SIGNET JEWELERS LTD, 10-Q filed on 6/6/2019
Quarterly Report
v3.19.1
Document and Entity Information - shares
3 Months Ended
May 04, 2019
May 31, 2019
Document And Entity Information [Abstract]    
Document type 10-Q  
Amendment flag false  
Document period end date May 04, 2019  
Document fiscal year focus 2020  
Document fiscal period focus Q1  
Trading symbol SIG  
Entity registrant name SIGNET JEWELERS LTD  
Entity Central Index Key 0000832988  
Entity Emerging Growth Company false  
Entity Small Business false  
Current Fiscal Year End Date --02-02  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares outstanding   52,191,117
v3.19.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
shares in Millions, $ in Millions
3 Months Ended
May 04, 2019
May 05, 2018
Sales $ 1,431.7 $ 1,480.6
Cost of sales (932.3) (995.8)
Gross margin 499.4 484.8
Selling, general and administrative expenses (475.2) (482.8)
Credit transaction, net 0.0 (143.1)
Restructuring charges (26.8) (6.5)
Goodwill and intangible impairments 0.0 (448.7)
Other operating income, net 0.0 22.1
Operating income (loss) (2.6) (574.2)
Interest expense, net (9.2) (8.9)
Other non-operating income 0.3 0.6
Income (loss) before income taxes (11.5) (582.5)
Income taxes 1.5 85.9
Net income (loss) (10.0) (496.6)
Dividends on redeemable convertible preferred shares (8.2) (8.2)
Net income (loss) attributable to common shareholders $ (18.2) $ (504.8)
Earnings (loss) per common share:    
Earnings per common share: basic (usd per share) $ (0.35) $ (8.48)
Earnings per common share: diluted (usd per share) $ (0.35) $ (8.48)
Weighted average common shares outstanding:    
Weighted average common shares outstanding: basic (shares) 51.6 59.5
Weighted average common shares outstanding: diluted (shares) 51.6 59.5
Restructuring Charges    
Cost of sales $ 0.0 $ 0.0
v3.19.1
Condensed Consolidated Statements Of Comprehensive Income (Loss) (Unaudited) - USD ($)
$ in Millions
3 Months Ended
May 04, 2019
May 05, 2018
Pre-tax amount    
Foreign currency translation adjustments $ (2.0) $ (21.7)
Available-for-sale securities:    
Unrealized gain (loss) 0.3 (0.2)
Impact from the adoption of new accounting pronouncements [1] 0.0 (1.1)
Cash flow hedges:    
Unrealized gain (loss) (4.3)  
Current period gains (losses) recognized in OCI   1.9
Reclassification adjustment for gains to net income (0.5)  
Reclassification adjustment for gains to net income   (0.5)
Pension plan:    
Reclassification adjustment to net income for amortization of actuarial losses 0.3 0.3
Reclassification adjustment to net income for amortization of prior service credits 0.0 (0.1)
Total other comprehensive income (loss) (6.2) (21.4)
Tax (expense) benefit    
Foreign currency translation adjustments 0.0 0.0
Available-for-sale securities:    
Unrealized gain (loss) 0.0 0.0
Impact from the adoption of new accounting pronouncements [1] 0.0 0.3
Cash flow hedges:    
Unrealized gain (loss) 1.1  
Unrealized gain (loss)   (0.4)
Reclassification adjustment for gains to net income 0.1  
Reclassification adjustment for gains to net income   0.2
Pension plan:    
Reclassification adjustment to net income for amortization of actuarial losses (0.1) 0.0
Reclassification adjustment to net income for amortization of prior service credits 0.0 0.0
Total other comprehensive loss 1.1 0.1
After-tax amount    
Net income (loss) (10.0) (496.6)
Foreign currency translation adjustments (2.0) (21.7)
Available-for-sale securities:    
Unrealized gain (loss) 0.3 (0.2)
Impact from the adoption of new accounting pronouncements [1] 0.0 (0.8)
Cash flow hedges:    
Unrealized gain (loss) (3.2)  
Unrealized gain (loss)   1.5
Reclassification adjustment for gains to net income (0.4)  
Reclassification adjustment for gains to net income   (0.3)
Pension plan:    
Reclassification adjustment to net income for amortization of actuarial losses 0.2 0.3
Reclassification adjustment to net income for amortization of prior service credits 0.0 (0.1)
Total other comprehensive income (loss) (5.1) (21.3)
Total comprehensive income (loss) $ (15.1) $ (517.9)
[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.
v3.19.1
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Millions
May 04, 2019
Feb. 02, 2019
May 05, 2018
Current assets:      
Cash and cash equivalents $ 195.1 $ 195.4 $ 153.9
Accounts receivable 23.1 23.7 491.4
Other current assets 205.5 244.0 236.8
Income taxes 4.8 5.8 55.2
Inventories 2,394.2 2,386.9 2,429.0
Total current assets 2,822.7 2,855.8 3,366.3
Non-current assets:      
Property, plant and equipment, net of accumulated depreciation of $1,319.6, $1,282.8 and $1,227.3, respectively 776.1 800.5 847.2
Operating lease right-of-use assets 1,822.8    
Goodwill 296.4 296.6 509.1
Intangible assets, net 264.1 265.0 343.2
Other assets 189.2 181.2 206.3
Deferred tax assets 22.0 21.0 0.8
Total assets 6,193.3 4,420.1 5,272.9
Current liabilities:      
Loans and overdrafts 43.7 78.8 72.3
Accounts payable 238.3 153.7 287.5
Accrued expenses and other current liabilities 420.2 502.8 463.7
