12: Drivers of Medium Term Performance
Drivers of Medium Term Performance Ö Economic environment Ö Maintain disciplined investment Ö little new space growth for at least next 18 months Ö Ability to leverage cost base to improve operating margins Ö Aim to win profitable market share in existing stores to drive sales Ö utilize competitive
Slide 13: Fiscal 2010 Performance
Fiscal 2010 Performance “Substantially Exceeded Objectives” 13 13
Slide 14: Sales Growth
Sales Growth US UK Group % % % Same store sales 0.2 (2.4) (0.4) Change in space 0.6 2.3 1.0 At constant exchange rates 0.8 (0.1) 0.6 Exchange translation - (9.2) (2.2) Total sales growth 0.8 (9.3) (1.6) 14 14
Slide 15: Operating Margin Movement
Operating Margin Movement US % UK % Group % Underlying fiscal 2009 margin(1) 6.8 8.8 6.9(2) Gross merchandise margin 0.4 (0.2) 0.2 Expenses leverage / deleverage 1.5 (0.9) 0.9 Underlying fiscal 2010 margin 8.7 7.7 8.0(2) US vacation entitlement policy 0.5 - 0.4 change Fiscal 2010 margin 9.2 7.7 8.4(
Slide 16: Significantly Strengthened Balance Sheet
Significantly Strengthened Balance Sheet Fiscal 2010 Fiscal 2009 Free cash flow(1) $471.9m $51.1m Decrease/(increase) in net $462.8m $(96.1)m debt(1) Fixed charge cover 2.04x 1.93x Interest cover 8.1x 7.9x(2) Gearing 0.4% 29.2% ROCE 11.4% 9.6%(3) (1) Non-GAAP see Company announcement March 25, 2010
Slide 17: Cash Inflow More Than Double Fiscal 2010 Objective
Cash Inflow More Than Double Fiscal 2010 Objective Fiscal 2010 2009 Net income adjusted for non-cash items(1) 293.9 259.8 Change in operating assets and liabilities Underlying (ex US space growth) 250.4 20.7 US space growth (28.2) (66.5) Forex impact on currency swaps (0.7) (49.6) 221.5 (95.4) Net c
Slide 18: Substantially Eliminated Net Debt of $470 Million
Substantially Eliminated Net Debt of $470 Million Fiscal 2010 2009 Opening net debt(1) (470.7) (374.6) Free cash flow(1) 471.9 51.1 Net shareholder distribution(2) - (123.8) Net change in common shares 1.0 0.1 Facility amendment fees (9.3) - (7.1) (447.2) Foreign exchange impact (0.8) (23.5) Closing
Slide 19: Changes In Borrowing Structure
Changes In Borrowing Structure Ö $50.9 million prepayment at par to note holders Ö $229.1 million remains outstanding Ö Revolving credit facility reduced to $300 million from $370 million Ö Maintain considerable financial flexibility Ö Reduce expected financing costs during fiscal 2011 19 19
Slide 20: US Jewelry
US Jewelry “Further growth from a proven strategy” 20 20
Slide 21: US Market Characteristics
US Market Characteristics Ö $58.8 billion total jewelry market Ö ~40% world diamond sales Ö $27.2 billion specialty jewelry market Ö Signet US Ö market leader with 9.4% share Ö 1.8x size of second largest operator Ö sales driven by bridal (45%-50%) and gift giving categories Ö ~75% of sales diamond
Slide 22: Rationalization by Top US Brands
Rationalization by Top US Brands Mid market brands Sales $m No. of stores Calendar 2009 2008 2004 2009 2008 2004 Kay(a) 1,508 1,439 1,174 923 926 832 Zales(ab) Gordons(ab) 1,110 1,363 { 1,071 314 895 1,045 { 757 287 Jared(a) 723 726 415 178 171 135 Fred Meyer(cd) Na 410 475 n/a 380 436 Helzberg(c) ~
Slide 23: Accelerated Consolidation in US
Accelerated Consolidation in US Ö Until 2008 about a net 400 specialty jewelry firms closed each year Ö Calendar 2008 Ö estimated closure of 1,800 doors* Ö ~(5)% sales capacity* Ö Calendar 2009 Ö further accelerated consolidation Ö projection for 750 to 1,500 closures Ö Calendar 2010 Ö likely to rem
