Signet Jewelers Limited · NYSE:SIG
Signet Jewelers — Q2 2011 Earnings Presentation
27 slides from Signet Jewelers's earnings presentation, Aug 26, 2010
Slide 1: Fiscal 2011 Q2 Results
Fiscal 2011 Q2 Results August 26, 2010
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: Continued Progress in Executing Strategy
Continued Progress in Executing Strategy Ö Leverage competitive advantages to gain profitable market share Ö Reduce business risk Ö aim to improve operating margin through greater store productivity Ö improve financial strength & flexibility Ö Focus on profit & cash flow maximization Ö Making progre
Slide 4: Sales Performance
Sales Performance Quarter 2 Year to Date US UK Total US UK Total Sales Fiscal 2011 $m 580.8 142.0 722.8 1,247.9 284.9 1,532.8 Sales Fiscal 2010 $m 552.5 158.3 710.8 1,177.4 296.0 1,473.4 Change in sales % % % % % % Same store sales 5.9 (0.5) 4.5 6.6 (0.4) 5.2 Space impact (0.8) (1.5) (0.9) (0.6) (1.
Slide 5: Result of Quarter
Result of Quarter Quarter 2 Year to Date 2011 2010 2011 2010 $m $m $m $m Sales 722.8 710.8 1,532.8 1,473.4 Operating income, net 63.3 46.6 148.8 99.0 Net interest expense (6.0) (8.1) (14.7) (19.1) Income before income taxes 57.3 38.5 134.1 79.9 Income taxes (16.6) (10.9) (41.4) (26.0) Net income 40.
Slide 6: Performance Reconciliation
Performance Reconciliation Quarter 2 Year to Date % of % of sales sales Income before tax Fiscal 2010 $38.5m 5.4% $79.9m 5.4% Gross margin movement $18.3m 2.0% $59.1m 2.6% Selling, general & admin. expense movement $0.1m 0.5% $(5.6)m 0.9% Other operating income movement $(1.7)m (0.3)% $(3.7)m (0.5)%
Slide 7: Free Cash Flow & Net Debt
Free Cash Flow & Net Debt YTD Fiscal YTD Fiscal 2011 2010 $m $m Net Income 92.7 53.9 Adjustments to reconcile to cash flow by operations 50.7 68.4 Net income adjusted for non-cash items1,2 143.4 122.3 Change in operating assets & liabilities 111.2 172.7 Net cash flows used in investing activities (1
Slide 8: US Jewelry
US Jewelry “Further growth from a proven strategy” 8
Slide 9: US Sales Performance
US Sales Performance Sales Same store Change in Change in sales sales ASP1 Q2 Fiscal 2011 Kay $325.4m 2.6% 1.8% 5.0% Regionals $64.7 m 1.1% (7.7)% 0.8% Jared $190.7m 14.0% 17.1% 6.9% US Division $580.8m 5.9% 5.1% 4.7% YTD Fiscal 2011 Kay $712.2m 3.5% 3.0% 6.1% Regionals $141.6m 2.0% (7.0)% (0.4)% Ja
Slide 10: US Operating Income
US Operating Income Q2 Fiscal 2011 YTD Fiscal 2011 Sales $580.8m 5.1% $1,247.9m 6.0% Operating income, net $63.3m 25.6% $154.4m 44.6% Operating margin 10.9% up 180bpts 12.4% up 330 bpts 10
Slide 11: US Drivers of Performance
US Drivers of Performance Ö Strengthened competitive position Ö further enhanced highly motivated sales staff through training Ö merchandising initiatives Ö national television advertising Ö Sector rationalization continues Ö many competitors remain under financial pressure and/or operationally cons
Slide 12: Improvement in Receivables During Q2
Improvement in Receivables During Q2 7.0 15.0 6.0 5.0 12.0 US net bad Average debt 4.0 9.0 monthly as % collection of total 3.0 rate % US sales 6.0 2.0 3.0 1.0 0.0 0.0 Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 12
Slide 13: Improvement in Receivables Year To Date
Improvement in Receivables Year To Date 7.0 15.0 6.0 5.0 12.0 US net bad debt 4.0 Average 9.0 monthly as % of total 3.0 collection rate % US sales 6.0 2.0 3.0 1.0 0.0 0.0 Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 13
Slide 14: US Merchandise Margin Outlook
US Merchandise Margin Outlook Ö Expectation for Fiscal 2011 gross merchandise margin remains broadly similar to Fiscal 2010 Ö Commodity costs Ö Pricing action taken Ö Price promotion activity planned to be similar to Fiscal 2010 14
Slide 15: US Cost Outlook
US Cost Outlook Ö Advertising spend up in Q4 Ö Some planned merit and salary increases implemented Ö TILA impact in H2 Fiscal 2011 expected to be $9 million - $11 million Ö Absence of H2 Fiscal 2010 non-recurring benefit of $3.4 million from change in vacation entitlement policy Ö Cost variance if s
Slide 16: Trading Outlook
Trading Outlook Ö Uncertain economic outlook Ö Ability to respond to changing market conditions Ö limited inventory risk Ö flexibility built into supply chain Ö experienced management supported by sector leading systems Ö Reinforced competitive position within sector Ö first choice of merchandise pr
Slide 17: US Changes in Square Footage
US Changes in Square Footage Kay Change Kay Off in Mall Mall Regionals Jared1 Total Space Jan 2008 789 105 351 154 1,399 10% Jan 2009 795 131 304 171 1,401 4% Openings 52 3 1 7 16 Closures (6) (5) (45)2 - (56) Jan 2010 794 129 260 178 1,361 (1)% Openings (forecast) 3 2 - 2 7 Closures (approx.) (13)
Slide 18: UK Jewelry
UK Jewelry “Making existing space work harder” 18
Slide 19: UK Operating Income
UK Operating Income Q2 Fiscal 2011 YTD Fiscal 2011 Sales Same Change ASP Sales Same Change ASP million store in sales at million store in sales at sales at CER2 sales at CER2 CER1 CER1 H.Samuel $73.5 (1.2)% (2.4)% 11.3% $148.0 (1.6)% (2.8)% 10.8% Ernest Jones $68.5 0.2% 0.2% 9.3% $136.9 1.0% 0.8% 10
Slide 20: UK Drivers of Performance
UK Drivers of Performance Ö Challenging economic environment Ö Charm bracelet category strong Ö Strengthened competitive position Ö focus on staff training Ö using scale to offer unique products Ö continuing to enhance websites Ö Tight control of costs 20
Slide 21: UK Trading Outlook
UK Trading Outlook Ö Challenging outlook Ö Gross merchandise margin expectation continues to be somewhat below Fiscal 2010 Ö Pound sterling operating costs remain tightly controlled Ö Year end space expected to be down 2% 21
Slide 22: Signet Fiscal 2011 Outlook
Signet Fiscal 2011Outlook Ö Operational focus remains on excellence in execution and reinforcing sustainable competitive advantages Ö Positioned to gain profitable market share Ö Free cash flow now expected to be between $225 million and $275 million, above original objective Ö year to date net inco
Slide 23: Regulation G
Regulation G JEWELERS
Slide 24: Fiscal 2011 Sales
Fiscal 2011 Sales Signet 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”. Management considers this to be a use
Slide 25: Q2 Fiscal 2011 Results
Q2 Fiscal 2011 Results Signet 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”. Management considers this to be
Slide 26: Net Cash or Net Debt
Net Cash or 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: July 31, January August 1, 2010 30, 2010 2009 $million $millio
Slide 27: 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