Deferred revenue 277.0 270.0 284.9
Operating lease liabilities 358.9    
Income taxes 24.1 27.7 0.0
Total current liabilities 1,362.2 1,033.0 1,108.4
Non-current liabilities:      
Long-term debt 639.0 649.6 679.7
Operating lease liabilities 1,589.4    
Other liabilities 126.0 224.1 236.5
Deferred revenue 699.6 696.5 667.5
Deferred tax liabilities 0.0 0.0 74.2
Total liabilities 4,416.2 2,603.2 2,766.3
Commitments and contingencies
Shareholders’ equity:      
Common shares of $0.18 par value: authorized 500 shares, 52.2 shares outstanding (February 2, 2019: 51.9 outstanding; May 5, 2018: 59.2 outstanding) 12.6 12.6 15.7
Additional paid-in capital 232.7 236.5 281.4
Other reserves 0.4 0.4 0.4
Treasury shares at cost: 17.8 shares (February 2, 2019: 18.1 shares; May 5, 2018: 28.0 shares) (999.8) (1,027.3) (1,992.2)
Retained earnings 2,223.4 2,282.2 3,869.2
Accumulated other comprehensive loss (307.9) (302.8) (281.9)
Total shareholders’ equity 1,161.4 1,201.6 1,892.6
Total liabilities, redeemable convertible preferred shares and shareholders’ equity 6,193.3 4,420.1 5,272.9
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 May 5,2018: 0.625 shares outstanding) $ 615.7 $ 615.3 $ 614.0
v3.19.1
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
shares in Thousands, $ in Millions
May 04, 2019
Feb. 02, 2019
May 05, 2018
Accumulated depreciation $ 1,319.6 $ 1,282.8 $ 1,227.3
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 52,200 51,900 59,200
Treasury shares, shares 17,800 18,100 28,000
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
v3.19.1
Condensed Consolidated Statements Of Cash Flows (Unaudited) - USD ($)
$ in Millions
3 Months Ended
May 04, 2019
May 05, 2018
Cash flows from operating activities    
Net income (loss) $ (10.0) $ (496.6)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Amortization of operating lease assets 87.3 0.0
Depreciation and amortization 41.0 49.8
Amortization of unfavorable leases and contracts (1.4) (2.0)
Share-based compensation 4.0 1.8
Deferred taxation 0.0 (18.8)
Credit transaction, net 0.0 141.0
Goodwill and intangible impairments 0.0 448.7
Restructuring charges 5.4 0.0
Other non-cash movements (4.9) 0.0
Changes in operating assets and liabilities:    
Decrease in accounts receivable 0.9 59.9
Decrease in other assets and other receivables 28.1 10.8
Increase in inventories (7.8) (162.4)
Increase in accounts payable 87.7 55.7
(Decrease) increase in accrued expenses and other liabilities (39.9) 15.3
Change in operating lease liabilities (91.4) 0.0
Increase (decrease) in deferred revenue 10.5 (4.3)
Decrease in income taxes payable (2.7) (70.3)
Pension plan contributions (1.4) (0.7)
Net cash provided by operating activities 105.4 27.9
Investing activities    
Purchase of property, plant and equipment (24.6) (26.1)
Purchase of available-for-sale securities (6.1) (0.4)
Proceeds from sale of available-for-sale securities 0.3 1.1
Net cash used in investing activities (30.4) (25.4)
Financing activities    
Dividends paid on common shares (19.2) (18.8)
Dividends paid on redeemable convertible preferred shares (7.8) (7.8)
Repurchase of common shares 0.0 (60.0)
Proceeds from revolving credit facility   40.0
Repayments of bank overdrafts (37.3) (13.9)
Other financing activities (1.5) (2.1)
Net cash used in financing activities (74.7) (69.3)
Cash and cash equivalents at beginning of period 195.4 225.1
Increase (decrease) in cash and cash equivalents 0.3 (66.8)
Effect of exchange rate changes on cash and cash equivalents (0.6) (4.4)
Cash and cash equivalents at end of period 195.1 153.9
Term Loan    
Financing activities    
Repayments of term loans (8.9) (6.7)
Credit Facility | Revolving Credit Facility    
Financing activities    
Proceeds from revolving credit facility $ 0.0 $ 40.0
v3.19.1
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. 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)
[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.
v3.19.1
Condensed Consolidated Statements Of Shareholders' Equity (Unaudited) - Parenthetical - $ / shares
3 Months Ended
May 04, 2019
May 05, 2018
Statement of Stockholders' Equity [Abstract]    
Common stock, dividends (usd per share) $ 0.37 $ 0.37
Preferred stock, dividends (in usd per share) $ 12.50 $ 12.50
v3.19.1
Organization and principal accounting policies
3 Months Ended
May 04, 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.
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 first quarter of the relevant fiscal years 2020 and 2019 refer to the 13 weeks ended May 4, 2019 and May 5, 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.
v3.19.1
New accounting pronouncements
3 Months Ended
May 04, 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 adopted during the period
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.
In addition to the pronouncement above, the following ASUs were adopted as of February 3, 2019. The impact on the Company's consolidated financial statements is described within the table below.
Standard
 
