Signet Jewelers Limited · NYSE:SIG
Signet Jewelers — Investor Day (October 2009)
44 slides from Signet Jewelers's investor day presentation, Oct 21, 2009
Slide 1: Competitive Advantages Reinforcing Sector Leadership
“Competitive Advantages Reinforcing Sector Leadership” NY Store Visit October 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: Why Invest in Signet?
Why Invest in Signet? Ö Market Leadership in US & UK Ö Gaining profitable market share in sector undergoing accelerated rationalization Ö Strong balance sheet and cash flow Ö Strengthening significant competitive advantages Ö Effective strategy in tough environment Ö Well positioned for recovery 3
Slide 4: 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: $726 Stores: 17
Slide 5: Strengths Driving Share Gains
Strengths Driving Share Gains Ö Excellence in customer service Ö staff training, development and incentivization programs Ö Superior merchandising Ö leading middle market supply chain expertise and merchandising systems Ö ability to successfully develop differentiated ranges Ö Significant brand equi
Slide 6: Effective Strategy in Tough Market
Effective Strategy in Tough Market Ö Enhance position as strongest middle market specialty retail jeweler and gain share Ö Maximize profit & free cash flow Ö Use strong balance sheet as competitive advantage Ö Highly disciplined investment in core activities Ö operational priorities set by returns a
Slide 7: Financial Objectives in Fiscal 2010
Financial Objectives in Fiscal 2010 Ö$100 million US cost saving program Ö$100 million inventory reduction ÖCapital expenditure down to $55 million (fiscal 2009: $115 million) Ö$175 million to $225 million net debt reduction at constant exchange rates 7
Slide 8: 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.240 Change in operating assets & liabilities (ex new US stores) (74.1) (28.9) c.140 Investing activities (ex new US stores) (79.3) (74.3) c.(45) Investment in new US stores(2)
Slide 9: 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 10: Competitive Advantages Reinforcing Sector Leadership - Mark Light
Competitive Advantages Reinforcing Sector Leadership Mark Light CEO US Division 10
Slide 11: 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 11
Slide 12: Signet US Leading Performance
Signet US Leading Performance Operating EBIT/Total Total Average 2002 to 2007 Margin Assetsa Sales Signet USb 12.0% 14.9% 9.7% Zale Corpc 5.3% 8.8% 0.9% Typical US Chain Jewelerd 3.7% 5.9% 6.5% Signet US 2008e 6.8% 7.5% (6.3)% Zale Corp 2008f (5.5)% (8.8)% (15.1)% Typical US Chain Jeweler 2.7% 1.3%
Slide 13: 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 two top 10 brands liquidated Ö estimated closure of 1,800 doors* Ö about (5)% sales capacity* Ö Calendar 2009 Ö two top 10 brands in Chapter 11 Ö further accelerated consolidation
Slide 14: 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% more than No.2 mid market brand ÖHigh store productivity with typically 1,270 sq ft of
Slide 15: 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 16: Management Priorities in 2010
Management Priorities in 2010 Ö Reinforce position as market leader Ö invest in high ROI initiatives Ö leverage competitive strengths Ö maximise gross merchandise dollars Ö Maximize profit and cash flow Ö $100 million expense saving program Ö $110 million inventory reduction Ö Continue to apply stri
Slide 17: Changes in Square Footage
Changes in Square Footage Kay Kay Change Mall Off Mall Regionals Jared Total in sq.ft. 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
Slide 18: Competitive Advantages
Competitive Advantages Talented and seasoned 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 • Supe
Slide 19: Competitive Advantages Reinforcing Sector Leadership - Tryna Kochanek
Competitive Advantages Reinforcing Sector Leadership Tryna Kochanek SVP Field Operations 19
Slide 20: 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 21: 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 Signet US store manager 21
Slide 22: Best Training in the Industry
Best Training in the Industry Ö Consistent development of all staff, at all levels Ö Training needs regularly refined based on Ö customer feedback from satisfaction surveys Ö associate requirements Ö management priorities Ö Integrated with merchandising and marketing Ö Specialist training team creat
Slide 23: 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 Customer service feedback Ö Monitoring Ö overnight reports provided to store staff and District Manager Ö Coaching Ö store mana
Slide 24: 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 25: System Support Drives Productivity
System Support Drives Productivity Ö Benefits to field operations Ö helps identify, understand, prioritize and schedule tasks Ö store process manuals always up to date Ö helps district and store managers focus on training, not admin Ö Improves executional effectiveness Ö better feedback and problem
Slide 26: 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 rete
