Add
SIG to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| SIG > SEC Filings for SIG > Form 10-Q on 20-Nov-2012 | All Recent SEC Filings |
20-Nov-2012
Quarterly Report
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q 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 as on assumptions made by and data currently available to management, appear in a number of places throughout this document and include statements regarding, among other things, Signet's results of operation, financial condition, liquidity, prospects, growth, strategies and the industry in which Signet operates. The use of the words "expects," "intends," "anticipates," "estimates," "predicts," "believes," "should," "potential," "may," "forecast," "objective," "plan," or "target," and other similar expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to a number of risks and uncertainties, including but not limited to general economic conditions, the merchandising, pricing and inventory policies followed by Signet, the reputation of Signet and its brands, the level of competition in the jewelry sector, the cost and availability of diamonds, gold and other precious metals, regulations relating to consumer credit, seasonality of Signet's business, financial market risks, deterioration in consumers' financial condition, exchange rate fluctuations, changes in consumer attitudes regarding jewelry, management of social, ethical and environmental risks, security breaches and other disruptions to Signet's information technology infrastructure and databases, inadequacy in and disruptions to internal controls and systems, changes in assumptions used in making accounting estimates relating to items such as extended service plans and pensions, and risks relating to Signet being a Bermuda corporation.
For a discussion of these and other risks and uncertainties which could cause actual results to differ materially from those expressed in any forward-looking statement, see the "Risk Factors" section of Signet's Fiscal 2012 Annual Report on Form 10-K filed with the SEC on March 22, 2012. Signet undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances, except as required by law.
OVERVIEW
Signet is the largest specialty retail jeweler in the US and UK. Signet manages its business as two geographical segments, the US and the UK divisions.
In the US, Signet operated 1,337 stores in 50 states at October 27, 2012. Its store brands are located nationally in malls and off-mall locations as Kay Jewelers ("Kay"), and regionally under a number of well-established mall-based brands. Destination superstores are operated nationwide as Jared The Galleria Of Jewelry ("Jared").
In the UK, Signet's store brands are "H.Samuel," "Ernest Jones," and "Leslie Davis," which are situated in prime "High Street" locations (main shopping thoroughfares with high pedestrian traffic) or major shopping malls. The UK division operated 520 stores at October 27, 2012, including 14 stores in the Republic of Ireland and 3 in the Channel Islands.
Non-GAAP measures
Signet provides certain non-GAAP information in reporting its financial results to give investors additional data to evaluate its operations. Management does not, nor does it suggest investors should, consider such non-GAAP measures in isolation from, or in substitute for, financial information prepared in accordance with US GAAP.
Exchange translation impact
Signet has historically used constant exchange rates to compare period-to-period changes in certain financial data. Management considers this a useful measure for analyzing and explaining changes and trends in Signet's results. The impact of the re-calculation, including a reconciliation to Signet's US GAAP results, is analyzed below.
13 weeks Change at
ended constant
Impact of October 29, 2011 exchange
exchange at constant rates
rate exchange rates (non-
