SIG - Earnings call transcript Q4 2020 | Signet Jewelers Limited

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Operator

Good morning, everyone, and welcome to the Signet Jewelers Fourth Quarter Fiscal 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please also note today’s event is being recorded.

Today’s speakers are Signet's CEO, Gina Drosos; and CFO, Joan Hilson.

we certain Signet statements. presentation, today's will forward-looking make During materially. are not a and Any differ are facts actual subject may uncertainties, statements that and historical to risks number results of factors, We filed Securities cautionary Signet’s urge with report XX-K, and the Form Form and reports on read Form current you the reports annual language other on disclosures to and in on XX-Q Commission. quarterly Exchange risk X-K as

in publicly light Signet law, undertakes obligation update by future forward-looking or statements new required as Except events. of to no or information revise

the certain rate During tax Accepted financial not presented measures as call, otherwise non-GAAP non-GAAP effective Principles, income, and Generally with earnings measures include Signet will operating These measures. per discuss in share. Accounting known accordance

reconciliations directly financial to release www.signetjewelers.com/investors. For future discussion GAAP of comparable posted the at non-GAAP review the as on the measures of the most financial Investors well measures. should measures website news Signet’s non-GAAP as

call turn At Drosos. conference this I'll over time, to Ms. the

Gina Drosos

thank you, you Thank everyone today's call. Jamie. joining for Good morning, and

members Before of in all prioritizing fourth quarter those team impacted and On members XXXX crisis. team demonstrating hearts go the time, address Signet evolving like of our healthcare fiscal many taking I ensure this the making we've rapidly decisions team are actions all sustainability business. are discuss would professionals on the to Board customers pandemic. to the for team who been of safety to and caring especially the and outbreak. environment, the greatly the of in our bold global appreciate also our compassion, need, courage this long-term and behalf our I'm commitment, frontlines. our out remarkable We Signet our health Directors, and In performance, during who to executive COVID-XX have members, and real been I thankful of by prayers and COVID-XX all who

of fourth a in quarter to forefront transition it's business discussion our of difficult minds, the results. that, With to

COVID-XX actions believe to important have for the from positioning since, pandemic, nation emerge taken the share performed begins to Company from to it's we're we how crisis. business we our prior the when how However, the seeing impact this and

Signet's more underscores and The environment the efficient of organization. are agile in into a operating today importance transformation we

from earlier Signet's week, quickly As you've seen this strengthen have and moved announcement flexibility. our we to financial aggressively

efficiencies in We do data our spend and not advanced are as on or digital using presence about, discretionary areas care marketing focused customers reducing through substantially targeting see well as that enhanced analytics. and driving

reduced stores, of hours, center closure furloughs given work compensation store and across implementing are temporary Additionally, teams. the reduced we support our and

of base top XX% agreed fund Many Board in leaders us entirely by of As too, half fees also has part contributed The relief compensated to have voluntary reduction replaced colleagues have Company's emergency have and taken our to with of XX% be be of need. other portion to retainer an in the bonuses our its common help established shares. equity a a of this, grants. taken our significant salary I will and reductions leaders this reduced and Directors

as Our together. stronger, team will we this team Signet united I in company. emerge an is confidence have And and even

dividend we the to pay Since, in related kind shares elected addition May in have this on cash. suspending not rather the economic of and preference visibility are we dividend impact, expense and duration than the cash have crisis to do in our reductions, the into quarterly temporarily

fulfillment initiative. Within We and our we planned also digital this prioritizing expenditures. capital are aggressively flexible lower spend, investments reduced

high-quality and product past visualization, imaging. two successfully over transitioned curated that Hybris the to our the much years, faster speed, we banners eCommerce enabling using Recall platform, search

mobile our design to configurators their own allow and even personalize important investments and jewelry. to made custom in also We experience customers

starts online and their purchaser improved one this experience will purchase of of our browser eventually our stores. who of journey brick-and-mortar well online the All the as in as

even eCommerce are browse, customers. we on To achieve and an easier checkout custom search and experience frictionless focused design enhancing advanced optimized capabilities more for and impact, shopping immediate to create

are flexible this network level enhances unlocks to improves implement our initiative, by allows across store optimize product single us pickup fulfillment a to store store online in continuing through which with experience our assortment also We our customer the view, and inventory, available buy holiday.

