SIGNET JEWELERS LTD, 10-Q filed on 9/5/2019
Quarterly Report
v3.19.2
Document and Entity Information - shares
6 Months Ended
Aug. 03, 2019
Aug. 30, 2019
Cover page.    
Document Type 10-Q  
Document Quarterly Report true  
Document Transition Report false  
Entity File Number 1-32349  
Entity Registrant Name SIGNET JEWELERS LIMITED  
Entity Incorporation, State or Country Code D0  
Entity Address, Address Line One Clarendon House  
Entity Address, Address Line Two 2 Church Street  
Entity Address, City or Town Hamilton  
Entity Address, Postal Zip Code HM11  
Entity Address, Country BM  
City Area Code 441  
Local Phone Number 296 5872  
Title of 12(b) Security Common Shares of $0.18 each  
Trading Symbol SIG  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   52,263,264
Amendment Flag false  
Document Period End Date Aug. 03, 2019  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Entity Central Index Key 0000832988  
Current Fiscal Year End Date --02-01  
v3.19.2
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
shares in Millions, $ in Millions
3 Months Ended 6 Months Ended
Aug. 03, 2019
May 04, 2019
Aug. 04, 2018
May 05, 2018
Aug. 03, 2019
Aug. 04, 2018
Sales $ 1,364.4   $ 1,420.1   $ 2,796.1 $ 2,900.7
Cost of sales (901.3)   (929.9)   (1,833.6) (1,925.7)
Gross margin 458.7   427.0   958.1 911.8
Selling, general and administrative expenses (411.4)   (444.8)   (886.6) (927.6)
Credit transaction, net 0.0   (23.9)   0.0 (167.0)
Restructuring charges (23.4)   (19.6)   (50.2) (26.1)
Goodwill and intangible impairments (47.7)   0.0   (47.7) (448.7)
Other operating income, net 1.4   3.2   1.4 25.3
Operating income (loss) (22.4)   (58.1)   (25.0) (632.3)
Interest expense, net (10.1)   (9.4)   (19.3) (18.3)
Other non-operating income 0.2   0.5   0.5 1.1
Income (loss) before income taxes (32.3)   (67.0)   (43.8) (649.5)
Income taxes (3.8)   44.0   (2.3) 129.9
Net income (loss) (36.1) $ (10.0) (23.0) $ (496.6) (46.1) (519.6)
Dividends on redeemable convertible preferred shares (8.2)   (8.2)   (16.4) (16.4)
Net income (loss) attributable to common shareholders $ (44.3)   $ (31.2)   $ (62.5) $ (536.0)
Earnings (loss) per common share:            
Earnings per common share: basic (usd per share) $ (0.86)   $ (0.56)   $ (1.21) $ (9.27)
Earnings per common share: diluted (usd per share) $ (0.86)   $ (0.56)   $ (1.21) $ (9.27)
Weighted average common shares outstanding:            
Weighted average common shares outstanding: basic (shares) 51.7   56.1   51.6 57.8
Weighted average common shares outstanding: diluted (shares) 51.7   56.1   51.6 57.8
Restructuring Charges            
Cost of sales $ (4.4)   $ (63.2)   $ (4.4) $ (63.2)
v3.19.2
Condensed Consolidated Statements Of Comprehensive Income (Loss) (Unaudited) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Aug. 03, 2019
Aug. 04, 2018
Aug. 03, 2019
Aug. 04, 2018
Pre-tax amount        
Foreign currency translation adjustments $ (24.0) $ (15.3) $ (26.0) $ (37.0)
Available-for-sale securities:        
Unrealized gain (loss) 0.0 0.6 0.3 0.4
Impact from the adoption of new accounting pronouncements [1]     0.0 (1.1)
Cash flow hedges:        
Unrealized gain (loss) 12.4   8.1  
Unrealized gain (loss)   (4.3)   (2.4)
Reclassification adjustment for gains to net income 0.0   (0.5)  
Reclassification adjustment for gains to net income   (0.4)   (0.9)
Pension plan:        
Actuarial loss 0.0 (8.0) 0.0 (8.0)
Reclassification adjustment to net income for amortization of actuarial losses 0.3 0.0 0.6 0.3
Reclassification adjustment to net income for amortization of net prior service credits 0.0 0.1    
Total other comprehensive income (loss) (11.3) (27.3) (17.5) (48.7)
Tax (expense) benefit        
Foreign currency translation adjustments 0.0 0.0 0.0 0.0
Available-for-sale securities:        
Unrealized gain (loss) (0.1) (0.1) (0.1) (0.1)
Impact from the adoption of new accounting pronouncements [1]     0.0 0.3
Cash flow hedges:        
Unrealized gain (loss) (3.0)   (1.9)  
Unrealized gain (loss)   1.3   0.9
Reclassification adjustment for gains to net income 0.0   0.1  
Reclassification adjustment for gains to net income   0.2   0.4
Pension plan:        
Actuarial loss 0.0 (1.5) 0.0 (1.5)
Reclassification adjustment to net income for amortization of actuarial losses 0.0 0.0 (0.1) 0.0
Reclassification adjustment to net income for amortization of net prior service credits 0.0 0.0    
Total other comprehensive income (loss) (3.1) 2.9 (2.0) 3.0
After-tax amount        
Net income (loss) (36.1) (23.0) (46.1) (519.6)
Foreign currency translation adjustments (24.0) (15.3) (26.0) (37.0)
Available-for-sale securities:        
Unrealized gain (loss) (0.1) 0.5 0.2 0.3
Impact from the adoption of new accounting pronouncements [1]     0.0 (0.8)
Cash flow hedges:        
Unrealized gain (loss) 9.4   6.2  
Unrealized gain (loss)   (3.0)   (1.5)
Reclassification adjustment for gains to net income 0.0   (0.4)  
Reclassification adjustment for gains to net income   (0.2)   (0.5)
Pension plan:        
Actuarial loss 0.0 (6.5) 0.0 (6.5)
Reclassification adjustment to net income for amortization of actuarial losses 0.3 0.0 0.5 0.3
Reclassification adjustment to net income for amortization of net prior service credits 0.0 0.1    
Total other comprehensive income (loss) (14.4) (24.4) (19.5) (45.7)