Description
ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, issued August 2017.
 
Expands the types of risk management strategies eligible for hedge accounting, refines the documentation and effectiveness assessment requirements and modifies the presentation and disclosure requirements for hedge accounting activities. The adoption of ASU 2017-12 did not have a material impact on the Company’s financial position or results of operations.
New accounting pronouncements to be adopted in future periods
The Company is also 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.
v3.19.1
Revenue recognition
3 Months Ended
May 04, 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 weeks ended May 4, 2019 and May 5, 2018:
 
13 weeks ended May 4, 2019
 
13 weeks ended May 5, 2018
(in millions)
North America
 
International
 
Other
 
Consolidated
 
North America
 
International
 
Other
 
Consolidated
Sales by banner:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kay
$
574.8

 
$

 
$

 
$
574.8

 
$
583.2

 
$

 
$

 
$
583.2

Zales
285.0

 

 

 
285.0

 
298.1

 

 

 
298.1

Jared
255.0

 

 

 
255.0

 
267.5

 

 

 
267.5

Piercing Pagoda
82.6

 

 

 
82.6

 
74.4

 

 

 
74.4

James Allen
52.0

 

 

 
52.0

 
53.3

 

 

 
53.3

Peoples
41.7

 

 

 
41.7

 
46.7

 

 

 
46.7

Regional banners
9.2

 

 

 
9.2

 
24.6

 

 

 
24.6

International segment

 
111.5

 

 
111.5

 

 
128.7

 

 
128.7

Other(1)

 

 
19.9

 
19.9

 

 

 
4.1

 
4.1

Total sales
$
1,300.3

 
$
111.5

 
$
19.9

 
$
1,431.7

 
$
1,347.8

 
$
128.7

 
$
4.1

 
$
1,480.6

(1)  
Includes sales from Signet’s diamond sourcing initiative.
 
