Signet Jewelers Limited (SIG) 2 Sep 212022 Q2 Earnings call transcript

Good morning and welcome to the Signet Jewelers Second Quarter Fiscal 2022 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Vinny Sinisi, Senior Vice President, Investor Relations and Treasury. sir. ahead, go Please

much, Quarter good Earnings very to everyone. our Second Conference Jason, Thanks morning, and Welcome Great. Call.

Officer, On CEO, the Hilson. Strategy Gina Signet Joan Drosos, and call, Chief Financial today are and

current revise and make today's on on facts language, to we uncertainties read in XX-K, urge historical to update and or quarterlies certain During results Except information subject other on we'll forward-looking Any differ are are risks required Form statements forward-looking of future new disclosure annual as XX-Q, X-K. our number cautionary report undertake on you no may or statements reports by risk and law, events. statements. a actual of factors, obligation not that and light to We presentation, materially. publicly

discuss the non-GAAP we During financial will certain call, measures.

further those For the release at to will that, reconciliations GAAP the of posted I investors as signetjewelers.com/investors. on them well news Gina. should our over site to review with we of measures, as And call discussion turn

Thank to us all with on call the today. thanks Vinny. And of you you,

me ones begin and our Ida. were hope and of prayers your the sending and safe partners First, let who our colleagues in and you We are wake by all loved thoughts to sound.

quarter. the on Now

Our to year. last our in maximize quarter capture performance transformation share this over the reflects Inspiring jewelry and Brilliance continued momentum market category strength

marketing, and experiences. and advancing propositions, commerce integrating newness, our connected we're better always-on value Specifically, banner product

three that alongside an Our and you talents. work to expanding capabilities to and with team. the like to them. you customers There messages team new and honor continues dedication, accelerate I'd passion, through to our transformation leave It's their loyal delight today. key Thank are and Signet

guidance. team quickly changing are raising trends. outperformed Data-driven consumer of our bespoke and our expectations 'XX we research identify to make First, most capabilities enabled insights the fiscal our and and

strategies Brilliance in an are Inspiring our Second, working integrated manner.

and experiences. customers serving our assortments differentiated value propositions with of product refinement continued are banner distinct Our

commerce us we connected and to excellence. wherever strategy our shop an our with our And Our more embracing and continuing and industries, agility, culture team third, culture innovation members enabling investing are strengthen and consumers however, want. are people whenever, to is across attracting capabilities increasingly they in stronger people and best the By competitive advantage. talent becoming new our even are with of

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this transform quarter, of time non-GAAP operating margin we to two compared basis operating our this point continue model, years to we As an delivered XX.X% improvement representing XXX ago.

strong more particularly positive this half ago, back it momentum, view quarter. third our a for was is As a few of than result the months of the

which travel anticipated is and related We are to of COVID we experiences, shift a toward delay seeing the spending in Delta believe primarily the variant.

remaining our while out momentum, to are quarter Xnd first, raising enabling store fiscal our Xrd headwinds. and our we strategies of the stay While factors to quarter are year. how today, important why employees don't potential anticipate and cautious, point put health Brilliance explain significant outperformance we macro the are team safety competitive These performance, reflecting back and Inspiring we both to the in given quarter continue closures customers of our agile it's our To Xnd create half guidance opportunities. and

our accessible Brilliance strong tailwinds growth Winning are this where-to-play that quarter. category in Recall built existed on While resonated on increased our that that commerce marketing in our targeted of QX, services, in combination is worked connected value, it customers, four biggest conversion leading our accelerating in and differentiated strategies. digital to that was assortments expanding phase capabilities and with the luxury Inspiring and businesses, always commerce. transformation all deliver

win focused data our to our into for quickly aim against. team execute and we consumer we big in to on identified early that leaning businesses, our As trends worked

is these consumer of trends first The strong confidence.