acutely time, we managing Signet’s to build believe effectively At are same our we disruption. transformation are the to we Very future. through through present the focused accelerate working importantly, investments

progress over Path number a agility strategies: to number one, on first; key efficiency. years galvanized building and two, Brilliance three customer Omni-channel; and made and of the our We've Number around three, past transformation two are culture

Our fourth are the working. demonstrate results these strategies quarter in that

we disruption today, foundation to So, with a considerable capabilities resiliency the a is while stronger advantage. and as we strong Company competitive emerge believe have built there enhanced and

as Now results XXXX fiscal turning our fourth to entering our as and well XXXX. fiscal quarter color performance, on

we business our the holiday strong ended overall Our with in better fourth and anticipated, four performance were year best results quarter years. than

fourth delivered X.X% sales double-digit the quarter, X.X% fiscal for eCommerce. achieving expense $XXX an year, for sales exceeded delivered of growth growth and savings team Our year generated approximately target growth reduction same-store the same-store and million. We of in our cost

flow of drove non-GAAP for fiscal million XX% year. this of free operating All $XXX income strong and up the cash

favorably Day the fiscal customers strong innovations, experience Valentine's holiday experienced XXXX. selling The with product our as season entered during continued We had newness, we reacting to season a customer momentum date and close COVID-XX to impact the pandemic, performance week. our led retail to this which approach March of store always-on us locations, increased earlier of the our all marketing. reflects we to

and celebrating is team we this, a our is effectively agile our customers, love innovative. all you being those In that To important. serve time know like

are Given deliver now scale, our celebrate doing relevance right mission help drive our love. and and there customers to things and size are we Company express to life

actively where and focused action customers are. to on our are Here themes innovation we put three meet are they into

expertise. First, our providing

strongest service, of one today, Our level our customers often final our advice decision. is their personal want especially before of of banners, making all our Across differentiators.

advance our customer are native rapidly assistance care across to expertise of and provide So, home enhanced virtually. of selling tool from and of the hundreds their in-store our capability banner, our banners. chat JamesAllen.com experts our now to jewelry who all live trained our online We've digitally we're working leveraging expertise

Secondly, the our of our with stores to customers best Omni-channel. bringing

for Day, We events, virtual empowering chats, to hosting video ambassadors. hosting our special Mother's including social and are team members be

rapidly also inventory have from added our to stock ready online be We to meet customer to needs. all store

We a jewelry value. our great We that are we excellent to customers third, allow are vendor scale uncertainty, current an and make economic relationships, conscious. And sure future value. believe giving us know capability more customers even value and sourcing excellent given at providing high-quality our

to celebrate to now, especially is All-in-all, working our support online. the desire customers’ team love,

team and members in delivering Our across our are new the ways. country mission innovative

fourth quarter fiscal team closing, In year XXXX. in results delivered our and the strong

the Brilliance our we we leveraging transformation. foundation the Path strong past navigate current As years are of over to we have uncertainty, built two the

build additional have we to disruption. immediately acted this flexibility financial Importantly, during

that our We working, key growth. transformation the and future most priorities focused will are also believe our acutely enable strategies that we are on

will turn results, and over Joan to discuss call plans. I cash the to cost management further now and our financial

Joan Hilson

everyone. Thanks, Gina. And morning, good

conserve to with COVID-XX, XXXX fourth the highlights we I'll financial taking cash stores discussion In conclude to to actions of while move and due quarter fiscal and our closed the cover our are first credit then my facilities. a results, are on of remarks, our

full-year evident holiday quarter fiscal made XXXX have we our progress cumulative strong financial results. in and is The

transformation strong SG&A savings. lower benefits and base. X.X% quarter, quarter ecommerce compensation dollar as from growth sales incentive with and expense well inclusive advertising as higher were Non-GAAP a SG&A cost grew in profit delivered sales spend the benefited a SG&A costs on margin smaller XX% sales Fourth of result same-store each gross double-digit quarter impressions Fourth in somewhat and well and offset as grew These by higher that sales as operating basis. a growth. positive lower percentage quarter year-over-year gross same-store benefited from margin the of profit brick-and-mortar in lower driven as also SG&A store higher by staff performance. of

is settlement with subject court million with approval. of This to shareholder in paid contribution of insurance the profit Company be our policies to cash portion filing. expected related which the approximately million previously is XX-K Company will proceeds described $XX from the to a charge has operating GAAP Form litigation, The disclosed place. of million settlement $XXX settlement a includes $XXX be in