Slide 24: Signet US Leading Performance
Signet US Leading Performance Operating EBIT/Total Total Calendar 2008 Performance Margin Assets(1) Sales Signet US(2) 6.8% 7.5% (6.3)% Zale Corp(3) (6.1)% (9.2)% (15.1)% Typical US Chain Jeweler(4) 2.7% 1.3% (13.2)% Calendar 2009 Performance Signet US(5) 8.7% 9.8% 0.8% Zale Corp(c3) (13.2)% (19.6)%
Slide 25: Kay
Kay Fiscal Fiscal Fiscal 2005 2009 2010 Sales (million) $1,174 $1,439 $1,508 Stores at y.e. 742 926 923 Average sales per store (‘000) $1,584 $1,536 $1,582 Average selling price $282 $331 $307 Ö~ 1,250 square feet of selling space ÖCustomer’s household income $35k to $100k ÖSales ~50% greater than n
Slide 26: Jared
Jared Fiscal Fiscal Fiscal 2005 2009 2010 Sales (million) $415 $726 $723 Stores at y.e. 93 171 178 Average sales per store (‘000) $4,975 $4,491 $4,046 Average selling price $644 $769(1) $713(1) Ö~4,800 square feet of selling space ÖCustomer’s household income $50k to $150k ÖConcept tested 1993 to 19
Slide 27: Strong Performance in Q4 Fiscal 2010
Strong Performance in Q4 Fiscal 2010 Q4 Fiscal 2010 Fiscal 2010 Same store ASP Same ASP sales store sales Kay 7.7% (7.6)% 4.4% (7.4)% Regional Brands 2.8% (5.1)% (4.0)% (4.8)% Jared 9.1% (3.3)%(1) (6.0)% (7.3)%(1) US division 7.4% 0.2% Space change (0.6)% 0.6% Total sales US division 6.8% 0.8% Gross
Slide 28: Fiscal 2010 US Performance Drivers
Fiscal 2010 US Performance Drivers Ö Gained profitable market share Ö superior customer service Ö successful merchandising initiatives Ö focus on TV advertising Ö Achieved gross merchandise margin target Ö further rise in gold costs offset by lower diamond prices Ö more differentiated merchandise ba
Slide 29: US Differentiated Merchandise
US Differentiated Merchandise Ö Demonstrated unique ability in mid market Ö Over 1,300 stores, sales of more than $2,500m Ö national television advertising Ö built executional expertise Ö strong balance sheet Ö now “go to” retailer for vendors Ö Advantages Ö stand out from competitors Ö less vulnera
Slide 30: US Merchandise Margin Drivers
US Merchandise Margin Drivers Ö Commodity costs Ö diamond prices up on Q1 fiscal 2010 but down on fiscal 2009 • ~55% COGS Ö year to date gold costs up 23% calendar 2010 v calendar 2009 • ~20% COGS • implementing price increases for selected merchandise Ö Use balance sheet strength to our advantage Ö
Slide 31: Tight Control of US Expenses
Tight Control of US Expenses Ö Controllable expenses forecast to be broadly flat Ö benefit from net space reduction Ö Adverse impact from: Ö absence of $13.4 million one-off benefit from change in vacation entitlement policy Ö direct adverse impact of TiLA in fiscal 2011 estimated as net $15-20 mill
Slide 32: In-house Receivables a Competitive Advantage
In-house Receivables a Competitive Advantage Ö Actual credit metrics for fiscal 2010 Ö participation up 30 bpts to 53.5% Ö approval rate up by 210 bpts Ö net bad debt to total sales 5.6%, up 70 bpts Ö collection rate 12.5%, down by 60 bpts Ö Performance driven by macro-economic factors Ö initial sig
Slide 33: US Receivables Performance
33 as % debt sales of total Net bad Fi sc a Fi l 1 0.0 1.0 2.0 3.0 4.0 5.0 6.0 sc 99 Fi al 1 7 sc 99 a Fi l 1 8 sc 99 a Fi l 2 9 sc 00 Fi al 2 0 sc 00 a Fi l 2 1 sc 00 a Fi l 2 2 sc 00 a Fi l 2 3 sc 00 Fi al 2 4 sc 00 a Fi l 2 5 sc 00 a Fi l 2 6 sc 00 Fi al 2 7 sc 00 a Fi l 2 8 sc 00 al 9 20 10 0.0
