HAMILTON, Bermuda, March 25 /PRNewswire/ -- Signet Jewelers Ltd
(NYSE and LSE: SIG), the world's largest specialty retail jeweler,
today announced its full year unaudited results for the 52 weeks
ended January 31, 2009. Results for the 52 weeks ended January 31,
2009 ("fiscal 2009") -- Group same store sales: down 8.2% -- Group
total sales: $3,344.3 million, down 5.7% at constant exchange
rates(1) -- Income before goodwill impairment, relisting costs and
income taxes: $200.9 million(2) -- Goodwill impairment charge:
$516.9 million -- Reported loss before income taxes: $326.5 million
-- Basic loss per share: $4.62 -- Adjusted basic earnings per
share: $1.57(2) (1) See note 11. (2) Before charging $516.9 million
impairment of goodwill and $10.5 million of relisting costs. These
financial measures are supplemental non-GAAP measures which
management believe useful to understanding the Group's performance.
See note 11 for a reconciliation to reported financial measures.
Group Strategy -- Enhance position as strongest middle market
specialty retail jeweler -- Reduce business risk -- Focus on profit
& cash flow maximization to further strengthen balance sheet
Group Objectives for the 52 weeks ending January 30, 2010 ("fiscal
2010") -- $100 million US cost reduction program -- Significant
working capital reduction -- Capital expenditure of about $55
million -- $175 million to $225 million cash inflow before
financing activities Terry Burman, Group Chief Executive,
commented: "Against a very challenging retail environment, we
capitalized on the Group's competitive strengths to outperform our
middle market competitors and to successfully execute our strategy
of maximizing gross merchandise margin dollars. As sector
rationalization continues at an accelerated pace, proven
management, a strong balance sheet and sustainable competitive
advantages are important considerations in relationships with
staff, suppliers and landlords. As we enter fiscal 2010, our prime
objective is to strengthen further the Group's industry leading
position so as to be able to benefit from the reduced capacity
within the specialty jewelry sector and to be well positioned for
the eventual consumer recovery. To reinforce our position, we also
aim to reduce net debt by around $200 million in fiscal 2010. Given
the very challenging environment, the Group has made an encouraging
start to fiscal 2010. In the US, same store sales for the first
seven weeks were down by 2.7% against the comparable period in
fiscal 2009, with Valentine's Day trading stronger than the
remainder of the period. The change in timing of Easter had an
adverse impact of about 1%. Gross merchandise margin was
meaningfully up, reflecting the benefit of the price increases
implemented in the first quarter of fiscal 2009 and favorable mix
changes, which more than offset the increase in the cost of gold.
In the UK, same store sales for the first seven weeks were down
3.8%, with the timing of Easter having limited impact. Gross
merchandise margin was up slightly, reflecting higher prices
offsetting increased merchandise costs. However, pressure on UK
gross merchandise margin is expected to build during the rest of
the year due to higher gold costs and the weakness of the pound
sterling against the US dollar." Enquiries: Terry Burman, Group
Chief Executive +1 441 296 5872 Walker Boyd, Group Finance Director
+1 441 296 5872 Michael Henson, Taylor Rafferty +1 212 889 4350
Jonathan Glass, Brunswick +44 (0) 20 7404 5959 Signet operated
1,959 specialty retail jewelry stores at January 31, 2009; these
included 1,401 stores in the US, where the Group trades as "Kay
Jewelers", "Jared The Galleria Of Jewelry", and under a number of
regional names. At that date Signet operated 558 stores in the UK,
where the Group trades as "H.Samuel", "Ernest Jones", and "Leslie
Davis". Further information on Signet is available at
http://www.signetjewelers.com/. See also http://www.kay.com/,
http://www.jared.com/, http://www.hsamuel.co.uk/ and
http://www.ernestjones.co.uk/. Results conference call details
There will be a conference call today at 9.00 a.m. EDT (1.00 p.m.
GMT and 6.00 a.m. Pacific Time) and a simultaneous audio webcast
and slide presentation available at http://www.signetjewelers.com/.
The slides are available to be downloaded from the website ahead of
the conference call. To help ensure the conference call begins in a
timely manner, could all participants please dial in 5 to 10
minutes prior to the scheduled start time. The call details are: US
dial-in: +1 718 354 1171 US 48hr. replay: +1 718 354 1112 Pass
code: 4086123# European dial-in: +44 (0) 20 7138 0816 European
48hr. replay: +44 (0) 20 7806 1970 Pass code: 4086123# GROUP
FINANCIAL REVIEW Income Statement In fiscal 2009, the Group loss
before income taxes was $326.5 million (fiscal 2008: income $336.2
million), including a goodwill impairment charge of $516.9 million
and non-recurring relisting costs of $10.5 million, see below for
further details. Before these items, the Group's income before
income taxes was $200.9 million, see note 11. Same store sales were
down 8.2%. Total sales were 8.8% lower at $3,344.3 million (fiscal
2008: $3,665.3 million), down 5.7% at constant exchange rates, see
note 11. The average pound sterling to US dollar exchange rate for
the period was 1/$1.75 pounds (fiscal 2008: 1/$2.00 pounds). The
components of the change in sales are set out below: Change in
sales US UK Group % % % Same store sales (9.7) (3.3) (8.2) Change
in net new store space 3.4 (0.5) 2.5 Exchange translation - (12.0)
(3.1) Total sales growth as reported (6.3) (15.8) (8.8) Net
operating income excluding goodwill impairment and relisting costs
was $230.1 million (fiscal 2008: $358.7 million), see note 11, and
operating margin was 6.9% (fiscal 2008: 9.8%). On a reported basis
there was a net operating loss of $297.3 million. The factors
influencing the lower operating margin are set out below: Change in
operating margin US UK Group % % % Fiscal 2008 operating margin 9.8
11.4 9.8(1) Gross merchandise margin movement 1.2 - 0.9 Expense
deleverage (3.8) (2.6) (3.5) Impact of new store space (0.4) -
(0.3) Fiscal 2009 operating margin before Goodwill impairment and
relisting costs 6.8 8.8 6.9(1) (1) Includes unallocated costs,
principally Group costs. Goodwill impairment In prior years, the
Group prepared its accounts under International Financial Reporting
Standards ("IFRS") and reflected on its balance sheet only $30.6
million of goodwill relating to an acquisition made in 2000.