Total comprehensive income (loss) $ (50.5) $ (47.4) $ (65.6) $ (565.3)
[1]
Adjustment reflects the reclassification of unrealized gains related to the Company’s available-for-sale equity securities as of February 3, 2018 from AOCI into retained earnings associated with the adoption of ASU 2016-1.
v3.19.2
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Millions
Aug. 03, 2019
Feb. 02, 2019
Aug. 04, 2018
Current assets:      
Cash and cash equivalents $ 271.5 $ 195.4 $ 134.1
Accounts receivable 21.8 23.7 11.1
Other current assets 190.6 244.0 239.3
Income taxes 2.6 5.8 119.2
Inventories 2,272.1 2,386.9 2,363.8
Total current assets 2,758.6 2,855.8 2,867.5
Non-current assets:      
Property, plant and equipment, net of accumulated depreciation of $1,338.3, $1,282.8 and $1,249.2, respectively 750.2 800.5 820.1
Operating lease right-of-use assets 1,729.3 0.0  
Goodwill 248.8 296.6 509.0
Intangible assets, net 264.3 265.0 341.3
Other assets 194.7 181.2 200.7
Deferred tax assets 19.7 21.0 2.2
Total assets 5,965.6 4,420.1 4,740.8
Current liabilities:      
Loans and overdrafts 54.2 78.8 111.4
Accounts payable 224.1 153.7 236.7
Accrued expenses and other current liabilities 418.0 502.8 440.4
Deferred revenue 265.4 270.0 276.3
Operating lease liabilities 324.8 0.0  
Income taxes 25.1 27.7 0.0
Total current liabilities 1,311.6 1,033.0 1,064.8
Non-current liabilities:      
Long-term debt 628.2 649.6 671.1
Operating lease liabilities 1,499.0 0.0  
Other liabilities 122.7 224.1 236.1
Deferred revenue 699.8 696.5 663.3
Deferred tax liabilities 0.0 0.0 91.0
Total liabilities 4,261.3 2,603.2 2,726.3
Commitments and contingencies
Shareholders’ equity:      
Common shares of $0.18 par value: authorized 500 shares, 52.3 shares outstanding (February 2, 2019 and August 4, 2018: 51.9 outstanding) 12.6 12.6 15.7
Additional paid-in capital 236.3 236.5 287.6
Other reserves 0.4 0.4 0.4
Treasury shares at cost: 17.7 shares (February 2, 2019: 18.1 shares; August 4, 2018: 35.3 shares) (993.0) (1,027.3) (2,418.0)
Retained earnings 2,154.2 2,282.2 3,820.7
Accumulated other comprehensive loss (322.3) (302.8) (306.3)
Total shareholders’ equity 1,088.2 1,201.6 1,400.1
Total liabilities, redeemable convertible preferred shares and shareholders’ equity 5,965.6 4,420.1 4,740.8
Series A Redeemable Convertible Preferred Stock      
Non-current liabilities:      
Series A redeemable convertible preferred shares of $.01 par value: authorized 500 shares, 0.625 shares outstanding (February 2, 2019 and August 4, 2018: 0.625 shares outstanding) $ 616.1 $ 615.3 $ 614.4
v3.19.2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
shares in Thousands, $ in Millions
Aug. 03, 2019
Feb. 02, 2019
Aug. 04, 2018
Accumulated depreciation $ 1,338.3 $ 1,282.8 $ 1,249.2
Common shares, par value (usd per share) $ 0.18 $ 0.18 $ 0.18
Common shares, authorized 500,000 500,000 500,000
Common shares, outstanding 52,300 51,900 51,900
Treasury shares, shares 17,700 18,100 35,300
Series A Redeemable Convertible Preferred Stock      
Preferred shares, par value (usd per share) $ 0.01 $ 0.01 $ 0.01
Preferred shares, authorized 500,000 500,000 500,000
Preferred shares, outstanding 625 625 625
v3.19.2
Condensed Consolidated Statements Of Cash Flows (Unaudited) - USD ($)
$ in Millions
6 Months Ended
Aug. 03, 2019
Aug. 04, 2018
Cash flows from operating activities    
Net income (loss) $ (46.1) $ (519.6)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Amortization of operating lease assets 175.2 0.0
Depreciation and amortization 85.8 93.7
Amortization of unfavorable leases and contracts (2.7) (4.1)
Share-based compensation 8.3 8.2
Deferred taxation (0.4) (0.3)
Credit transaction, net 0.0 160.4
Goodwill and intangible impairments 47.7 448.7
Restructuring charges 14.0 77.4
Other non-cash movements (0.4) (2.9)
Changes in operating assets and liabilities:    
Decrease in accounts receivable 1.5 58.6
Proceeds from sale of in-house finance receivables 0.0 445.5
Decrease in other assets and other receivables 19.3 9.8
Decrease (increase) in inventories 96.8 (170.9)
Increase in accounts payable 74.7 3.6
Decrease in accrued expenses and other liabilities (44.6) (2.0)
Change in operating lease liabilities (177.1) 0.0
Decrease in deferred revenue (1.1) (17.0)
Decrease in income taxes payable (1.1) (134.9)
Pension plan contributions (3.2) (1.6)
Net cash provided by operating activities 246.6 452.6
Investing activities    
Purchase of property, plant and equipment (52.2) (56.1)
Proceeds from sale of assets 0.0 5.5
Purchase of available-for-sale securities (11.7) (0.6)
Proceeds from sale of available-for-sale securities 0.5 8.5
Net cash used in investing activities (63.4) (42.7)
Financing activities    
Dividends paid on common shares (38.5) (40.6)
Dividends paid on redeemable convertible preferred shares (15.6) (15.6)
Repurchase of common shares 0.0 (485.0)
Proceeds from revolving credit facility   308.0
Repayments of revolving credit facility   (237.0)
Repayments of bank overdrafts (29.1) (8.1)
Other financing activities (0.6) (2.1)
Net cash used in financing activities (101.7) (493.8)
Cash and cash equivalents at beginning of period 195.4 225.1
Increase (decrease) in cash and cash equivalents 81.5 (83.9)
Effect of exchange rate changes on cash and cash equivalents (5.4) (7.1)
Cash and cash equivalents at end of period 271.5 134.1