the lower EPS higher by interest higher Interest of as the a XX% more refinancing. rates, and September of quarter expense profit rate. as expense operating was result compared benefit year-over-year a in non-GAAP offset Fourth of $X.XX, lower the benefit post EPS XXXX well lower prior as was declined our of $X.XX, year tax than non-GAAP as debt interest balances quarter to

up a Fiscal eCommerce and from declined Allen years. grew XXXX grew and by smaller For the X.X% with more store accounted percentage double-digit XX.X% of in of for doubling the year sales, Piercing same-store sales as driven XXXX, prior growth and three the last a X.X%, sales year-over-year base. over than XX% Pagoda. year fiscal XX.X% revenues at James full

million driven to staff XX closed of Operating gross operating basis leverage performance XXXX points. levels grew non-GAAP Fiscal improvement cost with margin transformation non-GAAP expansion lower margin and of delivering X.X% savings, somewhat and We initiatives the stores, delivered drive gross portion with XXXX, technology advertising cost of savings and slightly savings clearance. in innovation higher a higher fiscal reinvested $XXX in to in by growth. by operating profit SG&A profit cost XX% offset was of inclusive net

driven procurement, and optimization, by primarily Gross savings workforce costs. lower corporate were

have efforts years million $XXX transformation in achieved two of in savings savings plan. first Path Our our cost Brilliance to the

in continue We on strong have savings to fiscal focus a cost expect to XXXX.

time. year around providing However, three for be savings COVID-XX, outlook not will given this transformation a we of the uncertainties at cost

improved year. in free credit capital year-over-year up on adjusted $XXX Higher basis, million the working with proceeds operating flow excludes management in non-prime million, the which profit $XXX of together prior an resulted cash

Now, the I'll of unknown environment duration current we're and impact to discuss taking COVID-XX. of actions navigate the the the

and taking actions flexibility reductions. are capital financial We increase expense expenditure operating immediate through to

shares and of mentioned, dividend our suspend Gina pay quarterly in common has the As on elected the preference May dividend to the Board kind. Directors

With as targeted respect well as actively to to expenses. reduced spend. substantially all operating operations, campaigns marketing eCommerce our while continuing corporate spend, support discretionary addressing digital We

taken Board compensation. salary of in reductions foregone be will voluntary Our executives with Half the replaced and base grants. of Directors equity have

are actions store support across and also implementing We center teams.

planned and that to continue eCommerce support have capital initiatives by are year more prior XX% our prioritizing channel. We versus reduced expenditures than

Company. Additionally, inventory for remains management strategic a the priority

we loose store which in our over our were manage We year, just-in-time agile believe These capabilities disciplines artificial leveraging management. in piloted embarked last will have the developed on the inventory inventory a of lifecycle to us that last channels. way enable intelligence store across a review strong fourth inventory-related allocation quarter year, more management include policies. for diamond replenishment full and tools also We've

this later Thanks to appropriate while holiday significantly levels to reduced merchandise year. our vendor newness have the strong we ensure partners, with flexibility relationships we to of receipts have maintaining support

we as With portfolio, to reduce connected we our base to optimize that smaller, a continue growth store our a our respect store fully real Omni-channel to estate journey. footprint to expect delivers potential higher presence further physical

in presence small our reducing certain declining malls, are locations. to while our We to selectively planning stores reposition

we health of the However, we impact market due term be every location evaluating the fleet potential to of been and believe analyzing will where the impaired. longer potential our closely has COVID-XX, in

Turning to liquidity.

we announced, facility our previously refinanced As credit in XXXX. of September

an consists now and asset-based credit senior XXXX. of unsecured in of notes, are debt which Our both due facility

no facilities until have in these scheduled principal XXXX. We they under payments mature

we In our on XXth. facility our an accessed million asset-based flexibility, order $XXX March to financial on strengthen additional

facility. $XXX the million $X.X billion on cash drawdown, than more available of this date additional this and we hand of in on had an As

asset-based is The billion. is of if recently falls the base credit reported approximately fixed below facility $XXX base borrowing availability to XX% The or ratio facility charge is the borrowing whichever revolving under higher. most $X.X facility under this subject a million, coverage

senior the notes are subject to covenants. unsecured financial in Additionally, due not XXXX

Now, Signet's LP approximately credit Castlelake I represent sales Investors XX%, discuss non-prime five-year annual label the entered CarVal year. XX% of our in would briefly offering. agreement a sales June would XXXX, under related our of and like purchase to our credit currently In respectively, into of we X% which non-prime private to prior receivables non-prime These and offering.

net the gave which fallen yield the agreement minimum we the in agreement these as December below of to terminate receivables the December has the yield under our right on As XX-Q, disclosed investors XX, Form the XXXX.