Following the move of listing to the New York Stock Exchange
("NYSE") and the adoption of US Generally Accepted Accounting
Principles ("US GAAP"), goodwill of $486.3 million relating to
acquisitions made by the Group in 1990 or earlier was also required
to be reflected on the balance sheet. Under US GAAP, the Group is
required to undertake an annual goodwill impairment test at its
year end or when there is a triggering event. In fiscal 2009, in
addition to the annual impairment review there were a number of
triggering events in the fourth quarter due to a significant
decline in profitability reflecting the impact of the economic
downturn on the Group's operations and an even greater decline in
its share price resulting in a substantial discount of the market
capitalization to tangible net asset value (that is shareholders'
funds excluding intangible assets). An evaluation of the recorded
goodwill was undertaken and it was determined that it was impaired.
Accordingly, to reflect the impairment, the Group recorded a
non-cash charge of $516.9 million, which eliminated the value of
goodwill on its balance sheet. The goodwill write-off has no impact
on the Group's borrowing agreements or the net tangible assets of
the Group. Relisting costs On September 11, 2008 the primary
listing of the Group moved to the NYSE and the parent company of
the Group became Signet Jewelers Limited, a Bermuda domiciled
company. The non-recurring costs associated with these changes
amounted to $10.5 million. Group central costs, financing items and
taxation Group central costs were $13.0 million in fiscal 2009
(fiscal 2008: $15.8 million), largely due to the movement in the
pound sterling to US dollar exchange rate, as well as a foreign
exchange gain more than offsetting an underlying increase in costs.
Net financing costs rose to $29.2 million (fiscal 2008: $22.5
million), the increase being primarily due to higher levels of net
debt. The income tax charge was $67.2 million (fiscal 2008: $116.4
million), an underlying effective tax rate before goodwill
impairment and relisting costs of 33.5% (fiscal 2008: 34.6%). The
decline of 1.1% in the underlying effective rate reflected a lower
proportion of profits from the US division and a reduced level of
expenditure disallowable for tax than in fiscal 2008. It is
expected that, subject to the outcome of various uncertain tax
positions, the Group's underlying effective tax rate in fiscal 2010
will be approximately 36%, primarily due to an anticipated higher
proportion of expenditure disallowable for tax in relation to
income before tax. Net income, earnings per share and dividends The
net loss for fiscal 2009 was $393.7 million (fiscal 2008: $219.8
million net income). Excluding the impairment to goodwill and
relisting costs, net income for fiscal 2009 was $133.7 million
(fiscal 2008: $219.8 million), see note 11. On a reported basis,
both basic and diluted loss per share was $4.62 (fiscal 2008
earnings per share: basic $2.58 and diluted $2.55). Basic and
diluted earnings per share excluding the impairment to goodwill and
relisting costs were both $1.57, see note 11. In the light of
economic prospects and financial market conditions, as well a focus
on debt reduction, the Board concluded that it is not currently
appropriate to pay dividends. This policy is reflected in the
amended borrowing agreements. Cash flow and net debt Set out below
is a summary of the Group's cash flows for fiscal 2009 and fiscal
2008: Fiscal Fiscal 2009 2008 ---- ---- ($million) Net (loss) /
income (393.7) 219.8 Adjustments to reconcile to cash flows
provided by operations 653.5 113.8 ----- ----- Cash flows provided
by operations 259.8 333.6 Changes in operating assets and
liabilities (95.4) (192.8) ------ ------- Net cash from operating
activities 164.4 140.8 Net cash flows used in investing activities
(113.3) (139.4) ------- ------- Free cash flow 51.1 1.4 Dividends
paid (123.8) (123.9) Net change in common shares 0.1 (23.0) ---
------ (72.6) (145.5) Proceeds of debt during year 160.6 31.1 -----
---- Net increase / (decrease) in cash and cash equivalents 88.0
(114.4) ---- ------- In fiscal 2009, net cash flow provided by
operating activities increased to $164.4 million (fiscal 2008:
$140.8 million), although there was a net loss of $393.7 million
(fiscal 2008: $219.8 million net income). The adjustments for
non-cash items were $653.5 million (fiscal 2008: $113.8 million)
and included the impairment to goodwill of $516.9 million. The
adjustment for depreciation and amortization in fiscal 2009 at
$114.5 million was similar to fiscal 2008. Therefore cash flow
provided by operations was $259.8 million (fiscal 2008: $333.6
million). In fiscal 2009, there was a much smaller outflow from
operating assets and liabilities of $95.4 million (fiscal 2008:
outflow of $192.8 million). There was a decrease in inventories of
$12.7 million compared to an increase of $96.8 million in fiscal
2008, given the much reduced space growth in the US division and
tight control of inventory on both sides of the Atlantic. In
addition, the level of accounts receivable reduced by $20.5
million, reflecting the decline in sales in the US division partly
offset by a slower collection rate of outstanding receivables
(fiscal 2008: $56.2 million increase). There was also a substantial
increase in the adverse impact of exchange rate changes on currency
swaps of $49.6 million (fiscal 2008: $1.9 million). The Group has
historically swapped pound sterling deposits into US dollars on a
short term basis to reduce the level of US dollar debt. The size of
such cash deposits fluctuates during the year and also reflects an
historic restriction on dividend payments by the UK division. In
the fourth quarter of fiscal 2009, following a ruling by the High
Court of Justice in England & Wales, the Group had a greatly
increased ability to reduce the size of the pound sterling cash
deposits on a permanent basis by paying dividends up through the
corporate structure. Advantage was taken of this to significantly
reduce the future exposure of the Group's liquidity position to
changes in the pound sterling to US dollar exchange rate. Net cash
flow used in investing activities was $113.3 million (fiscal 2008:
$139.4 million) as a result of reduced store investment in the US
partly offset by an increased number of Ernest Jones
refurbishments. Free cash inflow in fiscal 2009 was $51.1 million
(fiscal 2008: $1.4 million). Dividends of $123.8 million were paid
(fiscal 2008: $123.9 million). The net change in common shares was
minimal (fiscal 2008: outflow $23.0 million). Net debt Net debt at
January 31, 2009 was $470.7 million (February 2, 2008: $374.6
million). Of the $96.1 million increase in net debt (fiscal 2008:
$141.4 million increase), $23.5 million (fiscal 2008: $4.1 million
decrease) was due to the effect of exchange rate changes. Group
gearing (that is the ratio of net debt to shareholders' equity
excluding goodwill) at January 31, 2009 was 29.2% (February 2,
2008: 21.2%). The peak level of net debt in fiscal 2009 was about
$670 million (fiscal 2008: about $620 million). Amended borrowing
agreements Discussions to make amendments to, and reduce the size
of, the Group's borrowing facilities were initiated by Signet in
November 2008, in light of a significant deterioration in the
economic environment. The goal of the discussions was to provide
the Group with additional financial flexibility in the medium term,
while more appropriately structuring the borrowing facilities
required by the significantly lower level of net debt now expected,
based on the Group's revised operating and expansion strategy. A
satisfactory outcome to these discussions was recently achieved and
details of the amended agreements were announced on March 16, 2009.
