Delivered First Quarter Expectations Engagement Recovery Momentum Continues Reaffirms April Increase to Full Year Outlook HAMILTON, Bermuda, June 13, 2024 /PRNewswire/ -- Signet Jewelers Limited ("Signet" or the "Company") (NYSE:SIG), the world's largest retailer of diamond jewelry, today announced its results for the 13 weeks ended May 4, 2024 ("first quarter Fiscal 2025"). "Our results reflect notable acceleration from a sluggish February to the top half of expectations, with an even stronger May," said Signet Chief Executive Officer Virginia C. Drosos. "Compared to the previous quarter, we increased North America engagement unit sales by 400 basis points excluding Digital banners. Further, customers continue to respond well to our new product offerings and loyalty program, reflected in a meaningful improvement in comparable sales for Fashion since February. We expect continued momentum in the second quarter, leading to a positive same store sales inflection in the second half of Fiscal 25." "Our flexible operating model continues to work as designed, leading to adjusted merchandise margin expansion of 100 basis points, continued working capital optimization, and improved free cash flow over the prior year," said Joan Hilson, Chief Financial, Strategy & Services Officer. "Signet's strong balance sheet provides a clear line of sight to redeeming all convertible preferred shares. We are reaffirming our increased full year guidance." First Quarter Fiscal 2025 Highlights: Sales of $1.5 billion, down $157.2 million or 9.4% (down 9.6%(1) on a constant currency basis) to Q1 of FY24. Same store sales ("SSS")(2) down 8.9% to Q1 of FY24. Operating income of $49.8 million, down $51.9 million from Q1 of FY24. Adjusted operating income(1) of $57.8 million, down $48.7 million from Q1 of FY24. Diluted loss per share of $0.90, compared to a diluted earnings per share ("EPS") $1.79 in Q1 of FY24. The current year diluted loss per share reflects the impact of a deemed dividend of $85.1 million related to the redemption of half of the preferred shares in Q1. Adjusted diluted EPS(1) of $1.11, compared to $1.78 in Q1 of FY24. Cash and cash equivalents, at quarter end, of $729.3 million, compared to $655.9 million in Q1 of FY24. Year-to-date cash used in operating activities of $158.2 million, compared to $381.8 million in Q1 of FY24. Repurchased $7.4 million, or approximately 73,000 common shares, during the first quarter. (1) Certain non-GAAP financial measures used within this release have been renamed this quarter. There have been no changes to how these non-GAAP measures are defined or reconciled to the most directly comparable GAAP measures. See the non-GAAP financial measures section below for additional information. (2) Same store sales include physical stores and eCommerce sales.   (in millions, except per share amounts) Fiscal 25 Q1 Fiscal 24 Q1 Sales $      1,510.8 $      1,668.0 SSS % change (1) (2) (8.9) % (13.9) % GAAP Operating income $           49.8 $         101.7 Operating margin 3.3 % 6.1 % Diluted EPS (loss per share) $        (0.90) $           1.79 Adjusted (3) Adjusted operating income $           57.8 $         106.5 Adjusted operating margin 3.8 % 6.4 % Adjusted diluted EPS $           1.11 $           1.78 (1) Same store sales include physical stores and eCommerce sales. (2) Fiscal 2025 Q1 same store sales have been calculated by aligning the sales weeks of the current quarter to the equivalent sales weeks in the prior fiscal year period. (3) See non-GAAP financial measures below.   First Quarter Fiscal 2025 Results: Change from previous year First Quarter Fiscal 2025 Same store sales (1) Non-same store sales, net Total sales at constant exchange rate (2) Exchange translation impact Total sales as reported Total sales (in millions) North America segment (9.2) % 0.2 % (9.0) % — % (9.0) % $   1,420.0 International segment (3.2) % (16.3) % (19.5) % 2.5 % (17.0) % $        77.2 Other segment (3) nm nm nm nm nm $        13.6 Signet (8.9) % (0.7) % (9.6) % 0.2 % (9.4) % $   1,510.8 (1) The 53rd week in Fiscal 2024 has resulted in a shift as the current fiscal year began a week later than the previous fiscal year. As such, same store sales for Fiscal 2025 have been calculated by aligning the sales weeks of the current quarter to the equivalent sales weeks in the prior fiscal year quarter. Total reported sales continue to be calculated based on the reported fiscal periods. (2) See non-GAAP financial measures below. (3) Includes sales from Signet's diamond sourcing operation. nm Not meaningful.   