this higher-income in to step remains earlier highest it second back heightened throughout and took a millennials and customers. While quarter levels August, was Confidence our year. Index among this similar is

off recent points. Our pandemic. offer before the the by providing research We've at to assortment XX% they U.S. our than or also same better economically are that today quality pieces price consumers higher additions that of believe shows were higher responded they

higher we the e-commerce online. Day, second our was closes than identified early value XX% and growth that trend We continue XX%. at drove to points both The again day ago this and average into with Valentine's resonating to leaned at customers Mother's Day. week them. showing gifting same and price as to Mother's in-store up than the X connected more is trend leading at transaction it sales commerce experience growth more same-store XX%, In those is to up time brick-and-mortar over in Similarly, of celebrate years period

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available fashion James decision assortment Another expand example to through good is the Allen. our

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education million over XX% years we or an to Company, bridal our and total important we providing expertise as customers online, a sales both ago. are on Customers quarter As of builds counsel, saw, two such tremendous trust responding, this with which and in-store have in $XXX category increase decision.

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self-purchase two points progress. can than their customers statement on analytics to shows holiday data our year aligning and customers are XXX our on of of XXX likely a more the example, basis with to milestone more refine Zales purchase likely For Kay's gifting we Meanwhile, Kay for new target journey, first and years basis points be holiday on maker, half new approach ago. journey the attract be bold that continues the Zales to sentimentalist. ' are a the in measure to generous

at assortment, through assortment our since continued of to engagement available or driven inventory the efforts of center began This assortment. our healthy differentiation is pieces Jared, ways consumer-inspired rings that with this to turn inventory of more we've focus line our and larger integrated stones at on One the transformation. refinement diamonds a diamond we position. the our our chosen a and is Pagoda. of Through Higher through metals cuts. driven initiatives, a we've our at differentiated series quality XX% Kay includes improvement increasing overall fancy Alongside a provide and

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that in options. step express transformation of roughly willing of for of customers at experience in more more long-term some provide foundry their indicated foundry the of a XX Foundry payment offering service. stores. For this financial and costs services, with This their its XX fiscal on-site credit XX% recent locations are example, continue insights lower also roughly Jared in products than delivered this premium. are jewelers Jared agreements provide we flexible pay These a to our and quarter. higher without in customers cannot software an a Jared another We of locations year. our and wedding that we get foundries our experience. have retail than of the XX% with in to increasingly interest and strategic rings. engagement have plan customization now which bridal with With sales customers partners investing In to Over them broader important XX% consumers reflected unique survey, in printing level took most computer-assisted and July, is jewelry combines services. XX% expressed rollout, customizing today, range other XD s will Customization an Stores interest we experience with performance as they and design with

to our banner by growing value through third is strategy differentiation and way continued portfolio. play the the luxury accessible Our expanding of mid-market

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most results, April. the encouraging. lowest opportunity our re-branding Results we've increased that likely exciting new of At device. time, times August mobile to by and their of from XXX stores On doubled we new e-commerce Based has expanded Online stores mid-market, have banter same because are traffic on in and Xnd. we Piercing end rollout banter.com. site site on the the on customer the began historically early, mobile-first site the of continued at is launched very the test XXX promising our of to This target the to banners. penetration end an bring among total the XX%. of digitally the has but But still represents our we this interaction Pagoda value been shop savvy

customers, and both customers from growth. and lift acquisition seeing customer we're unlocking existing new Importantly, levels Pagoda of new

seamless. data-driven and leading not is it digital. a of so accelerator. leveraging I The delivery leading and want to the combined digital with commerce brick-and-mortar technology It's connected It's and multipliers. and way. put The mid-market It and where-to-play and our foundation, our brings are channel-agnostic, mobile together Our strategy. it to more e-commerce powerful our in and final jewelry and fourth is strategy commerce or our businesses integration in If in-store experiences is Connected mindset customers particular our then and is capability. services winning two emphasis or the on online in as a is end. a commerce is people fundamental ubiquitous both industry. because together our biggest in expansion this

recognized adding growing more online. our calls, We through buy In meet more customers online, consumers their video more. is and fact, connected in commerce the a that shopping as in-store are that factor capabilities also better the pickup and previous perception. pandemic realize to pandemic services; shift are easier made comfortable of opportunities this online Customers was jewelry that said than have buying XX% our them