In accordance with that announcement, a prepayment of $100 million
of the notes at par plus accrued interest was made on March 18,
2009. Signet was in compliance with the terms of the original
agreements in respect of fiscal 2009. FISCAL 2009 OPERATING REVIEW
US Division (circa 76% of Group sales) In a very challenging retail
environment, US same store sales were down 9.7% and total sales
were $2,536.1 million (fiscal 2008: $2,705.7 million). Sales
performance was primarily driven by the difficult economic
conditions with same store sales falling by 6.0% in the first three
quarters. Following the sharp deterioration in consumer sentiment
in mid September, and a further decline in early December, same
store sales in the fourth quarter were 16.1% lower than the
comparable quarter in fiscal 2008. Spending by higher income
consumers was particularly weak in the fourth quarter, and this was
reflected in the performance of Jared. Operating income before
goodwill impairment was $171.6 million (fiscal 2008: $265.2
million), see note 11. The operating margin was 6.8% (fiscal 2008:
9.8%), see table above for an analysis of the movement. Gross
merchandise margin rate was ahead of expectations and increased by
120 basis points compared to last year, with a particularly strong
performance in the fourth quarter. This reflected price increases
implemented during the first quarter of fiscal 2009 and favorable
changes in mix resulting from management initiatives, including the
planned expansion of exclusive merchandise, which more than offset
commodity cost increases. There was a negative impact of 380 basis
points caused by the deleverage of the underlying cost base due to
the decline in same store sales, which included the adverse
movement in performance of the receivables portfolio, and an
unfavorable impact of 40 basis points from new store space. During
fiscal 2009, training focused on product knowledge and developing
selling skills appropriate for the more challenging marketplace.
Enhanced in-store technology reduced administrative burdens and
improved the efficiency of store, district and regional management.
Benefits were seen in compliance monitoring, store feedback and the
ability to identify store and divisional level opportunities to
enhance training. Further improvements to repair services, an
important driver of footfall and customer confidence, were also
implemented. Reflecting lower sales volumes, store staff hours were
reduced, and divisional head office staffing levels were decreased
through attrition. The average unit selling price was flat in
fiscal 2009 compared to fiscal 2008. During the first nine months
of fiscal 2009, the increase was 7% (mall brands up by 7% and Jared
up by 5%), reflecting the price increases implemented in the first
quarter. However, in the fourth quarter the consumer was seen to be
trading down and the average unit selling price decreased by 10%
(mall brands down by 7% and Jared down by 4%). The Jared average
unit price excludes the impact of the launch of a new charm
bracelet range in some stores. While all major merchandise
categories were down over the year on a same store basis, the
bridal category, which accounts for between 45% and 50% of sales,
performed better than average, as did the proprietary Leo diamond
range. The US division also successfully launched new, exclusive
ranges, such as a specially designed collection by Jane Seymour and
merchandise from Le Vian. The US division's merchandising and
inventory expertise enabled it to respond promptly to the rapid and
substantial changes in customer buying patterns in the fourth
quarter, and to realign inventory levels to plan by the end of
fiscal 2009. To reflect lower anticipated sales levels, marketing
expenditure was concentrated on the most productive channels and
brands. As a result of the unexpected sharp decline in fourth
quarter sales, the ratio of gross marketing spend to sales during
fiscal 2009 was again above planned levels, at 7.4% (fiscal 2008:
7.5%). Dollar gross marketing expenditure decreased by 7.6% to
$188.4 million (fiscal 2008: $204.0 million). Marketing efforts
were focused on national television advertising for Kay and Jared,
resulting in their 'share of voice' growing. In addition, the
promotional cadence was increased, particularly during the fourth
quarter. In the third quarter an e-commerce capability was added to
the Jared website. The net bad debt charge at 4.9% of total sales
during fiscal 2009 (fiscal 2008: 3.4%) was well above the tight
range of the past ten years. The increase in net bad debt was
partially offset by higher income from the receivables portfolio.