13 weeks ended Change movement (non-GAAP) GAAP)
October 27, October 29,
(in millions, except per share amounts) 2012 2011
Sales:
US $ 575.6 $ 563.0 2.2 % $ - $ 563.0 2.2 %
UK 140.6 147.5 (4.7 )% (3.7 ) 143.8 (2.2 )%
716.2 710.5 0.8 % (3.7 ) 706.8 1.3 %
Cost of sales (480.8 ) (480.6 ) - 2.7 (477.9 ) (0.6 )%
Gross margin 235.4 229.9 2.4 % (1.0 ) 228.9 2.8 %
Selling, general and administrative expenses (222.6 ) (219.6 ) (1.4 )% 1.3 (218.3 ) (2.0 )%
Other operating income, net 39.7 32.2 23.3 % - 32.2 23.3 %
Operating income/(loss):
US 67.9 56.4 20.4 % - 56.4 20.4 %
UK (5.5 ) (5.0 ) (10.0 )% 0.1 (4.9 ) (12.2 )%
Unallocated (9.9 ) (8.9 ) (11.2 )% 0.2 (8.7 ) (13.8 )%
52.5 42.5 23.5 % 0.3 42.8 22.7 %
Interest expense, net (0.9 ) (0.4 ) nm - (0.4 ) nm
Income before income taxes 51.6 42.1 22.6 % 0.3 42.4 21.7 %
Income taxes (16.7 ) (16.0 ) (4.4 )% (0.1 ) (16.1 ) (3.7 )%
Net income $ 34.9 $ 26.1 33.7 % $ 0.2 $ 26.3 32.7 %
Earnings per share - basic $ 0.43 $ 0.30 43.3 % $ - $ 0.30 43.3 %
Earnings per share - diluted $ 0.43 $ 0.30 43.3 % $ - $ 0.30 43.3 %
|
nm - not meaningful
39 weeks Change at
ended constant
Impact of October 29, 2011 exchange
exchange at constant rates
rate exchange rates (non-
39 weeks ended Change movement (non-GAAP) GAAP)
October 27, October 29,
(in millions, except per share amounts) 2012 2011
Sales:
US $ 2,029.0 $ 1,944.0 4.4 % $ - $ 1,944.0 4.4 %
UK 441.1 451.4 (2.3 )% (11.2 ) 440.2 0.2 %
2,470.1 2,395.4 3.1 % (11.2 ) 2,384.2 3.6 %
Cost of sales (1,569.8 ) (1,521.0 ) (3.2 )% 8.1 (1,512.9 ) (3.8 )%
Gross margin 900.3 874.4 3.0 % (3.1 ) 871.3 3.3 %
Selling, general and administrative expenses (727.4 ) (707.9 ) (2.8 )% 3.7 (704.2 ) (3.3 )%
Other operating income, net 119.9 97.0 23.6 % - 97.0 23.6 %
Operating income/(loss):
US 322.9 287.0 12.5 % - 287.0 12.5 %
UK (8.8 ) (2.4 ) nm 0.1 (2.3 ) nm
Unallocated (21.3 ) (21.1 ) (0.9 )% 0.5 (20.6 ) (3.4 )%
292.8 263.5 11.1 % 0.6 264.1 10.9 %
Interest expense, net (2.5 ) (3.8 ) 34.2 % - (3.8 ) 34.2 %
Income before income taxes 290.3 259.7 11.8 % 0.6 260.3 11.5 %
Income taxes (102.2 ) (91.9 ) (11.2 )% (0.2 ) (92.1 ) (11.0 )%
Net income $ 188.1 $ 167.8 12.1 % $ 0.4 $ 168.2 11.8 %
Earnings per share - basic $ 2.27 $ 1.94 17.0 % $ 0.01 $ 1.95 16.4 %
Earnings per share - diluted $ 2.26 $ 1.93 17.1 % $ - $ 1.93 17.1 %
|
nm - not meaningful
Free cash flow
Free cash flow is a non-GAAP measure defined as the net cash (used in)/provided by operating activities less net cash flows used in investing activities. Management considers that it is helpful in understanding how the business is generating cash from its operating and investing activities that can be used to meet the financing needs of the business. Free cash flow does not represent the residual cash flow available for discretionary expenditure.
13 weeks ended 39 weeks ended
October 27, October 29, October 27, October 29,
(in millions) 2012 2011 2012 2011
Net cash (used in)/provided by
operating activities $ (16.6 ) $ (78.5 ) $ 100.2 $ 113.6
Net cash used in investing
activities (46.1 ) (34.7 ) (100.9 ) (73.0 )
Free cash flow $ (62.7 ) $ (113.2 ) $ (0.7 ) $ 40.6
|
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial Statements and the related notes in Part I of this Quarterly Report on Form 10-Q, as well as the financial and other information included in Signet's Fiscal 2012(1) Annual Report on Form 10-K.
Third Quarter Highlights ("third quarter" is the 13 weeks ended October 27, 2012)
• Same store sales: up 1.4%
• Operating income: $52.5 million, up $10.0 million, an increase of 23.5%
• Diluted earnings per share: up by 43.3% to $0.43
Year to Date Highlights
• Same store sales: up 3.2%
• Operating income: $292.8 million, up $29.3 million, an increase of 11.1%
• Diluted earnings per share: up by 17.1% to $2.26
(1) Fiscal 2013 is the year ending February 2, 2013 and Fiscal 2012 is the year ended January 28, 2012.