pick-up we engagement customers forefront through online at Business of We of working roughly connection establish Of orders convenience, help continue we Business consultants. XX% know Apple drive we which additional like and consultants these implemented also and book for to our conversations couples the capabilities. to in human innovative rates than Kay, that as online, at XX% way aiming Last conversion. looking than Chat are of online, these customers bought Jared, engaged said double virtual this us. This from by ways of it And this over when appointment, or higher changing ship virtual the orders. digital Google shop XXXX, ring are was quarter In provide the shopping because online our store virtual reach amount jewelry with important is quarter, least more buy more Customers trend to be of one in is in-store an many in they in-store, calendar XX% for a Messages that their consulting, utilized XXXX. capabilities an experience. customers

within times customer appointments averages walk-in sale in of over is example, result Of spend. For a Ernest XX% the made now business four were result online. those a in-store that Jones, our XX% of what appointments, that

the core and experiences be come. advantage physical We Signet will continue blending to years expectation a believe competitive virtual fine in and, that for a customer jewelry to

words few ahead. a headwinds on the potential Now

with that Our more indicates impact to variance young older children, research XX, younger among customers. customers, XX concern growing those shopping people. particularly This younger aged may those behaviors unvaccinated are about COVID and than concerned

that across however meet we're on curbside and at us, delivery. more commerce to being these customers to concert So including they said, spas. know relatively and shopping wherever comfortable in preparing same-day them, want and also pickup, are in online shop connected planes, concierge our ecosystem, That than with venues, we malls centers,

while flexible take gifts advancing So concern and that in other is seat, lasting travel desires we're meeting back Inflation also the them and to a of closest experiences customer's celebrate are we our our fulfillment options seeing research. with significance those while value. to

decreases. as income for essentials prices wane, customers and programs increase discretionary stimulus As naturally,

Company. proud within We're commitment they while strong retail dedication top of Inspiring among as to provide purchases members work beyond. are to said our to However, strategies, remain particularly engagement within is our on with lasting to and unlocking jewelry, team, from at our variety In in XX% effort of the points, this value talent execution scale that offer also assortments our Customers, Signet, our of plays of our category recent and focused Brilliance industry within With a well goals. the our capitalize increasingly product will strength to our across of assortments. excellent with still and optimized to vendors, illustrating In performance value. the time our a momentum also agile summary, align higher-income survey, price with people. reflection trend team discretionary competitive and which to margin and attracting our continue ability of incredible discretionary customers culture able trusted network our on we're as and dollars uncertainty, spend a

than and any who to and nearer turn and working this insights performance into long-term Joan, it's of note, Joan? factor. confidence All our and customer what's her that powerful organization in positive our ahead. into advancements. translate that of creates will experiences, a of over share cycle. improving execution, continuing that Capabilities productive On this the our my And culture innovation, more strength drives talent I'll other agility what's

this capabilities. with Thank you, our Gina hello, the jewelry delivered results team to working new strong quarter, strength everyone. The maximize and category

As there our messages three talk to I through performance, highlight. key are

by costs, additional expanded higher and First, productivity labor margin merchandise growing cost margin, we operating leveraging achieving fixed and savings.

due experience-related Second, QX we're the raising QX primarily to spending, believe guidance is our reflect a given delay momentum beat shift anticipated variant. stronger we current to business and the the Delta of to and which

We are our the consumer flow. and third, capital -XX to authorized fourth aligned support in COVID on we've to sheet government expanded growth our of spend. opportunities uncertainty our confidence and of to the quarter repurchases our macro and priorities, maintaining due of conservative longer-term our balance with policies million strength reflect to variance related a impact cash view And the $XXX

Now XXX% reflect turning billion more to $X.X of the quarter, over year. our total last growth sales of than