Credit participation increased somewhat to 53.2% during fiscal 2009
(fiscal 2008: 52.6%), reflecting a higher level of applications
offset by a significant increase in the level of credit
applications rejected. The fall in credit acceptance rates followed
management action to reduce exposure to particular customer
attribute groups, and a lower proportion of customers satisfying
the US division's credit requirements. Overall, the expense base in
fiscal 2009 was similar to fiscal 2008, excluding the impact of new
space. Tight control of costs offset the increase in net bad debt
charge and inflationary cost increases in occupancy, utilities,
freight and staff wage rates. Actions taken included reductions in
store staff hours to partly reflect lower transaction volumes,
significantly lower levels of radio advertising and savings in
central costs. Given the deteriorating environment, and the Group's
strict investment criteria, action was taken in early fiscal 2009
to sharply slow the rate of net store space growth. This was
achieved by reducing the number of stores opened and increasing
store closures as leases expired. Net store space in fiscal 2009
increased by a little under 4% (fiscal 2008: 10%), see table below
in Fiscal 2010 Group Strategy and Objectives for details. Capital
expenditure in new and existing stores was $56.3 million (fiscal
2008: $88.1 million). Working capital investment, that is inventory
and receivables, associated with space growth was $66.5 million
(fiscal 2008: $118.8 million). UK Division (circa 24% of Group
sales) In fiscal 2009, same store sales decreased by 3.3% (H.Samuel
down by 2.6% and Ernest Jones down by 4.0%). Total sales decreased
by 3.8% at constant exchange rates and were $808.2 million as
reported (fiscal 2008: $959.6 million). In the first nine months of
fiscal 2009, same store sales increased by 0.8% (H.Samuel up by
1.1% and Ernest Jones up by 0.5%). As in the US, the fourth quarter
saw a sharp deterioration in consumer sentiment with the upper end
consumer being particularly weak. As a result, same store sales in
the fourth quarter declined by 9.2% (H.Samuel down by 7.8% and
Ernest Jones by 11.0%). Net operating income before goodwill
impairment was $71.5 million (fiscal 2008: $109.3 million), see
note 11. The operating margin was 8.8% (fiscal 2008: 11.4%), see
table above for an analysis of the movement. The gross merchandise
margin rate was unchanged, with price increases offsetting adverse
mix changes, greater promotional activity and higher commodity
costs. There was a negative impact of 260 basis points reflecting
the deleverage of the underlying cost base as a result of the
decline in same store sales. The average unit selling price in
fiscal 2009 increased by 9%, reflecting price increases implemented
in late fiscal 2008 and early fiscal 2009 and merchandise mix
changes. The consumer was more cautious in the fourth quarter, with
the average unit selling price in the first nine months up by 12%
over the comparable period and up by only 4% in the fourth quarter.
The watch category outperformed, particularly the prestige ranges
in Ernest Jones. The number of key volume lines were increased and
performed well. Good inventory management procedures and a better
than expected performance in January 2009, resulted in inventory
being at the planned level at year end. Gross marketing spend was
reduced to $22.1 million in fiscal 2009 (fiscal 2008: $29.2
million), the decrease at constant exchange rates was 13%, the
ratio to sales being 2.8% (fiscal 2008: 3.1%). H.Samuel continued
to use television advertising in the fourth quarter and also tested
customer relationship marketing. For Ernest Jones, expenditure was
focused on extending customer relationship marketing, which
management believes has proven effective. The e-commerce
capabilities of both H.Samuel and Ernest Jones were enhanced during
the year. Overall, a tight control of expenses resulted in the
underlying cost base in fiscal 2009 being broadly similar to that
in fiscal 2008. Actions taken included reductions in staff costs
and changes in the marketing strategy for Ernest Jones. Total store
capital expenditure was $32.2 million (fiscal 2008: $18.6 million).
There was a return to a more normal refit cycle for Ernest Jones
following a successful test of a new store design in fiscal 2008
and an increase in store openings because of the completion of
major new shopping centers in London, Liverpool and Bristol. At
January 31, 2009, 60% of the UK division's stores (February 2,
2008: 50% of stores) were trading in the open consumer oriented
format. At the year end, there were 352 H.Samuel stores (February
2, 2008: 359) and 206 Ernest Jones (February 2, 2008: 204). FISCAL
2010 GROUP STRATEGY & OBJECTIVES Introduction Fiscal 2009,
particularly the fourth quarter, was very challenging. As a result
the Board reviewed its strategy and made significant adjustments to
reflect the changed economic environment. The Group's revised
strategy is to enhance its position as the strongest operator in
the middle market specialty retail jewelry sector and capitalize on
the decrease in competition when consumer expenditure begins to
recover. This involves maintaining a balance between the
sustainable competitive advantages that the Group has established
and the need to reduce risk, maximize profit and strengthen the
balance sheet through cash generation. Sales will continue to be
driven by leveraging the Group's competitive strengths with the
objective of maximizing gross merchandise margin dollars. In late
fiscal 2009 and early fiscal 2010, a meaningful cost saving program
was implemented and significant inventory reductions are planned to
align both more closely with the lower sales levels. Capital
expenditure has also been substantially reduced, with decreased
spending planned on both existing operations and space growth. New
store openings have been largely eliminated. In the current
marketplace it is preferable, and a much lower risk strategy, to
grow profitable market share by focusing on sales productivity in
existing stores. While the level of expenditure on jewelry is
discretionary, the expression of romance and appreciation through
bridal jewelry and gift giving remain very important human needs,
as is self reward. Central to the Group's success is helping to
satisfy those needs. Therefore the training of staff so that they
can better understand the consumers' requirements, communicate the
value of the merchandise selected and 'close the sale' remains a
high priority. The Group's supply chain and merchandising
expertise, combined with its size and balance sheet strength,
enables it to increase differentiation in the marketplace through
its exclusive merchandise, while also offering a compelling value
proposition in more basic ranges. The Group's marketing is
effective and cost efficient, with its leading 'share of voice'
leveraged through national television advertising and customer
relationship marketing, both of which benefit from scale. At a time
when the specialty jewelry sector is undergoing an accelerated rate
of consolidation as weak competitors exit the market, these
advantages become even more important. US The current trading
environment remains extremely challenging. The prospects for same
store sales remain very uncertain and will depend largely on
consumer confidence and concerns about employment. For fiscal 2010,
the gross merchandise margin is expected to be at least at the
level achieved in fiscal 2009, with the increase in the cost of
gold offset by supply chain efficiencies, particularly in the
sourcing of diamonds. In the first quarter it is expected that
there will be some benefit from price increases implemented in
early fiscal 2009 as well as favorable mix changes. Against the
unfavorable macro-economic background, a substantial cost reduction
program has been implemented, with the objective of reducing costs
by $100 million in fiscal 2010. There will also be a one off
benefit of $13 million due to a change in vacation policy. However,
expenses will be adversely affected by underlying inflation and
anticipated further increases in net bad debt. The net change in
space is expected to have little impact on cost. Action is also
being taken to align inventory appropriately to the reduced level
of sales by lowering the amount of merchandise purchased. The
target is to decrease the investment in inventory by about $90
million during fiscal 2010. A further slowing in the rate of new
store openings will take place in fiscal 2010, and the number of
store closures is anticipated to be a little higher than in fiscal
2009. This will result in a marginal decline in store space (see
table below). There will also be a reduced level of store
refurbishment and investment in information technology. Capital
expenditure in fiscal 2010 is anticipated to be about $40 million,
significantly lower than in fiscal 2009. Kay Net Kay Off Space Mall
Mall Regionals Jared(a) Total Change January 2008 789 105 351 154
1,399 10% Opened 27(b) 30 3 17 77 Closed (21) (4) (50)(b) - (75)
January 2009 795 131 304 171 1,401 4% Openings (planned) 3 3 1 8 15
Closures (approx.) (13) (5) (57) - (75) January 2010 (approx.) 785
129 248 179 1,341 (1)% (a) A Jared store is equivalent in size to
just over four mall stores. (b) Includes 14 rebranded stores. UK
The UK marketplace also remains very challenging. The outlook for
sales in the remainder of the year is uncertain. Gross merchandise
margin in fiscal 2010 is expected to be somewhat below that
achieved in fiscal 2009, primarily reflecting a higher cost of gold
and the weakness of sterling, partly being offset by price
increases. Action has been taken with the objective of maintaining
costs broadly in line with those of fiscal 2009. These initiatives,
such as lower staffing levels in the divisional central functions,
realigned marketing expenditure and reduced store operating
expense, have offset a number of adverse factors, including higher
property related charges and an increase in pension costs arising
as a result of the pension deficit being amortized through the
income statement. Reflecting lower sales, the objective is to
reduce the investment in inventory by about $15 million during
fiscal 2010. A further small reduction in net store space is
expected in fiscal 2010, with the number of store closures lower
than in fiscal 2009 and one new store opening planned (see table
below). Capital expenditure in fiscal 2010 is anticipated to be
approximately $15 million (fiscal 2009: $38.9 million), due to a
slower pace of Ernest Jones refits in the current environment.