13 weeks ended May 4, 2019
 
13 weeks ended May 5, 2018
(in millions)
North America
 
International
 
Other
 
Consolidated
 
North America
 
International
 
Other
 
Consolidated
Sales by product:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bridal
$
594.7

 
$
48.6

 
$

 
$
643.3

 
$
617.9

 
$
55.6

 
$

 
$
673.5

Fashion
467.4

 
22.4

 

 
489.8

 
461.1

 
25.9

 

 
487.0

Watches
48.2

 
34.0

 

 
82.2

 
52.2

 
39.1

 

 
91.3

Other(1)
190.0

 
6.5

 
19.9

 
216.4

 
216.6

 
8.1

 
4.1

 
228.8

Total sales
$
1,300.3

 
$
111.5

 
$
19.9

 
$
1,431.7

 
$
1,347.8

 
$
128.7

 
$
4.1

 
$
1,480.6

(1)  
Other revenue primarily includes gift, beads and other miscellaneous jewelery sales, repairs, warranty and other miscellaneous non-jewelry sales.
 
13 weeks ended May 4, 2019
 
13 weeks ended May 5, 2018
(in millions)
North America
 
International
 
Other
 
Consolidated
 
North America
 
International
 
Other
 
Consolidated
Sales by channel:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Store
$
1,157.3

 
$
100.2

 
$

 
$
1,257.5

 
$
1,213.7

 
$
116.3

 
$

 
$
1,330.0

E-commerce
143.0

 
11.3

 

 
154.3

 
134.1

 
12.4

 

 
146.5

Other

 

 
19.9

 
19.9

 

 

 
4.1

 
4.1

Total sales
$
1,300.3

 
$
111.5

 
$
19.9

 
$
1,431.7

 
$
1,347.8

 
$
128.7

 
$
4.1

 
$
1,480.6

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 May 4, 2019, February 2, 2019 and May 5, 2018 were as follows:
(in millions)
May 4, 2019
 
February 2, 2019
 
May 5, 2018
Deferred ESP selling costs
 
 
 
 
 
Other current assets
$
23.8

 
$
23.8

 
$
30.6

Other assets
76.4

 
75.4

 
89.2

Total deferred ESP selling costs
$
100.2

 
$
99.2

 
$
119.8


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)
May 4, 2019
 
February 2, 2019
 
May 5, 2018
ESP deferred revenue
$
931.3

 
$
927.6

 
$
913.5

Voucher promotions and other
45.3

 
38.9

 
38.9

Total deferred revenue
$
976.6

 
$
966.5

 
$
952.4

 
 
 
 
 
 
Disclosed as:
 
 
 
 
 
Current liabilities
$
277.0

 
$
270.0

 
$
284.9

Non-current liabilities
699.6

 
696.5

 
667.5

Total deferred revenue
$
976.6

 
$
966.5

 
$
952.4

 
 
13 weeks ended
(in millions)
 
May 4, 2019
 
May 5, 2018
ESP deferred revenue, beginning of period
 
$
927.6

 
$
916.1

Plans sold(1)
 
96.0

 
96.0

Revenue recognized
 
(92.3
)
 
(98.6
)
ESP deferred revenue, end of period
 
$
931.3

 
$
913.5

(1) 
Includes impact of foreign exchange translation.
v3.19.1
Segment information
3 Months Ended
May 04, 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
(in millions)
 
May 4, 2019
 
May 5, 2018
Sales:
 
 
 
 
North America segment
 
$
1,300.3

 
$
1,347.8

International segment
 
111.5

 
128.7

Other
 
19.9

 
4.1

Total sales
 
$
1,431.7

 
$
1,480.6

 
 
 
 
 
Operating income (loss):
 
 
 
 
North America segment(1)
 
$
48.1

 
$
(537.3
)
International segment
 
(8.0
)
 
(7.6
)
Other(2)
 
(42.7
)
 
(29.3
)
Total operating income (loss)
 
$
(2.6
)
 