By reportable segment: North America Total sales of $1.4 billion, down $141.2 million or 9.0% to Q1 of FY24 reflecting a decrease of 1.6% in total average transaction value ("ATV"), on a lower number of transactions. SSS declined 9.2% compared to Q1 of FY24. International Total sales of $77.2 million, down $15.8 million or 17.0% to Q1 of FY24 (down 19.5% on a constant currency basis) reflecting a decrease of 15.3% in total ATV driven by the previously announced sale of prestige watch locations, as well as a lower number of transactions. SSS declined 3.2% versus Q1 of FY24. Gross margin was $572.4 million, down from $632.0 million in Q1 of FY24. Gross margin was 37.9% of sales, or flat to Q1 of FY24 as favorable merchandise margins, including a more than 300 basis point improvement in Digital banners (James Allen and Blue Nile), and a higher mix of Services business offset by deleveraging of fixed costs such as store occupancy. SG&A was $515.4 million, down from $530.4 million in Q1 of FY24. SG&A was 34.1% of sales, 230 basis points higher versus Q1 of FY24. The change in SG&A as a percentage of sales was primarily driven by deleverage on fixed costs. Operating income was $49.8 million or 3.3% of sales, compared to $101.7 million, or 6.1% of sales in the prior year first quarter. Adjusted operating income was $57.8 million, or 3.8% of sales, compared to $106.5 million, or 6.4% of sales in the prior year first quarter.   First quarter Fiscal 2025 First quarter Fiscal 2024 Operating income in millions $  % of sales $  % of sales North America segment $             83.2 5.9 % $           124.7 8.0 % International segment (13.0) (16.8) % (6.9) (7.4) % Other segment (3.1) nm (0.7) nm Corporate and unallocated expenses (17.3) nm (15.4) nm Total operating income $             49.8 3.3 % $           101.7 6.1 %     First quarter Fiscal 2025 First quarter Fiscal 2024 Adjusted operating income in millions (1) $  % of sales $  % of sales North America segment $             85.2 6.0 % $           129.5 8.3 % International segment (7.0) (9.1) % (6.9) (7.4) % Other segment (3.1) nm (0.7) nm Corporate and unallocated expenses (17.3) nm (15.4) nm Total adjusted operating income $             57.8 3.8 % $           106.5 6.4 % (1) See non-GAAP financial measures below. nm Not meaningful.   The current quarter income tax expense was $6.5 million compared to income tax expense of $9.5 million in Q1 of FY24. Adjusted income tax expense was $8.4 million compared to $14.7 million in Q1 of FY24. Diluted loss per share was $0.90, down from diluted EPS of $1.79 in Q1 of FY24. Diluted loss per share in the current quarter primarily includes $1.91 for deemed dividends for the premium on redemption of preferred shares, $0.10 of restructuring charges and $0.04 of asset impairments. Excluding these charges (and related tax and dilution effects), diluted EPS was $1.11 on an adjusted basis. Loss per share in the first quarter of Fiscal 2025 excludes the anti-dilutive impact of the preferred shares in the share count based on the net loss attributable to common shareholders recorded in the first quarter of Fiscal 2025. Adjusted diluted EPS in the current quarter includes the impact of the preferred shares in the dilutive share count based on the level of adjusted net income attributable to common shareholders this quarter. Balance Sheet and Statement of Cash Flows Highlights: Year to date cash used in operating activities was $158.2 million compared to cash used in operating activities of $381.8 million in Q1 of FY24. Cash and cash equivalents were $729.3 million as of quarter end, compared to $655.9 million in Q1 of FY24. The Company paid $414.1 million to redeem half of the preferred shares, including accrued dividends, on April 15, 2024. Subsequent to the end of the first quarter, Signet redeemed an additional 100,000 Preferred Shares, or 32% of the remaining preferred shares, for an aggregate price of approximately $129.0 million, which represents common share volume weighted average price of approximately $97 per share. Inventory ended the quarter at $2.0 billion, down $199.9 million or 9.2% to Q1 of FY24, driven by Signet's demand planning efforts and life cycle management. The Company ended the first quarter with an Adjusted Debt to Adjusted EBITDAR ratio of 2.2x on a trailing 12-month basis, well below the stated goal of at or below 2.5x, and was 1.6x on an Adjusted Net Debt basis. Net Debt to Adjusted EBITDA was (0.3)x on a trailing 12-month basis. Capital Returns to Shareholders: Signet's Board of Directors has declared a quarterly cash dividend on common shares of $0.29 per share for the second quarter of Fiscal 2025, payable August 23, 2024 to shareholders of record on July 26, 2024, with an ex-dividend date of July 26, 2024. In the first quarter Signet repurchased approximately 73,000 common shares at an average cost per share of $101.10, or $7.4 million. Second Quarter and Full Year Fiscal 2025 