TIDMSIG
SIGNET JEWELERS ANNOUNCES STRONG FOURTH QUARTER PRELIMINARY
RESULTS
Increases Synergy Target; Announces New Share Repurchase
Authorization of $750 Million
HAMILTON, Bermuda, February 29, 2016 - Signet Jewelers Limited
("Signet") (NYSE and LSE: SIG), the world's largest retailer of
diamond jewelry, today made a number of announcements including
preliminary results for the 13 weeks ended January 30, 2016
("fourth quarter Fiscal 2016") compared to the 13 weeks ended
January 31, 2015 ("fourth quarter Fiscal 2015").
Highlights
-- Fourth quarter same store sales increased 4.9%; diluted earnings per
share ("EPS") grew over 20%; adjusted EPS grew over 18% and
ahead of
the guided range.
-- Signet's credit program contributed to profitability during the
period; credit metrics improved over the third quarter in line
with
expectations.
-- Increased three-year net synergy target due to strong integration
progress to a range of $225 million - $250 million from $150
million -
$175 million (February 1, 2015 through January 31, 2018), with
the
majority of synergies to be realized in Fiscal 2017.
-- Board approves new share repurchase authorization of $750 million.
-- Board approves 18% increase in dividend.
Fourth Quarter Results
Fiscal 2016 Fiscal 2015 Variance Guidance
Same Store Sales 4.9% 4.2% 70 bps 4.6% - 5.0%
EPS $3.42 $2.84 20.4% $3.44 - $3.50
Adjustments $0.21 $0.22 ($0.01) $0.10
Adjusted EPS $3.63 $3.06 18.6% $3.54 - $3.60
Adjusted EPS is a Non-GAAP measure and is defined as EPS
adjusted for the impact of purchase accounting and transaction
costs. These adjustments were higher than previously guided due to
severance and consulting costs associated with an acceleration of
organizational changes and information technology implementations.
Purchase accounting includes deferred revenue adjustments related
to acquisition accounting which resulted in a reset of deferred
revenue associated with extended service plans previously sold by
Zale Corporation.
"Signet delivered outstanding fourth quarter results exceeding
the high end of our adjusted EPS guidance with year-over-year
growth of 18.6%, driven by a solid 4.9% increase in same store
sales," said Mark Light, Chief Executive Officer of Signet
Jewelers. "Our business was strong in the fourth quarter as
evidenced by our accelerating same store sales performance. At the
same time our credit metrics improved from the third quarter in
line with expectations and we remain confident in the strength of
our credit portfolio. We are pleased with our first quarter to date
operating results and continue to see strength in the business
including credit. We look forward to updating our Q1 performance on
our full earnings call March 24. After having operated Zales for a
full year we have identified a significant number of incremental
synergy opportunities and are increasing our expectations for total
synergies from $150 million - $175 million to $225 million - $250
million by the end of FY 2018 with a faster pace of synergy
realization than previously guided.
Mr. Light continued, "Confidence in our business and the
strength of our cash position enables us to maintain our capital
allocation strategy that provides for meaningful returns to our
shareholders. We see substantial value in our shares and our share
repurchase program begins this week. Our team is doing an
outstanding job of driving growth and delivering results."
Fourth Quarter Fiscal 2016 Diluted EPS Analysis:
Fourth quarter EPS was $3.42. Fourth quarter Adjusted EPS was
$3.63. Adjusted EPS can be reconciled to EPS as follows:
Adjusted EPS Purchase Accounting Transaction Costs EPS
$3.63 $0.06 $0.15 $3.42
Total adjustments (i.e. purchase accounting and transaction
costs) of $0.21 per share were higher than expectations of $0.10
per share due to an acceleration of organizational changes which
will benefit Fiscal 2017. This partially contributed to the
increase in synergy guidance. These accelerated organizational
changes included severance as well as information technology
implementations to drive synergies and resulted in an additional
$0.11 per share of adjustments.
Credit
For fourth quarter Fiscal 2016, credit participation was 58.7%
compared to 58.3% in fourth quarter Fiscal 2015, an increase of 40
basis points.
Signet's fourth quarter Fiscal 2016 credit expense and finance
income were favorable relative to management's expectations. The
difference in interest income from Sterling division in-house
finance programs relative to net bad debt was $3.9 million compared
to a difference of $2.3 million last year.
Fourth Quarter (in millions) Fiscal 2016 Fiscal 2015
Net bad debt ($60.0) ($54.2)
Interest income from in-house $63.9 $56.5
customer finance programs
Net Impact $3.9 $2.3
As expected, Signet's year-end valuation allowance and
non-performing metrics for its Sterling division in-house credit
portfolio improved compared to the third quarter:
Fiscal 2016 Credit Metrics Year-ended Q3-ended Basis Point Diff.
Total valuation allowance as 7.0% 7.8% down 80
% of gross receivables
Non-performing receivables 4.0% 4.9% down 90
as % of gross receivables
The improvement in these credit metrics exceeded the impact of
normal seasonality trends that tend to improve allowance metrics
from the third quarter to the fourth quarter. Excellent credit team
execution and credit marketing initiatives designed to favorably
influence credit receivable mix helped to drive the improvement. On
a full year basis, these credit metrics for Fiscal 2016 compared to
Fiscal 2015, increased 20 basis points.