Term Loan    
Financing activities    
Repayments of term loans (17.9) (13.4)
Credit Facility | Revolving Credit Facility    
Financing activities    
Proceeds from revolving credit facility 0.0 308.0
Repayments of revolving credit facility $ 0.0 $ (237.0)
v3.19.2
Condensed Consolidated Statements Of Shareholders' Equity (Unaudited) - USD ($)
$ in Millions
Total
Common shares at par value
Additional paid-in capital
Other reserves
Treasury shares
Retained earnings
Accumulated other comprehensive loss
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Impact from adoption of new accounting pronouncements [1]           $ 0.8 $ (0.8)
Beginning Balance at Feb. 03, 2018 $ 2,499.8 $ 15.7 $ 290.2 $ 0.4 $ (1,942.1) 4,396.2 (260.6)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income (loss) (496.6)         (496.6)  
Other comprehensive income (20.5)           (20.5)
Dividends declared: Common shares $0.37 in 2018 and 2019 (21.8)         (21.8)  
Dividends declared: Preferred shares, $12.50 in 2018 and 2019 (8.2)         (8.2)  
Repurchase of common shares (60.0)       (60.0)    
Net settlement of equity based awards (1.9)   (10.6)   9.9 (1.2)  
Share-based compensation expense 1.8   1.8        
Ending Balance at May. 05, 2018 1,892.6 15.7 281.4 0.4 (1,992.2) 3,869.2 (281.9)
Beginning Balance at Feb. 03, 2018 2,499.8 15.7 290.2 0.4 (1,942.1) 4,396.2 (260.6)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income (loss) (519.6)            
Dividends declared: Common shares $0.37 in 2018 and 2019 (41.0)            
Ending Balance at Aug. 04, 2018 1,400.1 15.7 287.6 0.4 (2,418.0) 3,820.7 (306.3)
Beginning Balance at May. 05, 2018 1,892.6 15.7 281.4 0.4 (1,992.2) 3,869.2 (281.9)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income (loss) (23.0)         (23.0)  
Other comprehensive income (24.4)           (24.4)
Dividends declared: Common shares $0.37 in 2018 and 2019 (19.2)         (19.2)  
Dividends declared: Preferred shares, $12.50 in 2018 and 2019 (8.2)         (8.2)  
Repurchase of common shares (425.0)       (425.0)    
Net settlement of equity based awards 0.9   (0.2)   (0.8) 1.9  
Share-based compensation expense 6.4   6.4        
Ending Balance at Aug. 04, 2018 1,400.1 15.7 287.6 0.4 (2,418.0) 3,820.7 (306.3)
Beginning Balance at Feb. 02, 2019 1,201.6 12.6 236.5 0.4 (1,027.3) 2,282.2 (302.8)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income (loss) (10.0)         (10.0)  
Other comprehensive income (5.1)           (5.1)
Dividends declared: Common shares $0.37 in 2018 and 2019 (19.3)         (19.3)  
Dividends declared: Preferred shares, $12.50 in 2018 and 2019 (8.2)         (8.2)  
Net settlement of equity based awards (1.6)   (7.8)   27.5 (21.3)  
Share-based compensation expense 4.0   4.0        
Ending Balance at May. 04, 2019 1,161.4 12.6 232.7 0.4 (999.8) 2,223.4 (307.9)
Beginning Balance at Feb. 02, 2019 1,201.6 12.6 236.5 0.4 (1,027.3) 2,282.2 (302.8)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income (loss) (46.1)            
Dividends declared: Common shares $0.37 in 2018 and 2019 (38.6)            
Ending Balance at Aug. 03, 2019 1,088.2 12.6 236.3 0.4 (993.0) 2,154.2 (322.3)
Beginning Balance at May. 04, 2019 1,161.4 12.6 232.7 0.4 (999.8) 2,223.4 (307.9)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income (loss) (36.1)         (36.1)  
Other comprehensive income (14.4)           (14.4)
Dividends declared: Common shares $0.37 in 2018 and 2019 (19.3)         (19.3)  
Dividends declared: Preferred shares, $12.50 in 2018 and 2019 (8.2)         (8.2)  
Net settlement of equity based awards 0.5   (0.7)   6.8 (5.6)  
Share-based compensation expense 4.3   4.3        
Ending Balance at Aug. 03, 2019 $ 1,088.2 $ 12.6 $ 236.3 $ 0.4 $ (993.0) $ 2,154.2 $ (322.3)
[1]
Adjustment reflects the reclassification of unrealized gains related to the Company’s equity security investments as of February 3, 2018 from AOCI into beginning retained earnings associated with the adoption of ASU 2016-01.
v3.19.2
Condensed Consolidated Statements Of Shareholders' Equity (Unaudited) - Parenthetical - $ / shares
3 Months Ended 6 Months Ended
Aug. 03, 2019
May 04, 2019
Aug. 04, 2018
May 05, 2018
Aug. 03, 2019
Aug. 04, 2018
Statement of Stockholders' Equity [Abstract]            
Common stock, dividends (usd per share) $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.74 $ 0.74
Preferred stock, dividends (in usd per share) $ 12.50 $ 12.5 $ 12.50 $ 12.5 $ 25.00 $ 25.00
v3.19.2
Organization and principal accounting policies
6 Months Ended
Aug. 03, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and principal accounting policies Organization and principal accounting policies
Signet Jewelers Limited (“Signet” or the “Company”), a holding company incorporated in Bermuda, is the world’s largest retailer of diamond jewelry. The Company operates through its 100% owned subsidiaries with sales primarily in the United States (“US”), United Kingdom (“UK”) and Canada. Signet manages its business as three reportable segments: North America; International; and Other. The “Other” reportable segment consists of all non-reportable segments, including subsidiaries involved in the purchasing and conversion of rough diamonds to polished stones and unallocated corporate administrative functions. See Note 4 for additional discussion of the Company’s segments.