H.Samuel Ernest Jones(a) Total Open Store Format Ernest H.Samuel
Jones(a) January 2008 359 204 563 41% 9% Opened 4 5 9 Closed (11)
(3) (14) January 2009 352 206 558 45% 15% Openings (planned) - 1 1
Closures (planned) (7) (2) (9) January 2010 345 205 550 46% 18% (a)
Includes stores trading as Leslie Davis. Group cash flow objectives
It is the Group's objective to achieve a net cash inflow during
fiscal 2010 of between $175 million and $225 million. While net
income is expected to be lower than in fiscal 2009, it is
anticipated that working capital will be significantly reduced,
with planned inventory falling by about $100 million. Capital
expenditure in fiscal 2010 is budgeted to be about $55 million,
compared to $114.9 million in fiscal 2009, with a small decrease in
space planned in both the US and UK divisions. In line with the
amended borrowing agreements, no dividends will be paid in fiscal
2010, nor will any share repurchases be made. In addition, the
increase in borrowing to the seasonal peak in November will be
meaningfully less than in recent years. Excluding fees and
associated costs of $9.5 million arising from the negotiations of
the amended borrowing agreements, net interest expense is forecast
to be $3 million to $5 million higher than in fiscal 2009. CURRENT
TRADING Given the very challenging environment, the Group has made
an encouraging start to fiscal 2010. In the US, same store sales
for the first seven weeks were down by 2.7% against the comparable
period in fiscal 2009, with Valentine's Day trading stronger than
the remainder of the period. The change in timing of Easter had an
adverse impact of about 1%. Gross merchandise margin was
meaningfully up, reflecting the benefit of the price increases
implemented in the first quarter of fiscal 2009 and favorable mix
changes, which more than offset the increase in the cost of gold.
In the UK, same store sales in the first seven weeks were down
3.8%, with the timing of Easter having limited impact. Gross
merchandise margin was up slightly, reflecting higher prices
offsetting increased merchandise costs. However, pressure on UK
gross merchandise margin is expected to build during the rest of
the year due to higher gold costs and the weakness of the pound
sterling against the US dollar. INVESTOR RELATIONS PROGRAM DETAILS
There will be a conference call today at 9.00 a.m. EDT (1.00 p.m.
GMT and 6.00 a.m. Pacific Time) and a simultaneous audio webcast
and slide presentation available at http://www.signetjewelers.com/.
The slides are available to be downloaded from the website ahead of
the conference call. To help ensure the conference call begins in a
timely manner, could all participants please dial in 5 to 10
minutes prior to the scheduled start time. The call details are: US
dial-in: +1 718 354 1171 US 48hr. replay: +1 718 354 1112 Pass
code: 4086123# European dial-in: +44 (0) 20 7138 0816 European
48hr. replay: +44 (0) 20 7806 1970 Pass code: 4086123# Citi Retail
Reverse Roadshow, Friday, March 27, 2009 Signet will be taking part
in the Citi Retail Reverse Roadshow on Friday, March 27, 2009 in
London, UK. Present will be Walker Boyd, Group Finance Director and
Tim Jackson, Investor Relations Director. Morgan Stanley Retail
Field Trip, Wednesday, April 1, 2009 Signet will be taking part in
the Morgan Stanley Retail Field Trip on Wednesday, April 1, 2009 in
Phoenix, Arizona. Present will be Walker Boyd, Group Finance
Director and Mark Light, US Divisional Chief Executive. There will
be a simultaneous audio webcast at http://www.signetjewelers.com/ .
First quarter sales First quarter sales figures are expected to be
announced on May 7, 2009. This release includes 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 made by and
data currently available to management, appear in a number of
places throughout this release and include statements regarding,
among other things, our results of operation, financial condition,
liquidity, prospects, growth, strategies and the industry in which
the Group operates. Our use of the words "expects," "intends,"
"anticipates," "estimates," "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 the Group, the reputation of the Group, the
level of competition in the jewelry sector, the price and
availability of diamonds, gold and other precious metals,
seasonality of the Group's business and financial market risk. For
a discussion of these and other risks and uncertainties which could
cause actual results to differ materially, see the "Risk and Other
Factors" section of the Annual Report & Accounts of Signet
Group plc furnished as an exhibit to its Report on Form 6-K
furnished with the U.S. Securities and Exchange Commission on May
1, 2008 and other filings made by the Company with the Commission.