Slide 34: US Changes in Square Footage
US Changes in Square Footage Kay Change Kay Off in Mall Mall Regionals Jared(1) Total Space Jan 2008 789 105 351 154 1,399 10% Opened 27(2) 30 3 17 77 Closed (21) (4) (50)(2) - (75) Jan 2009 795 131 304 171 1,401 4% Openings 5(2) 3 1 7 16 Closures (6) (5) (45)(2) - (56) Jan 2010 794 129 260 178 1,36
Slide 35: Planned Increase in US Capital Expenditure
Planned Increase in US Capital Expenditure Fiscal Fiscal Fiscal $ million 2011 plan 2010 2009 New stores ~5 10.1 39.0 Other stores ~35 8.1 17.3 Other ~20 12.9 20.4 Total ~60 31.1 76.7 Ö Other store capex up $27m on fiscal 2010 Ö 16 Jared remodels Ö 22 Kay remodels Ö Return MIS spend to historic leve
Slide 36: 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 37: UK Jewelry
UK Jewelry “Making existing space work harder” 37 37
Slide 38: UK Market Characteristics
UK Market Characteristics Ö Market size ~£4.8 billion Ö Signet market share ~11% Ö store base bigger than next 5 UK specialty competitors combined Ö ~60% larger than 3rd largest US mid market jeweler Ö Signet UK’s merchandise mix broader than US 38 38
Slide 39: Satisfactory Performance in Q4 fiscal 2010
Satisfactory Performance in Q4 fiscal 2010 Q4 Fiscal 2010 Fiscal 2010 Same store ASP Same store ASP sales sales H.Samuel (1.9)% 7.6% (1.7)% 7.88% Ernest Jones (0.9)% 15.0%(1) (3.2)% 12.5%(1) UK division (1.5)% (2.4)% Space change (0.1)% 2.3% Total sales UK division (1.6)% (0.1)% at constant exchange
Slide 40: H.Samuel
H.Samuel Fiscal Fiscal Fiscal 2005 2009 2010 Sales (million) £282 £250 £248 Stores at y.e. 398 352 347 Average sales per store (‘000) £723 £718 £712 Average selling price £37 £48 £52 Merchandise mix Gold jewelry na 27% 28% Diamond jewelry na 22% 22% Watches na 26% 25% ÖCustomer’s household income £1
Slide 41: Ernest Jones
Ernest Jones Fiscal Fiscal Fiscal 2005 2009 2010 Sales (million) £221 £208 £210 Stores at y.e. 204 206 205 Average sales per store (‘000) £1,150 £1,047 £1,027 Average selling price £141 £202 £228(1) Merchandise mix Gold jewelry na 13% 14% Diamond jewelry na 40% 39% Watches na 35% 35% ÖCustomer’s hou
Slide 42: Fiscal 2010 UK Performance Drivers
Fiscal 2010 UK Performance Drivers Ö Maintained pound sterling sales Ö focus on staff training Ö successful merchandising initiatives Ö customer relationship marketing increased Ö Exceeded gross merchandise margin target Ö prices increases largely offset higher cost of goods Ö Pound sterling expense
Slide 43: Industry Leader in UK
Industry Leader in UK Ö Sustainable advantages in fragmented market Ö leading staff training & development recognized by National Association of Goldsmiths Ö scale, direct sourcing supply chain capability & merchandising expertise Ö ability to use television advertising & 14 million name database fo
Slide 44: UK Sales & Merchandise Margin
UK Sales & Merchandise Margin Ö Sales initiatives in fiscal 2011 Ö maintain focus on training & customer service Ö test & develop new ranges, including differentiated ranges Ö continue development of customer relationship marketing Ö Gross merchandise margin outlook Ö gold cost increases Ö impact of
Slide 45: UK Cost Initiatives