XX-K same effective terminated the agreement. the to a filing, the a with in such facility at agreement, termination, In willing as XXXX, stated our from XX-day CarVal As XX notice of transition substantially is March XXXX. provided will the terms provide days XX, purchase Signet fixed for but is that of CarVal same terminating term the in see it Company that was XX, CarVal to March day. the agreement, it on notice you regarding discussions

would Castlelake understanding has terminate XX, potential informed into entered agreement. to On of reservation currently the Signet memorandum on terminate, add-on XXXX, XXX% Castlelake the and forward basis. non-binding on regarding parties' a agreement Signet not interest they that, their subject of go-forward right and March to purchases their a and Castlelake intend of definitive obligations to purchase whereby flow shared the funding a do

our partner provide Signet's have Financial that a Importantly, on place. Genesis on financial arrangement servicing condition, update an will with believe and impact CarVal's not are partner when arrangements termination our in remains discussions our we'll material adverse our completed. these We

financial focused be members market. cash to in quarter mention the that Be organization generating assured every at XXXX flexibility in environment. providing and to like leadership I'd current maintain first not fiscal guidance Finally, of level are fluid or to we resolutely the that will team our on team this our uncertainty due

I'll now, the over section. to call Q&A to turn operator the the And begin

Operator

our today Hutchinson your from with question of from comes Please Instructions] Lorraine America. go [Operator first And ahead question. Bank

Lorraine Hutchinson

Good for credit update you. on Thank the Thanks business. the morning.

So Can that is X% other rent non-prime financing the financing, own breakout offered? between also you've about rest of of of sales then the the your and the you prime talk the to sales.

Gina Drosos

question, the for Lorraine. Thanks

disclosed that year been that's business our the can our those. of something over past I and breakout leasing has the of is haven't aspect you But what responded We tell customer that. to is growing the

the in to moving looking year. offering that is things that doing One coming are of we at forward some online point the to

Lorraine Hutchinson

basis? CarVal's out and is that Castlelake the of Okay. discount change, the the be rest the should that for terms a we now receivables the any will help How go-forward portfolio? taking over thinking on paying stepping about they're And how then, on

Joan Hilson

arrangement But, in mentioned that Lorraine, under MDR memorandum are for of MOU time. existing that process the disclosed of XX rate. we at the of terms -- negotiating the this Castlelake a CarVal haven't agreement. as days same with with The I understanding we with substantially the next we is have

Lorraine Hutchinson

Okay. if on there look And at to jewelry partners you the any to purchases? all changes at we heard your then, offering, prime appetite from their finance have

Joan Hilson

this Lorraine, not time. at

throughout -- and and them with to emerge. providers working relationship look with very partnership this other forward the we we and our are strong, once crisis Our into

Operator

[Operator go from Our Paul Lejuez Instructions] with from question Please question. next Citigroup. ahead comes your

Tracy Kogan

for in I have Tracy It's Thanks. Paul. two filling Kogan questions.

issues just Castlelake rolling -- new know if be new this feel -- to then had those stood was to expect of what where you non-mall I groups if past seamless versus stores. your some at remind this was And after deals. mall just mall just the I closings, the on is customer versus first customer? on The all could stores. agreement, just I then, would you will wondering you the customer you -- before the the when you the wanted us, had out the non-mall. where performance between quarter And with different. different any you year-end stood do with understand

Joan Hilson

With Yes. we a is service strong to as relationship have provider, Genesis respect continuing Thanks with for the them. and the I questions, mentioned, very Tracy.

transition expected noticeable be customers no to and disruption this any should our not to little We real experience change. with

Gina Drosos

hi, -- Tracy. then It's And Gina.

to address question non-mall. Just versus mall first on your

drive data. So, traffic as off-mall versus we've other performance to ahead that in banners on quarter We continue to we our previous perform retailers, in continue see in fourth calls, did based the discussed and malls. Signet our see stronger of ShopperTrak location

on-malls. terrific hand, believe great closure. was a there news our stronger in team of we thanks to The a but the also and had having we traffic in working decline holiday to and So much season is less traffic merchandise that, our on always-on still malls good drive level traffic, higher approach marketing than

therefore transactions we up both, off-mall in and locations. so, mall saw And

Tracy Kogan

mall Now, was and the what at split between off-mall year-end?