Slide 27: Competitive Advantages Reinforce Sector Leadership - Ed Hrabak
Competitive Advantages Reinforce Sector Leadership Ed Hrabak SVP General Merchandising Manager 27
Slide 28: Mission
Mission Ö General Ö right product, right price, right place, right time Ö gross margin management Ö pursue supply chain opportunities Ö development of differentiated ranges Ö Critical to Jewelry Ö importance of commodities • quality control as each diamond is unique Ö optimise inventory investment a
Slide 29: GMROI Focused
GMROI Focused Ö Develop products with features and benefits Ö price / quality Ö subtle features Ö Utilize “Pull” merchandise methodology Ö maximizes sales, minimizes mistakes Ö test and run every product/program Ö rapid response to emerging trends Ö merchandising of stores reflects local demographic
Slide 30: Supply Chain Advantages
Supply Chain Advantages Ö About 50% of diamonds sold sourced loose, cut and polished Ö cost savings Ö quality assurance Ö ability to take advantage of market opportunities Ö improved insight into cost of complete merchandise Ö Built long term relationships with key vendors Ö lower cost Ö ability to
Slide 31: Advantages of Differentiated Merchandise
Advantages of Differentiated Merchandise Ö Drives footfall Ö Lower risk of competitive discounting Ö Offered new concepts ahead of competition Ö Speed to market Ö Clearer, more cost effective marketing message Ö Better able to execute future development of ranges 31
Slide 32: Highly Recognized Branded Diamond
Highly Recognized Branded Diamond Ö 2000 first tested Ö 2002 introduced to all stores Ö Continued development of range Ö cuts Ö products Ö Leo Artisan Ö 2008 improved specification Ö “One of the most recognized diamond cuts in the US” 32
Slide 33: Rapid Innovative Merchandising
Rapid Innovative Merchandising Ö Opportunity identified early 2008 Ö Tested Mothers Day Ö Rolled out for holiday Ö Continued strong performance Valentines and Mothers Day 2009 Ö Expanded range and improved availability for Holiday 2009 33
Slide 34: Traffic-building Opportunity
Traffic-building Opportunity Ö “Build a memory” Ö Tested 2008 Ö Female self-purchasers Ö Jared roll-out summer 2009 Ö Jared TV ad for Holiday 34
Slide 35: Major Initiative For Holiday 2009
Major Initiative For Holiday 2009 Ö Follows the Jane Seymour launch template Ö Different product ‘story’ and price points to Open Hearts Ö Concept: for the person who wants to declare their love for another Ö Shortened time to market Ö Roll-out for Holiday Ö Kay TV support 35
Slide 36: Competitive Advantages Reinforcing Sector Leadership - William Montalto
Competitive Advantages Reinforcing Sector Leadership William Montalto Chief Operating Officer 36
Slide 37: Marketing Leadership
Marketing Leadership Ö Largest budgets Ö Consistent messaging and brand proposition Ö Ability to use national TV advertising Ö Product segments create better opportunity for supplier contributions Ö Logical rationale supports emotional appeal Ö Record of creating new brands 37
Slide 38: Every Kiss Begins With Kay
“Every Kiss Begins With Kay” Ö Gift giving occasion Ö Romance and appreciation Ö Broad customer appeal Ö Strong emotional link to brand name Ö Clear call to action Ö Campaign been running for 10 years 38
Slide 39: He Went to Jared
“He Went to Jared” Ö Raise name awareness Ö Peer approval particularly important in new markets Ö Humor to make the brand accessible Ö Contemporary settings Ö Selection, providing a logical rationale Ö Product element Ö Store visuals: external and internal 39
Slide 40: Leading Integrated Marketing Program
Leading Integrated Marketing Program Ö Proprietary CRM database of over 25 million names Ö integrated mail, telephone and email communications Ö Leading national click & brick specialty jewelry brands Ö customer service focus Ö Catalogs remain important Ö Primary marketing activities supported by ra
Slide 41: Reasons for In-house Credit
Reasons for In-house Credit Ö Important element of jewelry sales transaction Ö Credit risk not eliminated by outsourcing Ö 3rd party funding issues Ö Factors under our control Ö score cards Ö collection strategies Ö customer service Ö Competitive sales advantage Ö problems for smaller players 41
Slide 42: Receivables Initiatives
Receivables Initiatives Ö Further tightening of credit procedures Ö selectively testing increased down payments Ö ceased lending on certain criteria Ö implemented revised scorecards Ö more proactive response to deteriorating trends Ö improved collection strategies Ö Performance largely dependent on
Slide 43: Outlook
Outlook Ö Economic outlook remains very uncertain Ö Great opportunity to increase profitable market share by: Ö focusing on reinforcing competitive strengths Ö take advantage of increased sector rationalization Ö quickly responding to changing conditions Ö use strong balance sheet and cash flow to o
Slide 44: Competitive Advantages Reinforcing Sector Leadership
Competitive Advantages Reinforcing Sector Leadership 44