Certain operating data as a percentage of sales were as follows:
Operating Data
Third Quarter Year To Date
Fiscal Fiscal Fiscal Fiscal
2013 2012 2013 2012
% % % %
Sales 100.0 100.0 100.0 100.0
Cost of sales (67.1 ) (67.6 ) (63.6 ) (63.5 )
Gross margin 32.9 32.4 36.4 36.5
Selling, general and administrative expenses (31.1 ) (30.9 ) (29.4 ) (29.6 )
Other operating income, net 5.5 4.5 4.9 4.1
Operating income 7.3 6.0 11.9 11.0
Interest expense, net (0.1 ) (0.1 ) (0.1 ) (0.2 )
Income before income taxes 7.2 5.9 11.8 10.8
Income taxes (2.3 ) (2.2 ) (4.2 ) (3.8 )
Net income 4.9 3.7 7.6 7.0
|
Third quarter sales
In the third quarter of Fiscal 2013, Signet's same store sales were up 1.4% compared to an increase of 10.6% in the 13 weeks ended October 29, 2011 ("third quarter of Fiscal 2012"). Total sales were $716.2 million compared to $710.5 million in the third quarter of Fiscal 2012, up $5.7 million or 0.8% compared to an increase of 10.7% in the third quarter of Fiscal 2012. eCommerce sales were $19.6 million compared to $14.5 million in the third quarter of Fiscal 2012, up $5.1 million or 35.2%. The breakdown of the sales performance is set out in the table below.
Change from previous year
Total sales at
Same constant Exchange Total Total
store Non same exchange translation sales sales
Third quarter of Fiscal 2013 sales store sales, net(1) rate (2) impact(2) as reported (in millions)
US division 1.2 % 1.0 % 2.2 % - 2.2 % $ 575.6
UK division 2.3 % (4.5 )% (2.2 )% (2.5 )% (4.7 )% $ 140.6
Signet 1.4 % (0.1 )% 1.3 % (0.5 )% 0.8 % $ 716.2
|
(1) Includes all sales from stores not open for 12 months.
(2) Non-GAAP measure, discussed herein.
US sales
In the third quarter of Fiscal 2013, the US division's sales were $575.6 million compared to $563.0 million in the third quarter of Fiscal 2012, up $12.6 million or 2.2%. Same store sales increased 1.2% compared to an increase of 13.9% in the third quarter of Fiscal 2012, driven primarily by Kay same store sales increase of 5.5%. Same store sales at Jared declined 4.1%, primarily due to a one-time watch event in Fiscal 2012 and discontinuation of the associated watch line. The loss of these sales reduced Jared same store sales by approximately 9.6% and US total same store sales by 3.5%. Across both Kay and Jared, same store sales were strong in the fashion jewelry and bridal categories, driven by branded and exclusive merchandise. See the table below for further analysis of sales.
Change from previous year
Same Non same Total Total
store store sales, sales as sales
Third quarter of Fiscal 2013 sales net (1) reported (in millions)
Kay 5.5 % 1.8 % 7.3 % $ 337.2
Jared (4.1 )% 1.6 % (2.5 )% $ 189.8
Regional brands (5.0 )% (5.2 )% (10.2 )% $ 48.6
US division 1.2 % 1.0 % 2.2 % $ 575.6
|
(1) Includes all sales from stores not open for 12 months.
UK sales
In the third quarter of Fiscal 2013, the UK division's sales were $140.6 million compared to $147.5 million in the third quarter of Fiscal 2012, down $6.9 million or 4.7%. Same store sales increased 2.3% compared to a decrease of 0.5% in the third quarter of Fiscal 2012. The primary driver was a strong performance in prestige and fashion watches. See the table below for further analysis of sales.
Change from previous year
Same Non same Total sales at Exchange Total Total
store store sales, constant translation sales as sales
Third quarter of Fiscal 2013 sales net (1) exchange rate(2) impact(2) reported (in millions)
H.Samuel 1.3 % (4.2 )% (2.9 )% (2.5 ) % (5.4 )% $ 74.1
Ernest Jones(3) 3.6 % (5.1 )% (1.5 )% (2.4 ) % (3.9 )% $ 66.5
UK division 2.3 % (4.5 )% (2.2 )% (2.5 ) % (4.7 )% $ 140.6
|
(1) Includes all sales from stores not open for 12 months.
(2) Non-GAAP measure, discussed herein.
(3) Includes stores selling under the Leslie Davis nameplate.
Year to date sales
In the year to date, Signet's same store sales increased 3.2% compared to an increase of 10.2% in the comparable period last year. In the year to date, total sales were $2,470.1 million compared to $2,395.4 million in the 39 weeks ended October 29, 2011, up $74.7 million or 3.1%. eCommerce sales were $65.9 million compared to $49.1 million in the 39 weeks ended October 29, 2011, up $16.8 million or 34.2%. The breakdown of the sales performance is set out in the table below.