$
(574.2
)
(1) 
Operating income (loss) during the 13 weeks ended May 4, 2019 includes a $0.5 million benefit recognized due to a change in inventory reserves previously recognized as part of the Company’s restructuring activities. See Note 5 for additional information. Operating income (loss) during the 13 weeks ended May 5, 2018 includes charges of $448.7 million and $141.0 million related to the goodwill and intangible impairments recognized and valuation losses related to the sale of eligible non-prime in-house accounts receivable, respectively. See Note 14 and Note 11 for additional information.
(2) 
Operating income (loss) during the 13 weeks ended May 4, 2019 includes charges of $27.3 million, primarily related to severance and professional services recorded in conjunction with the Company’s restructuring activities. Operating income (loss) during the 13 weeks ended May 5, 2018 includes charges of $6.5 million recorded in conjunction with the Company’s restructuring activities. See Note 5 for additional information.
(in millions)
May 4, 2019
 
February 2, 2019
 
May 5, 2018
Total assets:
 
 
 
 
 
North America segment
$
5,437.4

 
$
3,943.0

 
$
4,722.3

International segment
608.1

 
367.4

 
401.7

Other
147.8

 
109.7

 
148.9

Total assets
$
6,193.3

 
$
4,420.1

 
$
5,272.9

v3.19.1
Restructuring Plans
3 Months Ended
May 04, 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 $26.8 million were recognized in the 13 weeks ended May 4, 2019 primarily related to store closure and 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
(in millions)
Statement of operations caption
 
May 4, 2019
 
May 5, 2018
Other Plan related expenses
Restructuring charges
 
$
26.8

 
$
6.5

Total Signet Path to Brilliance Plan expenses
 
 
$
26.8

 
$
6.5


The composition of the restructuring charges the Company incurred during the 13 weeks ended May 4, 2019, as well as the cumulative amount incurred through May 4, 2019, were as follows:
 
 
13 weeks ended
 
Cumulative amount
(in millions)
 
May 4, 2019
 
May 4, 2019
Inventory charges
 
$

 
$
62.2

Termination benefits
 
8.8

 
18.5

Store closure and other costs
 
18.0

 
72.0

Total Signet Path to Brilliance Plan expenses
 
$
26.8

 
$
152.7

The following table summarizes the activity related to the Plan liabilities for Fiscal 2020:
(in millions)
 
Termination benefits
 
Store closure and other costs
 
Consolidated
Balance at February 2, 2019
 
$

 
$
12.6

 
$
12.6

Payments and other adjustments
 
(2.0
)
 
(25.1
)
 
(27.1
)
Charged to expense
 
8.8

 
18.0

 
26.8

Balance at May 4, 2019
 
$
6.8

 
$
5.5

 
$
12.3

v3.19.1
Redeemable preferred shares
3 Months Ended
May 04, 2019
Temporary Equity [Abstract]  
Redeemable preferred shares
Redeemable preferred shares
On October 5, 2016, the Company issued 625,000 shares of Series A Convertible Preference Shares (“preferred shares”) to certain affiliates of Leonard Green & Partners, L.P., (the “Investors”) for an aggregate purchase price of $625.0 million, or $1,000 per share (the “Stated Value”) pursuant to the investment agreement dated August 24, 2016. Preferred shareholders are entitled to a cumulative dividend at the rate of 5% per annum, payable quarterly in arrears. Refer to Note 7 for additional discussion of the Company’s dividends on preferred shares.
(in millions, except conversion rate and conversion price)
May 4, 2019
 
February 2, 2019
 
May 5, 2018
Conversion rate
11.5493

 
11.3660

 
10.9409

Conversion price
$
86.5853

 
$
87.9817

 
$
91.4002

Potential impact of preferred shares if-converted to common shares
7.2

 
7.1

 
6.8

Liquidation preference
$
632.8

 
$
632.8

 
$
632.8


In connection with the issuance of the preferred shares, the Company incurred direct and incremental expenses of $13.7 million. These direct and incremental expenses originally reduced the preferred shares carrying value, and will be accreted through retained earnings as a deemed dividend from the date of issuance through the first possible known redemption date, November 2024. Accumulated accretion recorded in the condensed consolidated balance sheets was $4.4 million as of May 4, 2019 (February 2, 2019 and May 5, 2018: $4.0 million and $2.7 million, respectively).
Accretion of $0.4 million was recorded to preferred shares in the condensed consolidated balance sheets during the 13 weeks ended May 4, 2019 ($0.4 million for the 13 weeks ended May 5, 2018).
v3.19.1
Shareholders' equity
3 Months Ended
May 04, 2019
Equity [Abstract]  
Shareholders' equity
Shareholders’ equity
Share repurchases
Common shares repurchased during the 13 weeks ended May 4, 2019 and May 5, 2018 were as follows:
 