Signet anticipates providing additional credit disclosures as
part of its full earnings release on March 24, 2016, as well as in
its Form 10-K filing.
Synergy Guidance Increased
In addition to the strong financial results and increasing
pipeline of opportunities, Signet is increasing its synergy
guidance (i.e. operating profit contribution) to a range of $225
million - $250 million from the previously expected range of $150
million - $175 million as measured cumulatively over the three year
period from February 1, 2015 - January 31, 2018.
"In Fiscal 2016, we delivered $60 million in synergies,
significantly exceeding the guided range of $30 million to $35
million," said Michele Santana, Signet Chief Financial Officer. "As
we enter the new fiscal year, we have clear line of sight to a
material acceleration and expansion of synergies over the next two
years. The incremental synergies are anticipated to come
principally from gross margin and operating expense initiatives and
secondarily from revenue-driving initiatives. Of the synergies
remaining in the next two years, we expect to realize 70% by
January-end 2017 and 30% by January-end 2018, which is faster than
we initially guided."
In Fiscal 2017, Signet expects that the synergies will be
realized disproportionately in the back half of the year reflecting
the cadence of how the Company's profit tends to flow.
Capital Allocation
Signet's strong balance sheet allows it to execute on its
strategic priorities, invest in the business, and then return
excess cash to shareholders while ensuring adequate liquidity and
maintaining its investment grade rating. Signet plans to distribute
70% to 80% of annual free cash flow in the form of stock
repurchases or dividends, assuming no other strategic uses of
capital. In Fiscal 2016, Signet repurchased $130 million of its
stock, within the previously stated guidance range of $100 million
to $150 million.
Reflecting the Board's confidence in the strength of the
business, Signet's ability to invest in growth initiatives and the
Board's commitment to building long-term shareholder value, the
Board authorized a new share repurchase program of $750 million in
addition to the $135 million remaining on the existing
authorization. Repurchases are expected to be financed by free cash
flow as well as potentially future incremental debt capacity. Under
the share repurchase program, purchases can be made in the open
market and through privately negotiated transactions from time to
time depending on market conditions. Signet's share repurchase
program will commence this week.
In addition, the Board also approved an 18% increase in the
quarterly cash dividend from $0.22 to $0.26 per share for the first
quarter of Fiscal 2017.
Signet will report its complete financial results for the fourth
quarter Fiscal 2016 on March 24, 2016.
About Signet and Safe Harbor Statement:
Signet Jewelers Limited is the world's largest retailer of
diamond jewelry. Signet operates approximately 3,600 stores
primarily under the name brands of Kay Jewelers, Zales, Jared The
Galleria Of Jewelry, H.Samuel, Ernest Jones, Peoples and Piercing
Pagoda. Further information on Signet is available at
www.signetjewelers.com. See also www.kay.com, www.zales.com,
www.jared.com, www.hsamuel.co.uk, www.ernestjones.co.uk,
www.peoplesjewellers.com and www.pagoda.com.
February 29, 2016 09:04 ET (14:04 GMT)
This release contains statements which are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements based upon management's
beliefs and expectations as well as on assumptions made by and data
currently available to management, include statements regarding,
among other things, Signet's results of operation, financial
condition, liquidity, prospects, growth, strategies and the
industry in which Signet operates. The use of the words "expects,"
"intends," "anticipates," "estimates," "predicts," "believes,"
"should," "potential," "may," "forecast," "objective," "plan," or
"target," and other similar expressions are intended to identify
forward-looking statements. These forward-looking statements are
not guarantees of actual results or future performance and are
subject to a number of risks and uncertainties, including but not
limited to general economic conditions, risks relating to Signet
being a Bermuda corporation, the merchandising, pricing and
inventory policies followed by Signet, the reputation of Signet and
its brands, the level of competition in the jewelry sector, the
cost and availability of diamonds, gold and other precious metals,
regulations relating to customer credit, seasonality of Signet's
business, financial market risks, deterioration in customers'
financial condition, exchange rate fluctuations, changes in
Signet's credit rating, changes in consumer attitudes regarding
jewelry, management of social, ethical and environmental risks,
security breaches and other disruptions to Signet's information
technology infrastructure and databases, inadequacy in and
disruptions to internal controls and systems, changes in
assumptions used in making accounting estimates relating to items
such as extended service plans and pensions, the impact of the
acquisition of Zale Corporation on relationships, including with
employees, suppliers, customers and competitors, and our ability to
successfully integrate Zale's operations and to realize synergies
from the transaction.
For a discussion of these and other risks and uncertainties
which could cause actual results to differ materially from those
expressed in any forward-looking statement, see the "Risk Factors"
section of Signet's Fiscal 2015 Annual Report on Form 10-K filed
with the SEC on March 26, 2015. Signet undertakes no obligation to
update or revise any forward-looking statements to reflect
subsequent events or circumstances, except as required by law.
Contacts:
Investors: James Grant, VP Investor Relations, Signet Jewelers
+1 (330) 668-5412
Media: David Bouffard, VP Corporate Affairs, Signet Jewelers +1
(330) 668-5369
View source version on businesswire.com:
http://www.businesswire.com/news/home/20160229006063/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
February 29, 2016 09:04 ET (14:04 GMT)
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