Guidance: Signet's second quarter Fiscal 2025 guidance for sales, same store sales, operating income and adjusted EBITDA is provided on an adjusted basis: Second Quarter Total sales $1.46 billion to $1.52 billion Same store sales (6)% to (2)% Operating income (1) $50 million to $75 million Adjusted EBITDA (1) $98 million to $123 million (1) See description of non-GAAP financial measures below. Forecasted adjusted operating income and adjusted EBITDA exclude potential non-recurring charges, such as restructuring charges, asset impairments or integration-related costs. However, given the potential impact of non-recurring charges to the GAAP operating income, we cannot provide forecasted GAAP operating income or the probable significance of such items without unreasonable efforts. As such, we do not present a reconciliation of forecasted adjusted operating income or adjusted EBITDA to corresponding forecasted GAAP amounts.   Signet's full year Fiscal 2025 guidance for sales, same store sales, operating income, adjusted EBITDA, and diluted EPS is provided on an adjusted basis: Fiscal 2025 Total sales $6.66 billion to $7.02 billion Same store sales (4.5)% to +0.5% Operating income (1) $590 million to $675 million Adjusted EBITDA (1) $780 million to $865 million Diluted EPS (1) $9.90 to $11.52 (1) See description of non-GAAP financial measures below. Forecasted adjusted operating income, adjusted EBITDA and adjusted diluted EPS provided above exclude potential non-recurring charges, such as restructuring charges, asset impairments or integration-related costs. However, given the potential impact of non-recurring charges to the GAAP operating income and diluted EPS, we cannot provide forecasted GAAP operating income or diluted EPS or the probable significance of such items without unreasonable efforts. As such, we do not present a reconciliation of forecasted adjusted operating income, adjusted EBITDA and adjusted diluted EPS to corresponding forecasted GAAP amounts.   The Company's Fiscal 2025 outlook is based on the following assumptions: The Company expects an approximately 1.5% to 2.0% negative impact to sales from integration issues with its Digital banners. The Company expects to resolve the issues in the second half of the year but is not reflected as such in guidance. Importantly, the issues are not tied to nor impacting the eCommerce channels of our core banners, which are performing well. Approximately $225 million in non-comparable sales headwinds reflecting over $100 million from the 53rd week in Fiscal 2024, approximately $75 million in the UK from the sale of previously announced prestige watch locations in the UK and up to 30 Ernest Jones store closures, and approximately $50 million from total store closures in North America in Fiscal 2024 and Fiscal 2025. The Company anticipates net square footage decline of 1% to flat for the year. The Company continues to expect a three-year recovery in US engagement rates, with Fiscal 2025 engagement incidents increasing 5% to 10% to Fiscal 2024. Approximately $150 million to $180 million in new cost savings initiatives leveraging technology such as AI, sourcing efficiencies, and spend discipline. Planned capital expenditures of approximately $160 million to $180 million, reflecting investments in 20 to 30 new stores, nearly 300 renovations with focus on Kay, Jared and Diamonds Direct stores, Connected Commerce capabilities, and digital and technology advancement. Annual tax rate of 19% to 20% excludes potential discrete items. Approximately $1.1 billion allocated to retirement of debt, redemption of preferred shares and open-market common share repurchases in Fiscal 2025. Our Purpose and Sustainable Growth: Signet reaffirmed its commitment to leadership in sustainable business practices in the Company's latest Corporate Citizenship & Sustainability Report released this week. The Report, which uses the Company's Sustainability framework defined by Love for All People, Love for Our Team and Love for Our Planet and Products, introduces revised 2030 Corporate Sustainability Goals to improve impact and measurability across its global operations. The Report details incremental progress achieved during Fiscal 2024 including the integration of environmental considerations into Signet's product packaging and store operations. It also describes how Signet delivers positive social impact, such as the largest single-year donation to St. Jude Children's Research Hospital toward a new $100 million commitment to increase survivorship from childhood cancers in the U.S. and around the world. Conference Call: A conference call is scheduled for June 13, 2024 at 8:30 a.m. ET and a simultaneous audio webcast is available at www.signetjewelers.com. The call