 
 
13 weeks ended May 4, 2019
 
13 weeks ended May 5, 2018
(in millions, except per share amounts)
Amount
authorized
 
Shares
repurchased
 
Amount
repurchased
 
Average
repurchase
price per
share
 
Shares
repurchased
 
Amount
repurchased
 
Average
repurchase
price per
share
2017 Program(1)
$
600.0

 

 
$

 
$

 
0.2

 
$
9.4

 
$
38.86

2016 Program(2)
$
1,375.0

 
n/a

 
n/a

 
n/a

 
1.3

 
$
50.6

 
$
39.76

Total
 
 

 
$

 
$

 
1.5

 
$
60.0

 
$
39.62

(1) 
The 2017 Program had $165.6 million remaining as of May 4, 2019.
(2) 
The 2016 Program was completed in March 2018.
n/a
Not applicable.
Dividends on common shares
Dividends declared on common shares during the 13 weeks ended May 4, 2019 and May 5, 2018 were as follows:
 
Fiscal 2020
 
Fiscal 2019
(in millions, except per share amounts)
Cash dividend per share
 
Total
dividends
 
Cash dividend
per share
 
Total
dividends
First quarter(1)
$
0.37

 
$
19.3

 
$
0.37

 
$
21.8

(1) 
Signet’s dividend policy for common shares results in the dividend payment date being a quarter in arrears from the declaration date. As a result, as of May 4, 2019 and May 5, 2018, $19.3 million and $21.8 million, respectively, has been recorded in accrued expenses and other current liabilities in the condensed consolidated balance sheets reflecting the cash dividends on common shares declared for the first quarter of Fiscal 2020 and Fiscal 2019, respectively.
Dividends on preferred shares
Dividends declared on preferred shares during the 13 weeks ended May 4, 2019 and May 5, 2018 were as follows:
 
Fiscal 2020
 
Fiscal 2019
(in millions)
Cash dividend
per share
 
Total cash
dividends
 
Cash dividend
per share
 
Total cash
dividends
First quarter(1)
$
12.50

 
$
7.8

 
$
12.50

 
$
7.8

(1) 
Signet’s preferred shares dividends results in the dividend payment date being a quarter in arrears from the declaration date. As a result, as of May 4, 2019 and May 5, 2018, $7.8 million and $7.8 million, respectively, has been recorded in accrued expenses and other current liabilities in the condensed consolidated balance sheets reflecting the cash dividends on preferred shares declared for the first quarter of Fiscal 2020 and Fiscal 2019, respectively.
There were no cumulative undeclared dividends on the preferred shares that reduced net income (loss) attributable to common shareholders during the 13 weeks ended May 4, 2019 or May 5, 2018. In addition, deemed dividends of $0.4 million related to accretion of issuance costs associated with the preferred shares was recognized during the 13 weeks ended May 4, 2019 ($0.4 million for the 13 weeks ended May 5, 2018). See Note 6 for additional discussion of the Company’s preferred shares.
v3.19.1
Earnings (loss) per common share (EPS)
3 Months Ended
May 04, 2019
Earnings Per Share [Abstract]  
Earnings (loss) per common share (“EPS”)
Earnings (loss) per common share (EPS)
Basic EPS is computed by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding for the period. The computation of basic EPS is outlined in the table below:
 
 
13 weeks ended
(in millions, except per share amounts)
 
May 4, 2019
 
May 5, 2018
Numerator:
 
 
 
 
Net income (loss) attributable to common shareholders
 
$
(18.2
)
 
$
(504.8
)
Denominator:
 
 
 
 
Weighted average common shares outstanding
 
51.6

 
59.5

EPS – basic
 
$
(0.35
)
 
$
(8.48
)