Actual results may differ materially from those anticipated in such
forward-looking statements even if experience or future changes
make it clear that any projected results expressed or implied
therein may not be realized. The Company undertakes no obligation
to update or revise any forward-looking statements to reflect
subsequent events or circumstances. Condensed consolidated income
statements for the 52 weeks ended January 31, 2009 13 weeks 13
weeks 52 weeks 52 weeks ended ended ended ended January 31,
February 2, January 31, February 2, 2009 2008 2009 2008 $m $m $m $m
Notes Sales 1,123.6 1,384.8 3,344.3 3,665.3 2 Cost of sales (745.1)
(849.2) (2,264.2) (2,414.6) Gross margin 378.5 535.6 1,080.1
1,250.7 Selling, general and administrative expenses (260.3)
(340.2) (969.2) (1,000.8) Impairment of goodwill (516.9) - (516.9)
- Relisting costs - - (10.5) - Other operating income, net 32.2
29.5 119.2 108.8 Operating (loss)/ income, net (366.5) 224.9
(297.3) 358.7 2 Interest income 0.5 1.6 3.6 6.3 Interest expense
(7.6) (7.8) (32.8) (28.8) (Loss)/income before income taxes (373.6)
218.7 (326.5) 336.2 Income taxes (50.4) (75.7) (67.2) (116.4) 4 Net
(loss)/income (424.0) 143.0 (393.7) 219.8 (Loss)/earnings per share
- basic $(4.97) $1.68 $(4.62) $2.58 5 - diluted $(4.97) $1.65
$(4.62) $2.55 5 All of the above relate to continuing activities
attributable to equity shareholders. The accompanying notes are an
integral part of these condensed consolidated financial statements.
Consolidated balance sheets at January 31, 2009 January February
31, 2009 2, 2008 $m $m Notes Assets Current assets: Cash and cash
equivalents 96.8 41.7 Accounts receivable, net 825.2 848.2 Other
receivables 81.8 40.5 Other current assets 45.0 38.8 Inventories
1,364.4 1,453.6 7 Total current assets 2,413.2 2,422.8 Non-current
assets: Property, plant and equipment, net of accumulated
depreciation of $572.6 million, and $642.8 million, respectively
452.1 489.2 Goodwill - 556.0 Other intangible assets, net 23.9 22.0
Other assets 9.9 34.8 Deferred tax assets 54.8 74.6 Total assets
2,953.9 3,599.4 2 Liabilities and Shareholders' equity Current
liabilities: Loans and overdrafts 187.5 36.3 Accounts payable 42.2
89.3 Accrued expenses and other current liabilities 274.8 268.2
Deferred revenue 120.1 125.3 8 Deferred tax liabilities 56.9 47.9
Income taxes payable 55.8 79.5 Total current liabilities 737.3
646.5 Non-current liabilities: Long-term debt 380.0 380.0 Other
liabilities 71.5 96.4 Deferred revenue 142.5 149.7 8 Retirement
benefit obligation 12.9 5.6 Total liabilities 1,344.2 1,278.2
Commitments and contingencies (note 9) Shareholders' equity: Common
stock of $0.18 par value: authorized 500 million shares, 85.3
million shares issued and outstanding (2008: 0.9c par value:
authorized 5,929.9 million shares, 1,705.5 million shares issued
and outstanding) 15.3 15.3 Deferred stock, 1 pound par value:
authorized nil shares, issued and outstanding nil shares (2008:
authorized 50,000 shares, issued and outstanding 50,000 shares) -
0.1 Additional paid-in capital 164.5 162.5 Other reserves 235.2
235.2 Treasury stock: 0.1 million shares of $0.18 par value (2008:
1.7 million shares of 0.9c par value) (10.7) (10.8) Retained
earnings 1,400.9 1,918.4 Accumulated other comprehensive
(loss)/income (195.5) 0.5 Total shareholders' equity 1,609.7
2,321.2 Total liabilities and shareholders' equity 2,953.9 3,599.4
The accompanying notes are an integral part of these condensed
consolidated financial statements. Condensed consolidated
statements of cash flows for the 52 weeks ended January 31, 2009 13
weeks 13 weeks 52 weeks 52 weeks ended ended ended ended January
February January February 31, 2009 2, 2008 31, 2009 2, 2008 $m $m
$m $m Cash flows from operating activities: Net (loss)/income
(424.0) 143.0 (393.7) 219.8 Adjustments to reconcile net
(loss)/income to cash flows provided by operations: Depreciation of
property, plant and equipment 27.8 33.7 108.1 109.2 Amortization of
other intangible assets 2.2 1.4 6.4 4.7 Impairment of goodwill
516.9 - 516.9 - Pension (income)/expense (0.6) (0.6) 0.2 (2.0)
Stock-based compensation (income)/expense (0.1) (2.0) 0.7 (3.4)
Deferred taxation 19.6 6.9 24.7 6.9 Other non-cash movements (1.4)
(1.1) (2.8) (3.0) (Profit)/loss on disposal of property, plant and
equipment (0.8) 1.4 (0.7) 1.4 Changes in operating assets and
liabilities: (Increase)/decrease in accounts receivable (108.6)
(154.8) 20.5 (56.2) Increase in other receivables (13.0) (10.6)
(18.2) (5.2) Decrease in other current assets 3.2 25.0 1.4 0.7
Decrease/(increase) in inventories 160.2 191.4 12.7 (96.8) Decrease
in accounts payable (81.0) (145.7) (38.0) (31.7) Increase in
accrued expenses and other liabilities 26.7 51.6 6.1 7.7
Increase/(decrease) in deferred revenue 22.0 35.7 (9.8) 9.6
Increase/(decrease) in income taxes payable 23.7 30.5 (20.5) (19.0)
Effect of exchange rate changes on currency swaps (7.5) (2.4)
(49.6) (1.9) Net cash provided by operating activities 165.3 203.4
164.4 140.8 Investing activities: Purchase of property, plant and
equipment (14.0) (30.0) (105.1) (129.1) Purchase of other
intangible assets (3.7) (4.0) (9.8) (11.3) Proceeds from sale of
property, plant and equipment 0.8 1.0 1.6 1.0 Net cash flows used
in investing activities (16.9) (33.0) (113.3) (139.4) Financing
activities: Dividends paid (16.4) (16.3) (123.8) (123.9) Proceeds
from issue of common stock 0.1 0.5 0.1 6.0 Purchase of own stock -
- - (29.0) (Repayments of)/proceeds from short-term borrowings
(39.1) (150.0) 160.6 31.1 Net cash flows (used in)/provided by
financing activities (55.4) (165.8) 36.9 (115.8) Cash and cash
equivalents at beginning of period 35.5 42.8 41.7 152.3
Increase/(decrease) in cash and cash equivalents 93.0 4.6 88.0
(114.4) Effect of exchange rate changes on cash and cash
equivalents (31.7) (5.7) (32.9) 3.8 Cash and cash equivalents at
end of period 96.8 41.7 96.8 41.7 The accompanying notes are an
integral part of these condensed consolidated financial statements.
