Signet(SIG) - 2026 Q3 - Quarterly Report

Sales Performance - Signet's total sales increased by 3.1% in Q3 Fiscal 2026 compared to the same period in Fiscal 2025, with same-store sales growth of 3.0%[123] - Total sales for the third quarter of Fiscal 2026 increased by 3.1% year over year to $1.39 billion, with same store sales rising by 3.0%[131] - Year-to-date sales increased by 2.7% to $4.47 billion, with same store sales up by 2.5%[137] - North America sales for the year-to-date were $4.18 billion, an increase of 2.4%, with same store sales also up by 2.4%[140] - International sales for the year-to-date increased by 4.8% to $258.9 million, with a 1.2% increase at constant exchange rates[141] Average Unit Retail (AUR) - Average unit retail (AUR) increased by 7.7% in North America and 3.0% in the International segment compared to Q3 Fiscal 2025, driven by a focus on lab-grown diamond fashion and higher gold prices[123] - The average unit retail (AUR) increased by approximately 7% in the third quarter compared to the prior year, driven by improved assortments in bridal and fashion categories[131] Strategic Initiatives - The Grow Brand Love strategy launched in Fiscal 2026 focuses on sustainable growth, product innovation, and brand loyalty, with three strategic imperatives identified[122] - The Company is strategically managing marketing spend to increase efficiency and capitalize on consumer demand during the holiday season[126] - The Company plans to continue focusing on organic growth and market share expansion in core areas such as Bridal, while optimizing its real estate footprint[176] Financial Performance - Gross margin for the third quarter was $518.8 million, representing 37.3% of sales, up from 36.0% in the prior year quarter[142] - Selling, general and administrative expenses (SG&A) were $485.3 million, or 34.9% of sales, nearly flat compared to 34.8% in the prior year[144] - Operating income for the third quarter was $23.9 million, or 1.7% of sales, compared to $9.2 million, or 0.7% of sales, in the prior year[147] - Adjusted operating income for Q3 was $32.0 million with an adjusted operating margin of 2.3%, compared to $16.2 million (1.2% margin) in the prior year[169] - Fiscal 2026 adjusted diluted EPS was $0.63, compared to $0.24 in Fiscal 2025, reflecting a significant increase of 162.5%[172] - Net income for the 39 weeks ended November 1, 2025, was $44.4 million, a turnaround from a net loss of $39.4 million in the prior year, representing an increase of $83.8 million[186] Cash Flow and Debt Management - The Company had $234.7 million in cash and cash equivalents as of November 1, 2025, with no outstanding borrowings on its asset-based revolving credit facility (ABL) which has a borrowing capacity of $1.2 billion[174] - Free cash flow for the 39 weeks ended November 1, 2025, was $(151.1) million, an improvement from $(304.2) million in the prior year[163] - The net cash used in operating activities was $58.0 million for the 39 weeks ended November 1, 2025, an improvement from $189.8 million in the prior year[185] - The adjusted leverage ratio was maintained at 1.1x through the end of Fiscal 2025, reflecting the retirement of all funded debt[179] - As of November 1, 2025, the Company had no outstanding debt and an available borrowing capacity of $1.2 billion under the ABL, compared to $253.0 million of debt outstanding in the prior year[193] - Net cash was $234.7 million as of November 1, 2025, a significant improvement from net debt of $95.3 million as of November 2, 2024[194] Store Operations - As of November 1, 2025, Signet operated 2,607 retail locations, including 2,262 in the US and 91 in Canada, alongside a digital presence[120] - The Company closed 46 stores and opened 11 stores during the 39 weeks ended November 1, 2025, resulting in a net decrease in selling square footage of 0.6% in North America and 2.7% internationally[188] Market Risks and Economic Factors - The Company continues to monitor macroeconomic factors, including inflation and geopolitical conflicts, which may affect operations and cash flows[128] - The Company is monitoring macroeconomic uncertainties, including tariffs and inflation, which could negatively impact merchandise costs and consumer spending, potentially affecting fair value estimates[200] - The Company uses derivative financial instruments to manage market risks related to foreign currency exchange rates, interest rates, and precious metal prices[202] - As of November 1, 2025, the Company's market risk profile has not materially changed since February 1, 2025, as disclosed in its Annual Report[205] Impairments and Restructuring - Asset impairments for the 39 weeks ended November 1, 2025, totaled $84.9 million, down from $169.3 million in the prior year[145] - The Company recorded restructuring and related charges of $26.1 million in Fiscal 2026, primarily due to its Grow Brand Love strategy initiatives[173] - Impairment charges of approximately $54 million, $13 million, and $3 million were recognized for Digital brands, James Allen, and Diamonds Direct trade names, respectively, due to declining cash flow projections[199]