UK Cost Initiatives Ö Moderate underlying inflationary pressures Ö Opportunities Ö improved store staff scheduling Ö reduced property costs Ö focus on major centers, close 15 stores Ö Cost base targeted to be slightly lower in pounds sterling 45 45
Slide 46: Planned Increase in UK Capital Expenditure
Planned Increase in UK Capital Expenditure Fiscal Fiscal Fiscal £ million 2011 plan 2010 2009 Stores ~8.5 6.7 18.4 Other ~5.0 1.2 3.4 Total ~13.5 7.9 21.8 Ö Store expenditure up £2 million Ö 23 store refurbishments planned Ö ~40 more store redecorations budgeted Ö Increased investment in MIS 46 46
Slide 47: 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 48: Regulation G
Regulation G JEWELERS 48
Slide 49: Fiscal 2010 Sales
Fiscal 2010 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 50: Fiscal 2010 Results
Fiscal 2010 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 be a
Slide 51: Net Debt
Net Debt Net debt is a “non GAAP financial measure”. Management considers it to be a useful additional measure for analyzing and explaining changes and trends in Signet’s financial position. It is calculated as set out below: January January 30, 2010 31, 2009 $m $m Long-term debt (280.0) (380.0) Loa
Slide 52: Free Cash Flow
Free Cash Flow Free cash flow is a “non GAAP financial measure” defined as the net cash provided by operating activities less net cash flows used in investing activities. Management considers that this is helpful in understanding how the business generating cash from its operating and investing acti
Slide 53: Appendix
Appendix JEWELERS 53
Slide 54: Group Financial Performance
Group Financial Performance Page Sales Growth 2 Operating Margin Movement Before Impairment & Relisting Costs 2 Group Comp. Performance 3 Group Financial Performance 3 Group Financial Performance 4 Capital Expenditure, Depreciation & Amortisation 4 54 54
Slide 55: Fiscal 2010 Q4 Sales Growth
Fiscal 2010 Q4 Sales Growth US UK Group % % % Same store sales 7.4 (1.5) 5.2 Change in space (0.6) (0.1) (0.5) At constant exchange rates 6.8 (1.6) 4.7 Exchange translation - 9.7 2.4 Total sales growth 6.8 8.1 7.1 55 55
Slide 56: Fiscal 2010 Q4 Operating Margin Movement Before Impairment and Relisting Costs
Fiscal 2010 Q4 Operating Margin Movement Before Impairment and Relisting Costs US % UK % Group % Q4 fiscal 2009 underlying margin 9.4 26.6 13.4(1) Gross merchandise margin (0.3) (0.9) (0.5) Expense leverage / (deleverage) 4.6 (4.3) 2.2 Q4 fiscal 2010 underlying margin 13.7 21.4 15.1(1) (1) Included
Slide 57: 5 Year Comp. Performance
5 Year Comp. Performance Signet Comp. Sales 4.8 2.4 -0.7 -8.2 -0.4 Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2007 2008 2009 2010 US Comp. Sales UK Comp. Sales 7.1 2.0 6.2 -3.3 -2.4 -1.7 0.2 -9.7 Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2007 2008 2009 2010 2006 2007 20
Slide 58: Group Financial Performance
Group Financial Performance Sales $m Operating Margin % 3,559.2 3,665.3 3,154.1 3,344.3 3,290.7 11.7 11.4 9.8 8.4 6.9 (1) Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2007* 2008 2009 2010 2006 2007* 2008 2009 2010 Income Before Tax, $m Basic earnings per share, $ 387.3
Slide 59: Group Financial Performance
Group Financial Performance (2) ROCE (1) % Dividend per share ,$ 22.3 22.4 17.3 1.43 1.45 1.45 1.19 11.4 9.6 nil Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2007* 2008 2009 2010 2006 2007* 2008 2009 2010 Net Debt, $m Gearing % 29.2 470.7 374.6 21.2 233.2 13.9 174.5 11.