The dilutive effect of share awards represents the potential impact of outstanding awards issued under the Company’s share-based compensation plans, including restricted shares, restricted stock units and stock options issued under the Omnibus Plan and stock options issued under the Share Saving Plans. The dilutive effect of preferred shares represents the potential impact for common shares that would be issued upon conversion. Potential common share dilution related to share awards and preferred shares is determined using the treasury stock and if-converted methods, respectively. Under the if-converted method, the preferred shares are assumed to be converted at the beginning of the period, and the resulting common shares are included in the denominator of the diluted EPS calculation for the entire period being presented, only in the periods in which such effect is dilutive. Additionally, in periods in which preferred shares are dilutive, cumulative dividends and accretion for issuance costs associated with the preferred shares are added back to net (loss) income attributable to common shareholders. See Note 6 for additional discussion of the Company’s preferred shares.
The computation of diluted EPS is outlined in the table below:
 
 
13 weeks ended
(in millions, except per share amounts)
 
May 4, 2019
 
May 5, 2018
Numerator:
 
 
 
 
Net income (loss) attributable to common shareholders
 
$
(18.2
)
 
$
(504.8
)
Numerator for diluted EPS
 
$
(18.2
)
 
$
(504.8
)
 
 
 
 
 
Denominator:
 
 
 
 
Weighted average common shares outstanding
 
51.6

 
59.5

Diluted weighted average common shares outstanding
 
51.6

 
59.5

 
 
 
 
 
EPS – diluted
 
$
(0.35
)
 
$
(8.48
)

The calculation of diluted EPS excludes the following items for each respective period on the basis that their effect would be anti-dilutive.
 
 
13 weeks ended
(in millions)
 
May 4, 2019
 
May 5, 2018
Share awards
 
1.1

 
0.5

Potential impact of preferred shares
 
7.2

 
6.8

Total anti-dilutive shares
 
8.3

 
7.3

v3.19.1
Accumulated other comprehensive income (loss)
3 Months Ended
May 04, 2019
Equity [Abstract]  
Accumulated other comprehensive income (loss)
Accumulated other comprehensive income (loss)
The following tables present the changes in AOCI by component and the reclassifications out of AOCI, net of tax:
 
 
 
 
 
 
 
Pension plan
 
 
(in millions)
Foreign
currency
translation
 
Losses on available-for-sale securities, net
 
Gains (losses)
on cash flow
hedges
 
Actuarial
losses
 
Prior
service
credits
 
Accumulated
other
comprehensive
loss
Balance at February 2, 2019
$
(248.4
)
 
$
(0.5
)
 
$
4.0

 
$
(53.8
)
 
$
(4.1
)
 
$
(302.8
)
Other comprehensive income (loss) (“OCI”) before reclassifications
(2.0
)
 
0.3

 
(3.2
)
 

 

 
(4.9
)
Amounts reclassified from AOCI to net income

 

 
(0.4
)
 
0.2

 

 
(0.2
)
Net current period OCI
(2.0
)
 
0.3

 
(3.6
)
 
0.2

 

 
(5.1
)
Balance at May 4, 2019
$
(250.4
)
 
$
(0.2
)
 
$
0.4

 
$
(53.6
)
 
$
(4.1
)
 
$
(307.9
)

The amounts reclassified from AOCI were as follows:
 
Amounts reclassified from AOCI
 
 
 
 
13 weeks ended
 
 
(in millions)
 
May 4, 2019
 
May 5, 2018
 
Statement of operations caption
Losses (gains) on cash flow hedges:
 
 
 
 
 
 
Foreign currency contracts
 
$
(0.3
)
 
$
0.3

 
Cost of sales (see Note 15)
Interest rate swaps
 
(0.6
)
 
(0.3
)
 
Interest expense, net
(see Note 15)
Commodity contracts
 
0.4

 
(0.5
)
 
Cost of sales (see Note 15)
Total before income tax
 
(0.5
)
 
(0.5
)
 
 
Income taxes
 
0.1

 
0.2

 
 
Net of tax
 
(0.4
)
 
(0.3
)
 
 
 
 
 
 
 
 
 
Defined benefit pension plan items:
 
 
 
 
 
 
Amortization of unrecognized actuarial losses
 
0.3

 
0.3

 
Other non-operating income
Amortization of unrecognized net prior service credits
 

 
(0.1
)
 
Other non-operating income
Total before income tax
 
0.3

 
0.2

 
 
Income taxes
 
(0.1
)
 

 
 
Net of tax
 
0.2

 
0.2

 
 
 
 
 
 
 
 
 
Total reclassifications, net of tax
 
$
(0.2
)