Condensed consolidated statement of shareholders' equity for the 52
weeks ended January 31, 2009 Deferred Common stock Additional stock
at at par paid-in Other par value value capital reserves $m $m $m
$m Balance at February 2, 2008 15.3 0.1 162.5 235.2 Net loss - - -
- Foreign currency translation adjustments - - - - Changes in fair
value of derivative instruments, net of tax - - - - Actuarial gains
and losses on pension scheme, net of tax - - - - Prior service
costs on pension scheme, net of tax - - - - Scheme of Arrangement -
(0.1) - - Dividends - - - - Stock options issued - - - -
Stock-based compensation expense - - 2.0 - Balance at January 31,
2009 15.3 - 164.5 235.2 Treasury Retained Accumulated stock
earnings other Total comprehensive shareholders' income/(loss)
equity $m $m $m $m Balance at February 2, 2008 (10.8) 1,918.4 0.5
2,321.2 Net loss - (393.7) - (393.7) Foreign currency translation
adjustments - - (190.4) (190.4) Changes in fair value of derivative
instruments, net of tax - - 1.8 1.8 Actuarial gains and losses on
pension scheme, net of tax - - (28.8) (28.8) Prior service costs on
pension scheme, net of tax - - 21.4 21.4 Scheme of Arrangement - -
- (0.1) Dividends - (123.8) - (123.8) Stock options issued 0.1 - -
0.1 Stock-based compensation expense - - - 2.0 Balance at January
31, 2009 (10.7) 1,400.9 (195.5) 1,609.7 The accompanying notes are
an integral part of these condensed consolidated financial
statements. Condensed consolidated statements of comprehensive
income for the 52 weeks ended January 31, 2009 13 weeks 13 weeks 52
weeks 52 weeks ended ended ended ended January February January
February 31, 2009 2, 2008 31, 2009 2, 2008 $m $m $m $m Net
(loss)/income (424.0) 143.0 (393.7) 219.8 Foreign currency
translation (73.1) (37.6) (190.4) (0.2) Changes in fair value of
derivative instruments 21.0 9.3 5.9 12.0 Actuarial loss (41.7)
(15.5) (40.2) (13.5) Prior service cost 29.9 1.2 29.9 1.2 Deferred
tax on items recognized in equity (2.6) 2.0 (1.2) 2.9 Comprehensive
(loss)/income (490.5) 102.4 (589.7) 222.2 The accompanying notes
are an integral part of these condensed consolidated financial
statements. Notes to the condensed consolidated financial
statements for the 52 weeks ended January 31, 2009 1. Basis of
preparation This financial information has been prepared in
accordance with accounting principles generally accepted in the
United States of America ("US GAAP"). This financial information
has been prepared on the basis of the accounting policies set out
in the Group's audited financial statements which will be filed as
part of the annual report on Form 20-F for the 52 weeks ended
January 31, 2009. This is expected to be filed with the SEC on
April 1, 2009. Whilst the financial information included in this
preliminary announcement has been prepared in accordance with US
GAAP, this announcement does not itself contain sufficient
information to comply with US GAAP. 2. Segmental information The
Group's sales are derived from the retailing of jewelry, watches,
other products and services. The Group is managed as two
geographical operating segments, being the US and UK divisions.
These segments represent channels of distribution that offer
similar merchandise and service and have similar marketing and
distribution strategies. Both divisions are managed by executive
committees, which report through the Group Chief Executive to the
Group Board. Each divisional executive committee is responsible for
operating decisions within guidelines set by the Group Board. The
performance of each segment is regularly evaluated based on sales
and operating income. The operating segments do not include income
taxes or certain Group costs, and there are no material
transactions between the operating segments. The accounting
policies of the segments are the same as those used by the Group to
report under US GAAP. 13 weeks 13 weeks 52 weeks 52 weeks ended
ended ended ended January February January February 31, 2009 2,
2008 31, 2009 2, 2008 $m $m $m $m Sales: US 862.1 1,000.6 2,536.1
2,705.7 UK 261.5 384.2 808.2 959.6 Consolidated total 1,123.6
1,384.8 3,344.3 3,665.3 Operating (loss)/income: US (327.1) 122.7
(236.4) 265.2 UK (39.3) 105.0 (37.4) 109.3 Unallocated(1) (0.1)
(2.8) (23.5) (15.8) Consolidated total (366.5) 224.9 (297.3) 358.7
January 31, February 2, 2009 2008 $m $m Total assets: US 2,287.0
2,737.3 UK 343.1 632.9 Unallocated(1) 323.8 229.2 Consolidated
total 2,953.9 3,599.4 Net tangible assets: US 1,372.3 1,460.7 UK
227.0 321.0 Unallocated(1) (13.5) (38.5) Consolidated total 1,585.8
1,743.2 (1) Unallocated principally relates to Group costs. 3.