Signet’s sales are seasonal, with the fourth quarter accounting for approximately 35-40% of annual sales, with December being by far the highest volume month of the year. The “Holiday Season” consists of results for the months of November and December. As a result of our strategic credit outsourcing and transformation initiatives, we anticipate our operating profit will be almost entirely generated in the fourth quarter.
Except as disclosed in Note 17, the Company has evaluated and determined that there are no additional events and transactions for potential recognition or disclosure through the date the condensed consolidated interim financial statements were issued.
Basis of preparation
The condensed consolidated financial statements of Signet are prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with US generally accepted accounting principles (“US GAAP”) have been condensed or omitted from this report, as is permitted by such rules and regulations. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes included in Signet’s Annual Report on Form 10-K for the fiscal year ended February 2, 2019 filed with the SEC on April 3, 2019. Signet has reclassified certain prior year amounts in its consolidated financial statements and notes to the consolidated financial statements to conform to the current year presentation.
Use of estimates
The preparation of these condensed consolidated financial statements, in conformity with US GAAP and SEC regulations for interim reporting, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are primarily made in relation to the valuation of accounts receivable, inventories, deferred revenue, derivatives, employee benefits, income taxes, contingencies, asset impairments, leases, indefinite-lived intangible assets, depreciation and amortization of long-lived assets, as well as accounting for business combinations.
Fiscal year
The Company’s fiscal year ends on the Saturday nearest to January 31st. Fiscal 2020 and Fiscal 2019 refer to the 52 week periods ending February 1, 2020 and February 2, 2019, respectively. Within these condensed consolidated financial statements, the second quarter of the relevant fiscal years 2020 and 2019 refer to the 13 weeks ended August 3, 2019 and August 4, 2018, respectively.
Foreign currency translation
The financial position and operating results of certain foreign operations, including certain subsidiaries operating in the UK as part of the International segment and Canada as part of the North America segment, are consolidated using the local currency as the functional currency. Assets and liabilities are translated at the rates of exchange on the balance sheet date, and revenues and expenses are translated at the monthly average rates of exchange during the period. Resulting translation gains or losses are included in the accompanying condensed consolidated statements of equity as a component of accumulated other comprehensive income (loss) (“AOCI”). Gains or losses resulting from foreign currency transactions are included within the condensed consolidated statements of operations.
See Note 9 for additional information regarding the Company’s foreign currency translation.
v3.19.2
New accounting pronouncements
6 Months Ended
Aug. 03, 2019
Accounting Policies [Abstract]  
New accounting pronouncements New accounting pronouncements
The following section provides a description of new accounting pronouncements ("Accounting Standard Update" or "ASU") issued by the Financial Accounting Standards Board ("FASB") that are applicable to the Company.
New accounting pronouncements recently adopted
Leases
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” The new guidance primarily impacts lessee accounting by requiring the recognition of a right-of-use asset and a corresponding lease liability on the balance sheet for long-term lease agreements. The lease liability will be equal to the present value of all reasonably certain remaining lease payments. The right-of-use asset will be based on the liability, subject to adjustment for initial direct costs. Lease agreements that are 12 months or less are permitted to be excluded from the balance sheet. In general, leases will be amortized on a straight-line basis with the exception of finance lease agreements. Signet adopted ASU 2016-02 and related updates effective February 3, 2019 using the additional transition method provided for in ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which permitted the Company as of the effective date of ASU 2016-02 to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The impact of this approach was deemed immaterial upon adoption of ASU 2016-02.
The Company has elected the practical expedient to account for the lease and non-lease maintenance components as a single lease component. Therefore, for those leases, the lease payments used to measure the lease liability include all of the fixed consideration in the contract. Additionally, the Company utilized the practical expedient relief package, as well as the short-term leases and portfolio approach practical expedients. The effects of the changes made to the Company’s condensed consolidated balance sheet as of February 3, 2019 for the adoption of ASC 842 were as follows:
(in millions)
 