details are: Toll Free – North America +1 800 549 8228 Local – Toronto +1 289 819 1520 Conference ID 59089 Registration for the listen-only webcast is available at the following link: https://events.q4inc.com/attendee/422676577 A replay and transcript of the call will be posted on Signet's website as soon as they are available and will be accessible for one year. About Signet and Safe Harbor Statement: Signet Jewelers Limited is the world's largest retailer of diamond jewelry. As a Purpose-driven and sustainability-focused company, Signet is a participant in the United Nations Global Compact and adheres to its principles-based approach to responsible business. Signet operates approximately 2,700 stores primarily under the name brands of Kay Jewelers, Zales, Jared, Banter by Piercing Pagoda, Diamonds Direct, Blue Nile, James Allen, Rocksbox, Peoples Jewellers, H. Samuel, and Ernest Jones. Further information on Signet is available at www.signetjewelers.com. See also www.kay.com, www.zales.com, www.jared.com, www.banter.com, www.diamondsdirect.com, www.bluenile.com, www.jamesallen.com, www.rocksbox.com, www.peoplesjewellers.com, www.hsamuel.co.uk, www.ernestjones.co.uk. This release contains statements which are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are 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, results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate. The use of the words "expects," "intends," "anticipates," "estimates," "predicts," "believes," "should," "potential," "may," "preliminary," "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 which could cause the actual results to not be realized, including, but not limited to: difficulty or delay in executing or integrating an acquisition, including Diamonds Direct and Blue Nile; executing other major business or strategic initiatives, such as expansion of the services business or realizing the benefits of our restructuring plans; the impact of the Israel-Hamas conflict on our operations; the negative impacts that public health crisis, disease outbreak, epidemic or pandemic has had, and could have in the future, on our business, financial condition, profitability and cash flows, including without limitation risks relating to shifts in consumer spending away from the jewelry category, trends toward more experiential purchases such as travel, disruptions in the dating cycle caused by the COVID-19 pandemic and the pace at which such impacts on engagements are expected to recover, and the impacts of the expiration of government stimulus on overall consumer spending (including the recent expiration of student loan relief); general economic or market conditions, including impacts of inflation or other pricing environment factors on our commodity costs (including diamonds) or other operating costs; a prolonged slowdown in the growth of the jewelry market or a recession in the overall economy; financial market risks; a decline in consumer discretionary spending or deterioration in consumer financial position; disruptions in our supply chain; our ability to attract and retain labor; our ability to optimize our transformation strategies; changes to regulations relating to customer credit; disruption in the availability of credit for customers and customer inability to meet credit payment obligations, which has occurred and may continue to deteriorate; our ability to achieve the benefits related to the outsourcing of the credit portfolio, including due to technology disruptions and/or disruptions arising from changes to or termination of the relevant outsourcing agreements, as well as a potential increase in credit costs due to the current interest rate environment; deterioration in the performance of individual businesses or of our market value relative to its book value, resulting in impairments of long-lived assets or intangible assets or other adverse financial consequences; the volatility of our stock price; the impact of financial covenants, credit ratings or interest volatility on our ability to borrow; our ability to maintain adequate levels of liquidity for our cash needs, including debt obligations, payment of dividends, planned share repurchases (including future Preferred Share conversions, execution of accelerated share repurchases and the payment of related excise taxes) and capital expenditures as well as the ability of our customers, suppliers and lenders to access sources of liquidity to provide for their own cash needs; potential regulatory changes; future legislative and regulatory requirements in the US and globally relating to climate change, including any new climate related disclosure or compliance requirements, such as those recently issued in the state of California or adopted by the ...