Gina Drosos

of is Well, if Kay is hometown roughly is a off-mall, which X,XXX has largest of as -- out think the outlet it, of about There Tracy. Kay breakout has example, when the between you But Kay XXX stores, an like think you composition off-mall different the XXX in off-mall. fleet. largest off-mall about there

Joan Hilson

Jared, course, an fully which than location. of off-mall is Other

Operator

Boruchow comes Fargo. go Wells question Ike from next from your Please ahead our with question. And

Ike Boruchow

know question Hey. -- everyone. I Good no My is there morning, first is guidance.

Joan, a about at curious I'm talk holding country. just when kind high generally a we know you eCommerce just that or the maybe up could time you're eCommerce stores the are So, seeing? of level, how across performance Gina during that closed

be it Just directionally, of about down? slowing again, there how would Is growth? any we accelerating? that color should think it channel? Is helpful. Is kind Just,

Gina Drosos

and the our to Sure. Ike. for a just were go continued quarter to I only XX% Hi, kind remember, sales. And of sales around in almost business. share up for in Thanks our If it ago, X%. was even you’ll XX% today. seen back just minute, a fourth up we've growing in now calling years we We've growth of steadily eComm, been eComm so few of

to we're our continuing been customer eCommerce environment. experience. we've to of stores So, that best doing really is to the to trying bring now add What that

mentioned of that great in just of we're the from country the consultants couple hours, Jared my virtual a and first was that home, putting as by as I really we XX script, the working example, new served ramped of up five this And good. jewelry some week customers So, different parts in tools the had selling. report for in

have we'll online we sure online tools value will be helpful. great new now. We're right So, we think have making coming that also

capabilities, on will on are this we’re time. as we doing been is So, in I last over based our strength of But seeing jury out, new at years the prepared the couple business where we've this and course, head. everything we But, some think eComm introducing go. of all

Ike Boruchow

it. Got

balance you relative up million. looking about line accrued QX, curious, For sheet. odd move. $XXX Can balance on about there? expenses how on that just going the talk years to just your It When by item Joan, sheet would to little prior at for just ending seems us I'm the what's the I'm of a jumped

Just kind exactly in of that accrued expense is now? what going on line, right

Joan Hilson

Well, the But, and the timing detail timing cut where the really about of end and the as of at generally specific just payments it's work end, off. Ike, the at that. can year of through close speaking, the look we I of the year year

Ike Boruchow

covenant, X.X if about my have up about is then, And Correct that period for that's end And place, does trying Okay. you, that retail -- levered potential that heavy under the know, remain nobody Joan. like a to times me I'm debt it looks take going to I but guess don't balance to for how you about one, guys pressure Just thinking might I does -- we we a What prolonged to EBITDA. know, you to tripping are wrong, how to exactly last if If trip mean? on think debt know going of covenant, again guys you I'm sheet? -- I how you debt that. think possibility? guys the just think but understand don't how knows, do time

Joan Hilson

Yes.

remarks, whichever the I the our below facility my of million, facility the subject coverage or falls not As credit is the availability higher. are the in notes $XXX And a to ratio borrowing mentioned is financial covenants. base under if unsecured subject to fixed XX%

So, this point, we're that not at in position.

falls if coverage below only facility XX%. fixed applies ratio the the So,

Operator

showing Ms. to this time, conference like for I'm turn I'd to And Drosos gentlemen, over closing questions. no remarks. any call back at and additional ladies the

Gina Drosos

Signet, with many our our Well, New again you behalf in here know, our for you by especially joining morning. now. at of which this this you those thank to a and Jamie. and who Again, pandemic York, team on COVID-XX investor time impacted of right base, are you, our all prayers And whole tough it's hearts everyone are thank call

we you us. today in this care So, part stay of appreciate safe. calling everyone Take and being with and

Operator

this today's do gentlemen, does Ladies conference you joining for call. and We thank presentation. conclude today's

lines. your disconnect now may You

Signet Jewelers Limited (SIG) 26 Mar 202020 Q4 Earnings call transcript