February 2, 2019
 
Adjustments due to ASC 842
 
February 3, 2019
Current assets:
 
 
 
 
 
 
Other current assets
 
$
244.0

 
$
(8.8
)
 
$
235.2

Non-current assets:
 
 
 
 
 
 
Operating lease right-of-use assets
 

 
1,927.2

 
1,927.2

Current liabilities:
 
 
 
 
 
 
Accrued expenses and other current liabilities
 
502.8

 
(109.0
)
 
393.8

Operating lease liabilities
 

 
376.5

 
376.5

Non-current liabilities:
 
 
 
 
 
 
Operating lease liabilities
 

 
1,676.9

 
1,676.9

Other liabilities
 
224.1

 
(26.0
)
 
198.1


See additional disclosure requirements within Note 13.
New accounting pronouncements to be adopted in future periods
The Company is currently evaluating the impact on its financial statements of the following ASUs:
Standard
 
Description
ASU No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, issued August 2018.
 
Modifies the disclosure requirements on fair value measurements in Topic 820 and eliminates ‘at a minimum’ from the phrase ‘an entity shall disclose at a minimum’ to promote the appropriate exercise of discretion by entities when considering fair value disclosures and to clarify that materiality is an appropriate consideration. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted.
ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, issued August 2018.
 
Modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans and clarifies the disclosure requirements regarding projected benefit obligations and accumulated benefit obligations. The ASU is effective for fiscal years ending after December 15, 2020, with early adoption permitted.

v3.19.2
Revenue recognition
6 Months Ended
Aug. 03, 2019
Revenue from Contract with Customer [Abstract]  
Revenue recognition Revenue recognition
The following tables provide the Company’s revenue, disaggregated by banner, major product and channel, for the 13 and 26 weeks ended August 3, 2019 and August 4, 2018:
 
13 weeks ended August 3, 2019
 
13 weeks ended August 4, 2018
(in millions)
North America
 
International
 
Other
 
Consolidated
 
North America
 
International
 
Other
 
Consolidated
Sales by banner:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kay
$
528.9

 
$

 
$

 
$
528.9

 
$
546.0

 
$

 
$

 
$
546.0

Zales
275.9

 

 

 
275.9

 
278.5

 

 

 
278.5

Jared
254.6

 

 

 
254.6

 
271.2

 

 

 
271.2

Piercing Pagoda
74.2

 

 

 
74.2

 
67.6

 

 

 
67.6

James Allen
53.6

 

 

 
53.6

 
54.4

 

 

 
54.4

Peoples
45.5

 

 

 
45.5

 
47.7

 

 

 
47.7

Regional banners
8.3

 

 

 
8.3

 
21.3

 

 

 
21.3

International segment

 
113.9

 

 
113.9

 

 
131.5

 

 
131.5

Other(1)

 

 
9.5

 
9.5

 

 

 
1.9

 
1.9

Total sales
$
1,241.0

 
$
113.9

 
$
9.5

 
$
1,364.4

 
$
1,286.7

 
$
131.5

 
$
1.9

 
$
1,420.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
26 weeks ended August 3, 2019
 
26 weeks ended August 4, 2018
(in millions)
North America
 
International
 
Other
 
Consolidated
 
North America
 
International
 
Other
 
Consolidated
Sales by banner:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kay
$
1,103.7

 
$

 
$

 
$
1,103.7

 
$
1,129.2

 
$

 
$

 
$
1,129.2

Zales
560.9

 

 

 
560.9

 
576.6

 

 

 
576.6

Jared
509.6

 

 

 
509.6

 
538.7

 

 

 
538.7

Piercing Pagoda
156.8

 

 

 
156.8

 
142.0

 

 

 
142.0

James Allen
105.6

 

 

 
105.6

 
107.7

 

 

 
107.7

Peoples
87.2

 

 

 
87.2

 
94.4

 

 

 
94.4

Regional banners
17.5

 

 

 
17.5

 
45.9

 

 

 
45.9

International segment

 
225.4

 

 
225.4

 

 
260.2

 

 
260.2

Other(1)

 

 
29.4

 
29.4

 

 

 
6.0

 
6.0

Total sales
$
2,541.3

 
$
225.4

 
$
29.4

 
$
2,796.1

 
$
2,634.5

 
$
260.2

 
$
6.0

 
$
2,900.7

(1)  
Includes sales from Signet’s diamond sourcing initiative.