We to and levels through business also return transaction that our values, brick-and-mortar UK the capabilities. connected higher retail higher reflects average note overcome industry continue commerce quarter for traffic conversion, banners. foot of lower of I'd this

of a improvement drivers our of point the years basis revenue, we earlier This on sales. This merchandise delivered event and point the merchandise drove a expansion. discount SG&A this Moving second reflects at expansion. gross The A combination to strategy enhanced this mix targeted to than controls, by XX% ago. costs cost contributed favorable $XXX of quarter were compared year. savings fixed more $XXX detailed two quarter, and remaining This complemented was factors service the improvement. XXX of margin, is XX% of X investor basis example is we sales. points driven to Leveraging XXX million by margin XXX ago. years virtual the increasing levels basis promotions of sustained or or improvement approximately million rate approximately of an

model noting Our use this though traffic loss sales turnover the time increasing words, to our unproductive to XX% overall than in flexible data-driven operating improvement period. Non-GAAP the labor per traffic $XXX make to while $XX.X prior has store our largest this time to contributing the million cost-efficiency. where two store an in also model compared more ago, factors we're operating model possible. year. continues by other labor worth a of down, hours decrease same In of It's employee hour continues removing hour. compared years one million is be operating that to of to hours of was store per profit This delivered in

two Second including quarter loss was a non-GAAP $X.XX diluted improved a since non-GAAP recorded. allowance year has of as to tax compares release against a diluted and performance diluted discrete $X.XX, was to benefit valuation of share. of EPS This share $X.XX a assets is it years deferred tax prior per ago. per This EPS significantly $X.XX our due of

to inventory, actions. in levels. achieve our inventory as level inventory and we capture, offer end life our and quarter turn Turning has strategic overall turning three made promotion. health resulted customers. slow We strategic inventory, To inventory the margin we're of broadening took improvement this, we improving to in reduction a in this XX% sheet, financial through This with product the significant and in strengthening to reduced and of the the of key some both I'd as perspective. productivity health balance well of additional Starting progress both to our like accessibility a

reaches consumer ship visibility such buy team fulfillment leaned flexible We've capabilities, the We life and of better and stage thereby and that insights product design and down to in propositions, and that from inventory banner into are online access our store increased is reducing amount clearance of sell ensure customers our in-store, new members. bring aligned the also with test improved driving our or for cycle. pickup inventory the products as cycle that we leveraging value

and deliver our agreements recently continue we the our on balance facility. customer Moving enhanced both in investing the with on growth services obligations, Alongside announced cash including this, from ABL credit financial sheet long-term our risk to liquidity, net recently removed to priorities. extension positioning We're debt we our us long-term have flexibility by our preferred of financial to position, share capital well a partners. with in

Our investment this the business. first invest as acquisition that opportunities we capabilities, primarily includes announced the banner also digital which and strategy of our priority Rocksbox, in is technology, align includes with value such earlier Inspiring This This evaluation year. propositions. in Brilliance to

with three Our to XXXX priority notes on provides that facilities additional option obligations. is focus note leverage debt our goal debt, and extension times. the our adjusted our senior us of address I'd EBITDA the an ABL July XXXX to recent to of below second our reducing share to through preferred ratio

we share we our an returning $XXX to we'll Our authorization repurchases reinstated on and dividend as basis. shareholders. to have Last third capital our quarter today, opportunistic priority common evaluate expanded we million, is which of announced current

I'd to like our guidance. discuss financial Now, XXXX fiscal

are shift QX our We of a primarily view anticipated delay full-year results variant. raising and the business a current beat as Delta in our the guidance QX into reflect to to experiences-related momentum; factor of spending

of create view due the government variants year, conservative into quarter. to a policies receipt -XX our to early spend. of earlier maintaining the fourth includes: are designed last COVID holiday cadence to macro support uncertainty shopping on back-half promotional related less the on third always-on quarter to strategy Building consumer of on reliance holiday assortment, the fourth a and and We drive impact quarter marketing,

the in higher store from quarter of the well to is mid-single last year, X% expect sales EBITDA guidance, We to credit expenses and QX million. impact billion embedded of of enhanced sales to X% favorable sales recently our digits. agreement. same-store to down in Within negative $X.XX non-GAAP Implied marketing range to fourth up range billion $X.XX low in our million as of third-quarter range same-store staff with the the guidance $XX in and we've $XX as