Slide 60: Capital Expenditure, Depreciation & Amortisation
Capital Expenditure, Depreciation & Amortisation Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2007 2008 2009 2010 $m $m $m $m $m Capital expenditure US 88.4 101.1 111.1 76.7 31.1 UK 48.2 23.3 29.3 38.2 12.5 Total 136.6 124.4 140.4 114.9 43.6 Depreciation and amortisation US 51.3 61.3 72.1 84.0 78.4 UK 31
Slide 61: US Jewelry Division
US Jewelry Division Page Summary Financials 5 Merchandise Mix 6 Diamond Supply Chain 6 Average Retail Price of Merchandise Sold 7 Average Sales Per Store 7 Growth in US Stores 8 In-house Credit Requirements 8 Receivables Profile 9 61 61
Slide 62: US Summary Financials
US Summary Financials Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2007 2008 2009 2010 Sales - $m 2,308.8 2,652.1 2,705.7 2,536.1 2,557.5 Comp. store sales growth 7.1% 6.2% (1.7)% (9.7)% 0.2% Total sales growth 12.1% 14.9% 2.0% (6.3)% 0.8% Operating (2) income - $m 295.9 318.9 265.2 171.6 235.8 Operating
Slide 63: US Merchandise Mix
US Merchandise Mix Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2007 2008 2009 2010 % % % % % Diamonds & diamond 72 74 75 75 76 jewelry Gold & silver 8 7 7 7 8 jewelry Other jewelry 13 12 11 11 9 Watches 7 7 7 7 7 Total 100 100 100 100 100 Excluding repairs, warranties and other miscellaneous sales 63 63
Slide 64: US Diamond Supply Chain
US Diamond Supply Chain ~75% of US merchandise mix Rough Polished Manufactured Retailers Mines T T r r a Cutters & a Sightholders d polishers d Manufacturers Wholesalers e e r r s s Contract Manufacture Complete Signet 64 64
Slide 65: Average Retail Price of Merchandise Sold ($)
Average Retail Price of Merchandise Sold ($) Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2007 2008 2009 2010 Kay 305 317 327 331 307 Regionals 324 332 343 346 329 Jared 697 719 747 769* 713* * Excluding charm bracelet category 65 65
Slide 66: Average Sales Per Store
Average Sales Per Store Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2007* 2008 2009 2010 Kay ($’000) 1,665 1,815 1,710 1,536 1,582 Regionals ($’000) 1,514 1,517 1,344 1,160 1,163 Jared ($’000) 5,453 5,676 5,341 4,491 4,046 Includes only stores operated for the full financial year * 53 week year 66 66
Slide 67: 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 1,2
Slide 68: In-house Credit Requirement
In-house Credit Requirement Ö High bridal participation ~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 Ö
Slide 69: US Receivables Profile
US Receivables Profile Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2007 2008 2009 2010 Average outstanding $841 $957 $997 $1,028 $1,016 balance Average monthly 14.5% 14.6% 13.9% 13.1% 12.5% collection rate Credit sales as % of 51.6% 51.7% 52.6% 53.2% 53.5% sales Net bad debt as % of 5.8% 5.3% 6.5% 9.2%
Slide 70: US Jewelry Market
US Jewelry Market Page Long Term Industry Growth 10 US Jewelry Sector Performance 10 US Jewelry Market 11 Fewer Specialty Jewelry Firms 11 Sales Per Store 12 70 70
Slide 71: Long Term Industry Growth
Long Term Industry Growth ~40% of world diamond sales(a) 70 60 .r. 4.8% 50 c.a.g $bn 40 30 20 10 0 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 US Jewelry and Watch Market(b) Sources: (a) IDEX (b) US Department of Commerce 71 71
Slide 72: US Jewelry Sector Performance
US Jewelry Sector Performance 14% 10% Growth p.a. 6% 2% -2% -6% -10% 2000(a) 2001(a) 2002 2003 2004 2005 2006 2007 2008 2009 Furniture & Household excl. Electricals Electricals & Electronics Clothing Jewelry & Watches Signet US (a) Excludes Marks & Morgan acquisition Source: US Department of Commerc
Slide 73: US Jewelry Market
US Jewelry Market 2004 2007 2008 2009 US Market size $57bn $62bn $60bn $59bn Chain Jewelers ($100m+ sales) 12% 17% 15% 14% Independent Jewelers 37% 32% 32% 32% Total specialty 49% 49% 47% 46% Chain Department Stores est. 12% 11% 10% 10% Mass Merchants est. 10% 11% 11% 11% TV Home Shopping est. 4% 4%