Exchange rates The exchange rates used for the translation of UK
pound sterling transactions and balances in this preliminary
announcement are as follows: January 31, February 2, 2009 2008
Income statement (average rate) 1.75 2.00 Balance sheet (closing
rate) 1.45 1.97 4. Taxation 52 weeks 52 weeks ended ended January
February 31, 2, 2009 2008 $m $m Current taxation - US 10.6 67.5 -
UK 31.9 42.0 Deferred taxation - US 26.5 9.5 - UK (1.8) (2.6) 67.2
116.4 5. (Loss)/earnings per share 13 weeks 13 weeks 52 weeks 52
weeks ended ended ended ended January 31, February 2, January 31,
February 2, 2009 2008 2009 2008 Net (loss)/income ($million)
(424.0) 143.0 (393.7) 219.8 Basic weighted average number of shares
in issue (million) 85.2 85.2 85.2 85.2 Dilutive effect of share
options (million) - 1.5 - 0.9 Diluted weighted average number of
shares in issue (million) 85.2 86.7 85.2 86.1 (Loss)/earnings per
share - basic $(4.97) $1.68 $(4.62) $2.58 (Loss)/earnings per share
- diluted $(4.97) $1.65 $(4.62) $2.55 Basic and diluted earnings
per share for the comparative periods have been recalculated
following the one for 20 share consolidation undertaken as part of
the move of the primary listing of the parent company's shares,
effective September 11, 2008. 6. Dividends 13 weeks 13 weeks 52
weeks 52 weeks ended ended ended ended January 31, February 2,
January 31, February 2, 2009 2008 2009 2008 $m $m $m $m Final
dividend paid of 6.317c per share (2008: 6.317c) - - 107.4 107.6
Interim dividend paid of 0.96c per share (2008: 0.96c) 16.4 16.3
16.4 16.3 16.4 16.3 123.8 123.9 7. Inventories January 31, February
2, 2009 2008 $m $m Raw materials 25.5 16.7 Finished goods 1,338.9
1,436.9 Total inventory net of inventory provisions 1,364.4 1,453.6
8. Deferred revenue Deferred revenue represents income under
extended service warranty agreements and voucher promotions.
January 31, February 2, 2009 2008 $m $m Warranty reserve 243.1
246.6 Other 19.5 28.4 262.6 275.0 Current liabilities 120.1 125.3
Non-current liabilities 142.5 149.7 262.6 275.0 13 weeks 13 weeks
52 weeks 52 weeks ended ended ended ended January 31, February 2,
January 31, February 2, 2009 2008 2009 2008 $m $m $m $m Warranty
reserve, beginning of period 231.4 227.2 246.6 232.7 Warranties
sold 51.9 64.6 149.6 166.5 Revenues recognized (40.2) (45.2)
(153.1) (152.6) Warranty reserve, end of period 243.1 246.6 243.1
246.6 9. Commitments and contingencies Litigation The Group is not
party to any legal proceedings considered to be material to the
financial statements. Furthermore, no director, officer or
affiliate of the Group or any associate of any such director has
been a party adverse to the Group or any of its subsidiaries or has
a material interest adverse to the Group or any of its
subsidiaries. A class lawsuit for an unspecified amount has been
filed against Sterling Jewelers Inc., a subsidiary of Signet
Jewelers Limited, in the New York federal court by private
plaintiffs. The US Equal Opportunities Commission has filed a
separate lawsuit alleging that US store-level employment practices
are discriminatory as to compensation and promotional activities.
The Group denies these allegations and intends to defend them
vigorously. 10. Accounts The financial information set out above
does not constitute the Group's financial statements for the 52
weeks ended January 31, 2009 or the 52 weeks ended February 2,
2008, but is derived from these financial statements. The Group's
audited financial statements will be filed as part of the annual
report on Form 20-F for the 52 weeks ended January 31, 2009. This
is expected to be filed with the SEC on April 1, 2009 and will be
available for download from the Group website
http://www.signetjewelers.com/. 11. Impact of constant exchange
rates, goodwill impairment and relisting costs 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
release. The Group considers this a useful measure for analyzing
and explaining changes and trends in the Group's results. The
impact of the re-calculation of sales and other operating
(loss)/income at constant exchange rates, including a
reconciliation to the Group's US GAAP results, is analyzed below.
52 weeks 52 weeks Growth at Impact of ended ended actual relisting
& January 31, February 2, exchange goodwill 2009 2008 rates
impairment $m $m % $m Sales by origin and destination: US 2,536.1
2,705.7 (6.3) - UK 808.2 959.6 (15.8) - 3,344.3 3,665.3 (8.8) -
Operating (loss)/income: US (236.4) 265.2 n/a 408.0 UK (37.4) 109.3
n/a 108.9 Unallocated (23.5) (15.8) 48.7 10.5 (297.3) 358.7 n/a
527.4 (Loss)/income before n/a taxes (326.5) 336.2 527.4 Net
(loss)/income (393.7) 219.8 n/a 527.4 (Loss)/earnings per n/a share
$(4.62) $2.58 $6.19 52 weeks ended 52 weeks 52 weeks January 31,
ended ended 2009 Impact of February 2, February 2, recalculated
exchange rate 2008 at 2008 (non-GAAP) movement constant growth at
exchange constant Rates exchange (non-GAAP) rates (non-GAAP) $m $m
$m % Sales by origin and destination: US 2,536.1 - 2,705.7 (6.3) UK
808.2 (119.9) 839.7 (3.8) 3,344.3 (119.9) 3,545.4 (5.7) Operating
(loss)/income: US 171.6 - 265.2 (35.3) UK 71.5 (13.7) 95.6 (25.2)
Unallocated (13.0) 2.0 (13.8) (5.8) 230.1 (11.7) 347.0 (33.7)
(Loss)/income before taxes 200.9 (12.2) 324.0 (38.0) Net
(loss)/income 133.7 (7.9) 211.9 (36.9) (Loss)/earnings per share
$1.57 $(0.09) $2.49 (36.9) The underlying performance of the
business excluding the impact of the costs of moving listing and
goodwill impairment is detailed below. 52 weeks ended January 31,
2009 Excluding relisting costs & As goodwill reported
impairment $m $m (Loss)/income before income taxes (326.5) 200.9
Tax rate 20.6% 33.5% Tax charge (67.2) (67.2) Net (loss)/income
(393.7) 133.7 Weighted average number of shares in issue (million)
85.2 85.2 (Loss)/earnings per share - basic $(4.62) $1.57
(Loss)/earnings per share - diluted $(4.62) $1.57 DATASOURCE:
Signet Jewelers Ltd CONTACT: Terry Burman, Group Chief Executive,
+1-441-296-5872, or Walker Boyd, Group Finance Director,
+1-441-296-5872; or Michael Henson, Taylor Rafferty,
+1-212-889-4350; or, Jonathan Glass, Brunswick, +44(0)20-7404-5959
Web Site: http://www.signetjewelers.com/
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