XX% $XXX year, and EBITDA billion $XXX sales $X.XX For $X.X same-store within total to billion. XX% to range now we with million sales of million. the non-GAAP fiscal expect in of the to of range

closures began store sourcing we've significant from changes. variants to our no we strategy, meaningful of as impact Our on from and environment holidays level or resulting arising acting or already assume inflation fulfillment guidance assumes pricing no COVID

up including to year continue track remain and so our locations strategy to that we close We've months, we've opened in XXX. on XXX strict and XX reopened estate open a locations rationalization As optimize far XX, to evolved at this our over least fleet we footprint, closures XX real optimization. then off-mall mall from locations. past closed fleet were Recall to XX the

of This quarter and as has performance the off-mall shown similar approach benefits drove levels. this mall locations our

cost recall to of as mentioned range Lastly, of previous expected continue million. commerce. I capital represents incremental margin $XXX narrowing and as $XXX cost spend, $XXX fulfilling other that indirect of expenditures in savings $XXX range gross range for our raising of a $XXX we've expected million to $XX million $XX million. to year to from This we a the million we're range of a a $XX identified within million Further, the to our connected savings

a take call like team. to thank to I'd our Signet we for the open Q&A, moment Before

as now Q&A as turn to our a their through team. devoted quarter. transformation, Signet Company Our call is exciting for begin team to It an commitment I I'm continues strategies be to our Operator work alongside this such for the a and the time session. over we continue force the proud to driving this performance to strong delivered

you. Thank

[Operator session. begin will Instructions]. the question-and-answer We now

from Our comes first Fargo. Please go Boruchow ahead. from question Wells Ike

margin. gross morning. Good ask is This to I William just Hi. Ike. about for wanted

I normal just the back to the we bit had about how the about gross Can you little mean, over a you levels should to points think into sustainability talk pre-pandemic do basis in said half another of more back revert levels. it expect the or -- half margin? XXX these You you levels?

second say driven assortment that, rather We've take assortment markdowns than The broad-based, specifically the closures reduction then targeted the response our controls, And our helping things. our several that leveraging strong cost of is, it's promotions also expansion. -- was and expanding the quarter and seeing fixed expansion. that's the margin. would consistently, cost, gross by I helping broad-based. in to And margin really also margin of our occupancy our to I'll we're that is controls, occupancy gross One very and thirdly, Will. and store also so margin enhanced but cost fixed was that the related that merch So the very our is leverage discount

in back flexibility targeted ourselves remarks the And regarding third half, as so positioning with as we well. the promotions quarter, my said we're and essentially for

the particularly fourth of the uncertainty, and With shopping the competitive behavior. consumer environment the quarter in

thank Great, a billion if term, more. I idea targeting where us know now? just just you an where a perspective, are you you. sense squeeze from the is could And just that revenue can give can of Service is a in business one that us business, I of long but over you give revenue

Jen, that Hey, Will, I'll take one. it's

of our out services even Signet's revenues So pre-transformation. don't report no, can we what separately, services I meaningful part say is that have business a been

who from experience. those repairs we're end-to-end custom design staff more to where ring better now offerings, our same foundries. is simpler light we're testing doing with warranty than jewelers service a work, and customers. and really everything have sizing capabilities and on building to do XXXX our on and programs, customer what those Same expanding We fully where customization Jared that we're on a better And on options shining for learning really expanding on

So a do now consumer we're with underutilized, lot have insights of been the of a life bit capabilities these but to how driving bringing them that. Company, really part and we

it I'll Great. Thank you. pass Thank you. along.

from go The Please Lejuez next Citibank. question ahead. comes from Paul

our morning Paul. and is for for Good Brian this question. taking Chindamo thanks Everyone, (ph)

you pull remarks, quarter with your guess mentioned sales in you third third in are then period? guess into in I quarter and third over and the to why levels quarter in -- or that some reconcile holiday ask, this those to of you're I and trying that the going seeing forward wanted you promoting sales holiday Just pull the the prepared try just their forward XXXX can Telsey momenta promoting

transaction the three early From a look for to several lower now types more at savvy more insight. typically have, fourth-quarter And of more that's who typically on are and shoppers macro to know value with September, typically holiday last about something the in them looking that are value, believe for consumer-driven looking so earlier are most standpoint, women, the that and we years, earlier know shoppers; different that a promotional been ready We for another We targeted frame. our we Christmas are performance. them, shopping reliance we reduce cadence of merchandise October holidays and begin the this start kinds We engagements thinking with right people time in year. and

our lot a about think we so in where engagement are and we And business bridal.