Slide 74: Fewer Specialty Jewelry Firms
Fewer Specialty Jewelry Firms 35,000 ~(1.6)% pa 30,000 Num ber of firm s 25,000 20,000 15,000 2009 10,000 ~(2)% 5,000 0 87 89 91 93 95 97 99 01 03 05 07 09 19 19 19 19 19 19 19 20 20 20 20 20 Source: Jewelers Board of Trade 74 74
Slide 75: Sales Per Store
Sales Per Store 2008/09 sales per store $'000 1,489 1,116 1,061 Kay/ Zales/ Regionals(1) Gordons(2) Industry(3) (1) y.e. January 30, 2010 (2) y.e. July 31, 2009 – Source: 10-K (3) y.e. December 31, 2008 – Source: Jewelers of America – Cost of Doing Business Survey 75 75
Slide 76: Jared
Jared Page Jared Locations 13 Jared Development 13 Growing Off-mall Presence 14 76 76
Slide 77: Jared Locations
Jared Locations Existing stores Opened in fiscal 2010 77 77
Slide 78: 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 79: Growing Off-mall Presence
Growing Off-mall Presence % of Space Growth % of Total Space 44% 40% 27% 29% 32% 59% 62% 33% 36% 36% 66% 76% 1% 2% 4% 6% 7% 8% 34% 12% 38% 11% 15% 72% 69% 64% 61% 57% 56% 12% 29% 26% 23% 22% 18% 12% 05 06 07 08 9* 0* 5 6 7 8 09 10 20 20 20 20 00 01 00 00 00 00 20 20 al al al al al 2 al 2 l2 l2 l2 l2
Slide 80: Real Estate
Real Estate Page Typical Mall Layout 15 In-Line v. Corner Location 15 Typical Power Strip 16 Typical Lifestyle Centre 16 80 80
Slide 81: 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 81 81
Slide 82: In-Line v. Corner Location
In-Line v. Corner Location Mall Mall Mall Display cases 82 82
Slide 83: 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 83 83
Slide 84: 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 84 84
Slide 85: UK Jewelry
UK Jewelry Page Summary Financials 17 Comp. Store Sales Growth 18 Store Count 18 Customer Oriented Format 19 Average Sales per Store 19 Average Retail Price 20 Retail Market Map 20 85 85
Slide 86: UK Summary Financials
UK Summary Financials Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2007 2008 2009 2010 Sales - £m 469.6 482.5 479.8 461.8 461.2 Comp. store sales growth (8.2)% 1.2% 2.0% (3.3)% (2.4)% Total sales growth (7.3)% 2.7% (0.6)% (3.8)% (0.1)% Operating income - £m 49.3 53.2 54.7 40.9(2) 35.5 Operating 10.5% 11.
Slide 87: Comp. Store Sales Growth
Comp. Store Sales Growth H.Samuel Ernest Jones 1.3 2.9 0.7 1.7 -2.6 -1.7 -4.0 -3.2 -7.5 -8.7 Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 87 87
Slide 88: UK Store Count
UK Store Count Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2007 2008 2009 2010 H.Samuel 386 375 359 352 347 Ernest Jones 207 206 204 206 205 Total 593 581 563 558 552 88 88
Slide 89: Customer Oriented Format
Customer Oriented Format 7% 9% 15% 18% 22% % of store numbers 37% 41% 45% 46% 47% 29% 28% 22% 19% 16% 27% 22% 18% 17% 15% Fiscal Fiscal Fiscal Fiscal Forecast 2007 2008 2009 2010 fiscal 2011 HS Traditional EJ Traditional HS Customer oriented EJ Customer oriented 89 89
Slide 90: UK Average Sales per Store
UK Average Sales per Store Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2007* 2008 2009 2010 H.Samuel (£’000) 681 695 722 718 712 Ernest Jones (£’000) 1,065 1,079 1,105 1,047 1,027 Average sales per store excluding VAT. Includes only stores operated for the full financial year * 53 week year 90 90
Slide 91: Average Retail Price of Merchandise Sold (£)
Average Retail Price of Merchandise Sold (£) Fiscal Fiscal Fiscal Fiscal Fiscal 2006 2007 2008 2009 2010 H.Samuel 38 42 44 48 52 Ernest Jones 148 163 180 202 228* *Excluding charm bracelet category 91 91
Slide 92: UK Retail Market Map
UK Retail Market Map (ex. independents) £250 Leslie Davies Beaverbrooks Ernest Jones HIGH Goldsmiths H Samuel Estimated Average Transaction Value Argos Warren James LOW F. Hinds Half Price Supermarkets Jewellers £0 FEW MANY RANGE OF PRODUCTS 92 92