Signet(SIG) - 2025 Q3 - Quarterly Report

Sales Performance - Signet's sales decreased by 3.1% in Q3 Fiscal 2025 compared to Q3 Fiscal 2024[110] - Total sales decreased by 3.1% year over year to $1.35 billion in Q3 Fiscal 2025, with same store sales down 0.7$1.26 billion, with same store sales down 0.8%[119] - International segment sales decreased by 11.4% to $83.3 million, with same store sales up 1.6$4.35 billion compared to $4.67 billion in the prior year, with same store sales down 4.6$4.08 billion, with same store sales down 4.9%[124] - International reportable segment's total sales decreased 14.5% to $247.0 million, with same store sales down 16.9$289.2 million, accounting for 21.4% of total sales[116] - eCommerce sales decreased 8.4% to $959.4 million, accounting for 22.0$9.2 million, down from $13.3 million in the prior year quarter[115] - Gross margin remained flat at 36.0$9.2 million or 0.7% of sales, down from $13.3 million or 1.0$41.9 million or (1.0)% of sales, compared to $205.2 million or 4.4$30.1 million or 0.7% of segment sales, down from $281.0 million or 6.5$(20.9) million or (8.5)% of segment sales, compared to $(22.9) million or (7.9)$5.4 million, compared to $3.0 million in the prior year quarter[115] - Net income for the 13 weeks ended November 2, 2024 was$7.0 million, compared to $11.7 million in the prior year period[142] - Net loss was$39.4 million, a decrease of $223.6 million compared to net income of$184.2 million in the prior year period, primarily due to non-cash asset impairment charges of $169.3 million[154] - Cash and cash equivalents as of November 2, 2024 were$157.7 million, down from $1,378.7 million as of February 3, 2024 and$643.8 million as of October 28, 2023[138] - Net cash used in operating activities for the 13 weeks ended November 2, 2024 was $75.4 million, compared to$48.0 million provided by operating activities in the prior year period[140] - Free cash flow for the 13 weeks ended November 2, 2024 was $(138.5) million, compared to$14.0 million in the prior year period[140] - Net cash used in operating activities for the 39 weeks ended November 2, 2024 was $189.8 million, compared to$205.3 million for the same period in 2023[153] - Cash and cash equivalents decreased by $1,219.3 million to$157.7 million as of November 2, 2024, compared to a decrease of $518.9 million to$643.8 million for the same period in 2023[153] - Net cash used in investing activities was $121.0 million, primarily related to capital expenditures of$114.4 million for new stores, remodels, and digital/IT investments[156] - Net cash used in financing activities was $908.5 million, primarily due to the repurchase of Preferred Shares ($812.9 million) and repayment of Senior Notes ($147.8 million)[158] Merchandise Transactions and ATV - North America segment's average merchandise transaction values (ATV) were flat, while International segment's ATV decreased by 13.4$900 million in acquisitions over the past three years, including Diamonds Direct, Blue Nile, and Services Jewelry Repair[148] - The company divested its UK prestige watch business for approximately $54 million in fiscal 2024[148] - The company reduced its adjusted leverage ratio target to 2.5x and maintained a 2.3x ratio through fiscal 2024[149] - The company repurchased$113.8 million of common shares during the 39 weeks ended November 2, 2024, with $747.3 million remaining authorized for repurchase[151] Store Operations and Count - Company operates 2,655 retail locations as of November 2, 2024, with 2,298 in the US and 91 in Canada[108] - Store count decreased by 51 stores, with North America segment store count at 2,389 and International segment store count at 266 as of November 2, 2024[157] Digital Banners and Operational Challenges - Digital banners James Allen and Blue Nile faced integration and re-platforming challenges, impacting traffic and sales in Q3 Fiscal 2025[110] - The company faced operational challenges and decreased traffic at digital banners, partially offset by growth in fashion and new merchandise[116] - The company recognized pre-tax impairment charges of$7.0 million for Diamonds Direct trade name, $123.0 million for Digital Banners reporting unit, and$36.0 million for Blue Nile trade name[163] Macroeconomic Factors and Seasonality - Company monitors macroeconomic factors including inflation, Russia-Ukraine conflict, and Israel-Hamas conflict, with no material impact on Israel operations to date[113] - The company's business is seasonal, with the fourth quarter historically accounting for 35-40% of annual sales and a substantial portion of annual operating income[160] Financial Metrics and Ratios - Adjusted EBITDA for the 13 weeks ended November 2, 2024 was $53.9 million, down from$77.3 million in the prior year period[142] - Adjusted operating income for the 39 weeks ended November 2, 2024 was $142.6 million, compared to$233.1 million for the same period in 2023[145] - The company had $157.7 million in cash and cash equivalents and$253.0 million in outstanding borrowings on its ABL as of November 2, 2024, with $929 million in available borrowing capacity[147] - Capital expenditures for fiscal 2025 are planned to be up to$170 million, primarily for new stores, renovations, and digital/technology advancements[148] - The company amended its ABL, extending the maturity to August 23, 2029 and reducing the size to $1.2 billion, with an option to increase by up to$600 million[159] Tax and Interest Expenses - Income tax expense for the third quarter of Fiscal 2025 was $1.4 million with an effective tax rate (ETR) of 16.7$1.9 million and 14.0% ETR in the prior year period[134] - Year-to-date income tax expense for Fiscal 2025 was $9.5 million with an ETR of (31.8)$28.6 million and 13.4% ETR in the prior year period[135] - Net interest expense for the 13 weeks ended November 2, 2024 was $1.0 million, compared to net interest income of$2.6 million in the same period last year[133] - Net interest income for the 39 weeks ended November 2, 2024 remained flat at $10.0 million compared to the prior year period[133] Asset Impairments and Inventory - Asset impairments for the 39 weeks ended November 2, 2024 were$168.5 million, primarily related to goodwill and indefinite-lived intangible assets[142] - Cash used by inventory was $189.5 million, compared to a source of$14.8 million in the prior year period, driven by replenishment of inventories to healthier in-stock levels[154] Revenue Growth Strategy - Company aims to grow revenue to $9 to$10 billion with double-digit adjusted operating margin under its Inspiring Brilliance strategy[109]