 
13 weeks ended August 3, 2019
 
13 weeks ended August 4, 2018
(in millions)
North America
 
International
 
Other
 
Consolidated
 
North America
 
International
 
Other
 
Consolidated
Sales by product:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bridal
$
560.3

 
$
47.3

 
$

 
$
607.6

 
$
585.1

 
$
51.8

 
$

 
$
636.9

Fashion
435.4

 
21.2

 

 
456.6

 
420.5

 
27.2

 

 
447.7

Watches
53.0

 
39.3

 

 
92.3

 
58.0

 
46.8

 

 
104.8

Other(1)
192.3

 
6.1

 
9.5

 
207.9

 
223.1

 
5.7

 
1.9

 
230.7

Total sales
$
1,241.0

 
$
113.9

 
$
9.5

 
$
1,364.4

 
$
1,286.7

 
$
131.5

 
$
1.9

 
$
1,420.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
26 weeks ended August 3, 2019
 
26 weeks ended August 4, 2018
(in millions)
North America
 
International
 
Other
 
Consolidated
 
North America
 
International
 
Other
 
Consolidated
Sales by product:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bridal
$
1,155.0

 
$
95.9

 
$

 
$
1,250.9

 
$
1,203.0

 
$
107.4

 
$

 
$
1,310.4

Fashion
902.8

 
43.6

 

 
946.4

 
881.6

 
53.1

 

 
934.7

Watches
101.2

 
73.3

 

 
174.5

 
110.2

 
85.9

 

 
196.1

Other(1)
382.3

 
12.6

 
29.4

 
424.3

 
439.7

 
13.8

 
6.0

 
459.5

Total sales
$
2,541.3

 
$
225.4

 
$
29.4

 
$
2,796.1

 
$
2,634.5

 
$
260.2

 
$
6.0

 
$
2,900.7

(1)  
Other revenue primarily includes gift, beads and other miscellaneous jewelry sales, repairs, warranty and other miscellaneous non-jewelry sales.
 
13 weeks ended August 3, 2019
 
13 weeks ended August 4, 2018
(in millions)
North America
 
International
 
Other
 
Consolidated
 
North America
 
International
 
Other
 
Consolidated
Sales by channel:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Store
$
1,097.2

 
$
100.8

 
$

 
$
1,198.0

 
$
1,150.2

 
$
117.7

 
$

 
$
1,267.9

E-commerce
143.8

 
13.1

 

 
156.9

 
136.5

 
13.8

 

 
150.3

Other

 

 
9.5

 
9.5

 

 

 
1.9

 
1.9

Total sales
$
1,241.0

 
$
113.9

 
$
9.5

 
$
1,364.4

 
$
1,286.7

 
$
131.5

 
$
1.9

 
$
1,420.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
26 weeks ended August 3, 2019
 
26 weeks ended August 4, 2018
(in millions)
North America
 
International
 
Other
 
Consolidated
 
North America
 
International
 
Other
 
Consolidated
Sales by channel:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Store
$
2,254.5

 
$
201.0

 
$

 
$
2,455.5

 
$
2,363.9

 
$
234.0

 
$

 
$
2,597.9

E-commerce
286.8

 
24.4

 

 
311.2

 
270.6

 
26.2

 

 
296.8

Other

 

 
29.4

 
29.4

 

 

 
6.0

 
6.0

Total sales
$
2,541.3

 
$
225.4

 
$
29.4

 
$
2,796.1

 
$
2,634.5

 
$
260.2

 
$
6.0

 
$
2,900.7

For the majority of the Company’s transactions, revenue is recognized when there is persuasive evidence of an arrangement, products have been delivered or services have been rendered, the sale price is fixed and determinable, and collectability is reasonably assured. The Company’s revenue streams and their respective accounting treatments are discussed below.
Merchandise sales and repairs
Store sales are recognized when the customer receives and pays for the merchandise at the store with cash, in-house customer finance, private label credit card programs, a third-party credit card or a lease purchase option. For online sales shipped to customers, sales are recognized at the estimated time the customer has received the merchandise. Amounts related to shipping and handling that are billed to customers are reflected in sales and the related costs are reflected in cost of sales. Revenues on the sale of merchandise are reported net of anticipated returns and sales tax collected. Returns are estimated based on previous return rates experienced. Any deposits received from a customer for merchandise are deferred and recognized as revenue when the customer receives the merchandise. Revenues derived from providing replacement merchandise on behalf of insurance organizations are recognized upon receipt of the merchandise by the customer. Revenues on repair of merchandise are recognized when the service is complete and the customer collects the merchandise at the store.
Extended service plans and lifetime warranty agreements (“ESP”)
The Company recognizes revenue related to ESP sales in proportion to when the expected costs will be incurred. The deferral period for ESP sales is determined from patterns of claims costs, including estimates of future claims costs expected to be incurred. Management reviews the trends in claims to assess whether changes are required to the revenue and cost recognition rates utilized. A significant change in estimates related to the time period or pattern in which warranty-related costs are expected to be incurred could materially impact revenues. All direct costs associated with the sale of these plans are deferred and amortized in proportion to the revenue recognized and disclosed as either other current assets or other assets in the consolidated balance sheets. Unamortized deferred selling costs as of August 3, 2019, February 2, 2019 and August 4, 2018 were as follows:
(in millions)
August 3, 2019
 