they're late if because there e-com to in the off. we've think serve We know December shoppers. but to XXrd days shopping to very especially also know it's cut that they're capabilities after have them the on all on early that we place XXth go, right They got are X

we're targeting that December through meet whole cadence, differentiated of time merchandise in, these services commerce In promotional consumer September really and bring frame. the we all connected So our to needs this

So big of the in move year are QX funnel with we already toward anticipate as they customers' and really QX year, people we of and purchasing. are year stay our we'll given holiday, been This so it engaged the We it. a it the the we're we've is this of important a be it's and uncertainties really marketing top here consideration last to million part contact for into looking where we successfully this probably to idea considering part so drive macro do of in starting set sales that QX to did continue bit X.X and spreading holiday to us. in more that getting

is only always-on began fiscal that I with would 'XX. thing brilliance The to the past in marketing that add strategy

the support as that in year, the and the with second shift seeing the in And we quarter to this the the expected put Jenna think important promotions and we with for about. anticipated that third maximize And transitioning and the we're our in holidays so we've later that we've momentum, we quarter, very into place. strategies that particularly been us in fine-tuning in momentum to the see of and that the delay spoke manage share market business our on it's

that bring much strategy of receipt product gift-giving that of importantly, what the well. the within helped in would as being for the also we're so receipts, our as holiday take and advantage really positioned timing support in they we're of customer so the to well it already water, market as to the newness us expect seeing Importantly on

some heading it. like forward good cited that efforts there holiday inventory Got disrupt you your supply an a follow expected just And in feel pull Were the can the chain of second you're do you I in mitigation release half? is that up, the if able are into just the back to to position or you half.

plan material deliberate took any to at vendor the production, value our time, where to inventory We us actions very partners disruptions is shines. We holiday to our provided the projections also This and anticipate sourcing this really vendors with of don't manage allow and this trusted potential relationship early to help safely time for demand. meet to impact. our holiday proximity have we

holiday In already half of fact, enhanced. we have our than more orders

great. very much you Thank That's luck. good and

Thank you.

[Operator Instructions].

go Please Our from next Advisory comes ahead. from Telsey Telsey question Dana Group.

inventory path? Joan, about on incremental savings, then on opportunity are the rationalization talked Thank going on cost And where everyone. the where for you. as category? by there you see Gina, is pipeline more you And and is rationalization this from? an you SKU productivity, Hi, do it inventory that and coming where

Thanks, Jenna.

made, So during inventory set transformation do the of on we progress integrated pleased an have to really inventory, far. with But increase XX% that we're we've our actions. turn our so

members have We on this. team who good focus

improve We technology to our help inventory in have can I the to continue productivity. that invested see full we've that yet, benefit new think, of us

that So I'd just things. plan X It we say journey gives it's a be us, on. continue to to

the planning done further significance now much precise over ideas XXX what specific out with because just and statistical of we can them. and be learning, our ahead, so that's years, uncertain we and we're the new has really need on we've our product very think tests couple we're when forecasting for concept it testing we It's last that. better when more vendors on And and with times more we important. agility. and that's about And So need especially so flexibility in and volume

being put lines well of we're analytics that the on core we've performance much able as helping. bringing So is which more against inventory, really in, the new we're to our getting precise that predict data as

area. is on the it would in and very to say focused continue we're improvements looking that So I team

with And and really models. places indirect productivity well to see continue -- Dana, respect our spending savings, as in about, doesn't we really continuing of process our to gross And drive and in then which costs drive to labor impact margin. store areas merchandise-related then the cost that costs customer as occurring we the down or where see care

and in forth our has business drive continuing amazing that costs focused drive growth strategy. can invest these So to we down an really our the team so we're and disciplines effort continue to put these to very on

So very effort. team a much

Thank you.

Gina and closing our answers any would to remarks. concludes question Drosos for conference the to This I session. back over turn like

Thank toward us confidence. our we've capabilities insights Thanks macro allow holiday again. that you agile again, us with uncertainties, and joining continuing to Despite today. stay heading with we're team for everyone, armed and

Thank concluded. today's conference attending presentation. The you is now for

may disconnect. You now