Change from previous year
Same Non same Total sales at Exchange Total Total
store store sales, constant translation sales as sales
Year to Date Fiscal 2013 sales net (1) exchange rate(2)(3) impact(2) reported (in millions)
US division 3.5 % 0.9 % 4.4 % - 4.4 % $ 2,029.0
UK division 1.9 % (1.7 )% 0.2 % (2.5 )% (2.3 )% $ 441.1
Signet 3.2 % 0.4 % 3.6 % (0.5 )% 3.1 % $ 2,470.1
|
(1) Includes all sales from stores not open for 12 months.
(2) Non-GAAP measure, discussed herein.
(3) The average US dollar to pound sterling exchange rate for the 39 weeks ended October 27, 2012 was $1.58 compared to $1.62 for the 39 weeks ended October 29, 2011.
US sales
In the year to date, the US division's sales were $2,029.0 million compared to $1,944.0 million in the 39 weeks ended October 29, 2011, up $85.0 million or 4.4%. Same store sales increased 3.5% compared to an increase of 12.8% in the prior year period. The impact of the one-time watch event in Fiscal 2012 and the discontinuation of the associated watch line reduced Jared same store sales by approximately 2.9% and US total same store sales by 1.0%. Branded and exclusive merchandise and bridal continue to be key drivers of US sales. See the table below for further analysis of sales.
Change from previous year
Same Non same Total Total
store store sales, sales as sales
Year to Date Fiscal 2013 sales net (1) reported (in millions)
Kay 6.8 % 1.4 % 8.2 % $ 1,208.4
Jared (0.4 )% 1.6 % 1.2 % $ 643.8
Regional brands (2.8 )% (4.4 )% (7.2 )% $ 176.8
US division 3.5 % 0.9 % 4.4 % $ 2,029.0
|
(1) Includes all sales from stores not open for 12 months.
UK sales
In the year to date, the UK division's sales were $441.1 million compared to $451.4 million in the 39 weeks ended October 29, 2011, down $10.3 million or 2.3%. Same store sales increased 1.9% compared to an increase of 0.4% in the prior year period. Branded jewelry, watches and bridal were key drivers of the sales increase. See the table below for further analysis of sales.
Change from previous year
Same Non same Total sales at Exchange Total Total
store store sales, constant translation sales as sales
Year to Date Fiscal 2013 sales net (1) exchange rate(2)(3) impact(2) reported (in millions)
H.Samuel 1.1 % (1.2 )% (0.1 )% (2.5 )% (2.6 )% $ 232.9
Ernest Jones(4) 2.9 % (2.3 )% 0.6 % (2.5 )% (1.9 )% $ 208.2
UK division 1.9 % (1.7 )% 0.2 % (2.5 )% (2.3 )% $ 441.1
|
(1) Includes all sales from stores not open for 12 months.
(2) Non-GAAP measure, discussed herein.
(3) The average US dollar to pound sterling exchange rate for the 39 weeks ended October 27, 2012 was $1.58 compared to $1.62 for the 39 weeks ended October 29, 2011.
(4) Includes stores selling under the Leslie Davis nameplate.
Cost of sales and gross margin
In the third quarter of Fiscal 2013, the gross margin was $235.4 million or 32.9% of sales, an increase of 50 basis points compared to $229.9 million or 32.4% of sales in the third quarter of Fiscal 2012. Gross margin dollars in the US increased $7.8 million compared to the third quarter of Fiscal 2012, reflecting a gross margin rate increase of 70 basis points. This improvement is primarily a result of an increase in the gross merchandise margin rate of 90 basis points over that of the third quarter of Fiscal 2012, principally due to favorable changes in sales mix. The US net bad debt to US sales ratio was unchanged at 5.4% compared to the third quarter of Fiscal 2012. In the UK, gross margin dollars decreased $2.3 million compared to the third quarter of Fiscal 2012, reflecting a gross margin rate decline of 30 basis points. The decrease in rate is a result of a decline in gross merchandise margin of 130 basis points, caused primarily by customers' preferences for promotional merchandise. Partially offsetting the decline were favorable store occupancy expenses due to store closures and negotiated rent reductions.
For the year to date, the gross margin was $900.3 million or 36.4% of sales compared to $874.4 million or 36.5% of sales in the 39 weeks ended October 29, 2011. Gross margin in the US increased $34.9 million compared to the 39 weeks ended October 29, 2011, primarily as a result of increased sales and an . . .
|
|