February 2, 2019
 
August 4, 2018
Deferred ESP selling costs
 
 
 
 
 
Other current assets
$
20.6

 
$
23.8

 
$
30.3

Other assets
76.5

 
75.4

 
88.4

Total deferred ESP selling costs
$
97.1

 
$
99.2

 
$
118.7


The North America segment sells ESP, subject to certain conditions, to perform repair work over the life of the product. Revenue from the sale of the lifetime ESP is recognized consistent with the estimated pattern of claim costs expected to be incurred by the Company in connection with performing under the ESP obligations. Lifetime ESP revenue is deferred and recognized over a maximum of 17 years of the sale of the warranty contract. Although claims experience varies between our national banners, thereby resulting in different recognition rates, approximately 55% of revenue is recognized within the first two years on a weighted average basis.
The North America segment sells a Jewelry Replacement Plan (“JRP”). The JRP is designed to protect customers from damage or defects of purchased merchandise for a period of three years. If the purchased merchandise is defective or becomes damaged under normal use in that time period, the item will be replaced. JRP revenue is deferred and recognized on a straight-line basis over the period of expected claims costs.
Signet also sells warranty agreements in the capacity of an agent on behalf of a third-party. The commission that Signet receives from the third-party is recognized at the time of sale less an estimate of cancellations based on historical experience.
Sale vouchers
Certain promotional offers award sale vouchers to customers who make purchases above a certain value, which grant a fixed discount on a future purchase within a stated time frame. The Company accounts for such vouchers by allocating the fair value of the voucher between the initial purchase and the future purchase using the relative-selling-price method. Sale vouchers are not sold on a stand-alone basis. The fair value of the voucher is determined based on the average sales transactions in which the vouchers were issued, when the vouchers are expected to be redeemed and the estimated voucher redemption rate. The fair value allocated to the future purchase is recorded as deferred revenue.
Consignment inventory sales
Sales of consignment inventory are accounted for on a gross sales basis as the Company is the primary obligor providing independent advice, guidance and after-sales service to customers. The products sold from consignment inventory are indistinguishable from other products that are sold to customers and are sold on the same terms. Supplier products are selected at the discretion of the Company. The Company is responsible for determining the selling price, physical security of the products and collections of accounts receivable.
Deferred revenue
Deferred revenue is comprised primarily of ESP and sale voucher promotions and other as follows:
(in millions)
August 3, 2019
 
February 2, 2019
 
August 4, 2018
ESP deferred revenue
$
930.2

 
$
927.6

 
$
906.6

Voucher promotions and other
35.0

 
38.9

 
33.0

Total deferred revenue
$
965.2

 
$
966.5

 
$
939.6

 
 
 
 
 
 
Disclosed as:
 
 
 
 
 
Current liabilities
$
265.4

 
$
270.0

 
$
276.3

Non-current liabilities
699.8

 
696.5

 
663.3

Total deferred revenue
$
965.2

 
$
966.5

 
$
939.6

 
13 weeks ended
 
26 weeks ended
(in millions)
August 3, 2019
 
August 4, 2018
 
August 3, 2019
 
August 4, 2018
ESP deferred revenue, beginning of period
$
931.3

 
$
913.5

 
$
927.6

 
$
916.1

Plans sold(1)
90.5

 
90.9

 
186.5

 
186.9

Revenue recognized
(91.6
)
 
(97.8
)
 
(183.9
)
 
(196.4
)
ESP deferred revenue, end of period
$
930.2

 
$
906.6

 
$
930.2

 
$
906.6

(1) 
Includes impact of foreign exchange translation.
v3.19.2
Segment information
6 Months Ended
Aug. 03, 2019
Segment Reporting [Abstract]  
Segment information Segment information
Financial information for each of Signet’s reportable segments is presented in the tables below. Signet’s chief operating decision maker utilizes sales and operating income, after the elimination of any inter-segment transactions, to determine resource allocations and performance assessment measures. Signet manages its business as three reportable segments: North America; International; and Other. Signet’s sales are derived from the retailing of jewelry, watches, other products and services as generated through the management of its reportable segments.
The North America reportable segment operates across the US and Canada. Its US stores operate nationally in malls and off-mall locations principally as Kay (Kay Jewelers and Kay Jewelers Outlet), Zales (Zales Jewelers and Zales Outlet), Jared (Jared The Galleria Of Jewelry and Jared Vault), James Allen and Piercing Pagoda, which operates through mall-based kiosks. Its Canadian stores operate as the Peoples Jewellers store banner. The segment also operates a variety of mall-based regional banners.
The International reportable segment operates stores in the UK, Republic of Ireland and Channel Islands. Its stores operate in shopping malls and off-mall locations (i.e. high street) principally as H.Samuel and Ernest Jones.
The Other reportable segment consists of all non-reportable segments that are below the quantifiable threshold for separate disclosure as a reportable segment, including subsidiaries involved in the purchasing and conversion of rough diamonds to polished stones and unallocated corporate administrative functions.
 
13 weeks ended
 
26 weeks ended
(in millions)
August 3, 2019
 
August 4, 2018
 
August 3, 2019
 
August 4, 2018
Sales:
 
 
 
 
 
 
 
North America segment
$
1,241.0

 
$
1,286.7

 
$
2,541.3

 
$
2,634.5

International segment
113.9

 
131.5

 
225.4

 
260.2

Other
9.5

 
1.9

 
29.4

 
6.0

Total sales
$
1,364.4

 
$
1,420.1

 
$
2,796.1

 
$
2,900.7

 
 
 
 
 
 
 
 
Operating income (loss):
 
 
 
 
 
 
 
North America segment(1)
$
24.2

 
$
(4.2
)
 
$
72.3

 
$
(541.5
)
International segment(2)
(1.0
)
 
(6.1
)
 
(9.0
)
 
(13.7
)
Other(3)
(45.6
)
 
(47.8
)
 
(88.3
)
 
(77.1
)
Total operating income (loss)
$
(22.4
)
 
$
(58.1
)
 
$
(25.0
)
 
$
(632.3
)
(1) 
Operating income (loss) during the 13 and 26 weeks ended August 3, 2019 includes a $47.7 million out-of-period goodwill adjustment. In addition, operating income (loss) during the 13 and 26 weeks ended August 3, 2019 includes $1.7 million and $1.2 million, respectively, related to inventory charges recorded in conjunction with the Company’s restructuring activities. Operating income (loss) during the 13 weeks and 26 weeks ended August 4, 2018 includes: 1) $53.7 million related to inventory charges recorded in conjunction with the Company’s restructuring activities; and 2) $19.4 million and $160.4 million, respectively, related to valuation losses associated with the sale of eligible non-prime in-house accounts receivable. The 26 weeks ended August 4, 2018 also included $448.7 million related to goodwill and intangible impairments recognized in the first quarter.
(2) 
Operating income (loss) during the 13 and 26 weeks ended August 4, 2018 includes $3.8 million related to inventory charges recorded in conjunction with the Company’s restructuring activities.
(3) 
Operating income (loss) during the 13 and 26 weeks ended August 3, 2019 include charges of $26.1 million, and $53.4 million, respectively, related to charges recorded in conjunction with the Company’s restructuring activities including inventory charges. Operating income (loss) during the 13 and 26 weeks ended August 4, 2018 includes $4.5 million and $6.6 million, respectively, related to transaction costs associated with the sale of the non-prime in-house accounts receivable and $25.3 million and $31.8 million, respectively, related to charges recorded in conjunction with the Company’s restructuring activities including inventory charges.
For additional information on the items discussed above, see Note 5 related to the Company’s restructuring activities, Note 11 for details regarding the credit transaction and Note 14 regarding impairment charges.
(in millions)
August 3, 2019
 
February 2, 2019
 
August 4, 2018
Total assets:
 
 
 
 
 
North America segment
$
5,226.8

 
$
3,943.0

 
$
4,171.9

International segment
521.1

 
367.4

 
366.6

Other
217.7

 
109.7

 
202.3

Total assets
$
5,965.6

 
$
4,420.1

 
$
4,740.8


v3.19.2
Restructuring Plans
6 Months Ended
Aug. 03, 2019
Restructuring and Related Activities [Abstract]  
Restructuring Plans Restructuring Plans
Signet Path to Brilliance Plan
During the first quarter of Fiscal 2019, Signet launched a three-year comprehensive transformation plan, the “Signet Path to Brilliance” plan (the “Plan”), to reposition the Company to be a share-gaining, OmniChannel jewelry category leader. The Plan is expected to result in pre-tax charges in the range of $200 million - $220 million over the duration of the plan of which $105 million - $115 million are expected to be cash charges.
Restructuring charges of $27.8 million and $54.6 million were recognized in the 13 and 26 weeks ended August 3, 2019, respectively, primarily related to store closure, severance costs and professional fees for legal and consulting services.
Restructuring charges and other Plan related costs are classified in the condensed consolidated statements of operations as follows:
 
 
 
13 weeks ended
 
26 weeks ended
(in millions)
Statement of operations caption
 
August 3, 2019
 
August 4, 2018
 
August 3, 2019
 
August 4, 2018
Inventory charges
Restructuring charges - cost of sales
 
$
4.4

 
$
63.2

 
$
4.4

 
$
63.2

Other Plan related expenses
Restructuring charges
 
23.4

 
19.6

 
50.2

 
$
26.1

Total Signet Path to Brilliance Plan expenses
 
 
$
27.8

 
$
82.8

 
$
54.6

 
$
89.3


The composition of the restructuring charges the Company incurred during the 13 and 26 weeks ended August 3, 2019, as well as the cumulative amount incurred through August 3, 2019, were as follows:
 
 
13 weeks ended
 
26 weeks ended
 
Cumulative amount
(in millions)
 
August 3, 2019
 
August 3, 2019
 
August 3, 2019
Inventory charges
 
4.4

 
$
4.4

 
$
66.6

Termination benefits
 
6.0

 
14.8

 
24.5

Store closure and other costs