Signet(SIG) - 2025 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements (Unaudited) The company's Q1 FY2025 results show a sales decline to $1.51 billion and a net loss of $40.1 million due to a preferred share redemption Condensed Consolidated Statements of Operations Q1 FY2025 sales fell 9.4% to $1.51 billion, leading to a net loss of $40.1 million driven by a large dividend on preferred shares Q1 FY2025 vs Q1 FY2024 Statement of Operations | Metric | Q1 FY2025 (13 weeks ended May 4, 2024) | Q1 FY2024 (13 weeks ended April 29, 2023) | Change | | :--- | :--- | :--- | :--- | | Sales | $1,510.8 million | $1,668.0 million | -9.4% | | Gross Margin | $572.4 million | $632.0 million | -9.4% | | Operating Income | $49.8 million | $101.7 million | -51.0% | | Net Income | $52.1 million | $97.4 million | -46.5% | | Net (Loss) Income Attributable to Common Shareholders | ($40.1) million | $88.8 million | -145.2% | | Diluted EPS | ($0.90) | $1.79 | -150.3% | Condensed Consolidated Balance Sheets Total assets decreased to $6.15 billion, primarily due to a reduction in cash used for redeeming preferred shares Key Balance Sheet Items (in millions) | Account | May 4, 2024 | February 3, 2024 | April 29, 2023 | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $729.3 | $1,378.7 | $655.9 | | Inventories | $1,983.6 | $1,936.6 | $2,183.5 | | Total Assets | $6,151.2 | $6,813.2 | $6,205.4 | | Current portion of long-term debt | $147.8 | $147.7 | $0.0 | | Total Liabilities | $3,741.4 | $3,991.2 | $3,969.6 | | Total Shareholders' Equity | $2,081.8 | $2,166.5 | $1,581.5 | Condensed Consolidated Statements of Cash Flows Net cash used in operations improved, while significant cash was used in financing for preferred and common share repurchases Summary of Cash Flows (in millions) | Cash Flow Activity | 13 weeks ended May 4, 2024 | 13 weeks ended April 29, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(158.2) | $(381.8) | | Net cash used in investing activities | $(21.5) | $(27.1) | | Net cash used in financing activities | $(467.5) | $(100.7) | | Decrease in cash and cash equivalents | $(647.2) | $(509.6) | Notes to the Condensed Consolidated Financial Statements Notes detail sales declines across banners, a $414.1 million preferred share redemption, and a new restructuring plan Q1 FY2025 Sales by Banner (in millions) | Banner | Q1 FY2025 Sales | Q1 FY2024 Sales | | :--- | :--- | :--- | | Kay | $567.5 | $602.2 | | Zales | $256.7 | $295.4 | | Jared | $249.5 | $274.0 | | Digital banners (James Allen/Blue Nile) | $133.7 | $168.2 | Q1 FY2025 Sales by Product (in millions) | Product | Q1 FY2025 Sales | Q1 FY2024 Sales | | :--- | :--- | :--- | | Bridal | $674.6 | $768.7 | | Fashion | $552.0 | $587.0 | | Watches | $63.5 | $74.9 | | Services | $184.5 | $182.1 | - On April 1, 2024, the company settled a conversion of 312,500 Preferred Shares for $414.1 million in cash[49] - The company initiated a restructuring plan involving the closure of up to 150 stores with total estimated costs of $20-$30 million[89][90] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 9.4% sales decline, flat gross margin, and reduced operating income, while highlighting a strong liquidity position Overall Performance and Outlook Q1 sales declined due to macroeconomic pressures, but the company anticipates sequential improvement and a recovery in US engagements - Sales in Q1 FY2025 decreased by 9.4% year-over-year, impacted by a challenging macroeconomic environment and a decline in engagements[105] - For Fiscal 2025, the company expects same-store sales between -4.5% and +0.5%, with a projected 5% to 10% increase in US engagements[108] Results of Operations Q1 total sales fell 9.4% with an 8.9% same-store sales decline, leading to a significant drop in operating income to $49.8 million Q1 FY2025 Sales Performance vs. Prior Year | Segment | Same Store Sales Change | Total Sales Change (Constant Exchange Rate) | Total Sales Change (Reported) | | :--- | :--- | :--- | :--- | | North America | -9.2% | -9.0% | -9.0% | | International | -3.2% | -19.5% | -17.0% | | Signet Total | -8.9% | -9.6% | -9.4% | - Gross margin rate remained flat at 37.9% as higher merchandise margins offset the deleveraging of fixed costs on lower sales[120] - SG&A as a percentage of sales increased to 34.1% from 31.8%, primarily due to higher advertising expense and deleverage on fixed costs[121] Q1 Operating Income by Segment (in millions) | Segment | Q1 FY2025 Operating Income | Q1 FY2024 Operating Income | | :--- | :--- | :--- | | North America | $83.2 | $124.7 | | International | $(13.0) | $(6.9) | | Total Operating Income | $49.8 | $101.7 | NON-GAAP Measures Adjusted operating income was $57.8 million and adjusted diluted EPS was $1.11, excluding restructuring and preferred share dividend impacts Reconciliation of GAAP to Adjusted Operating Income (in millions) | Metric | Q1 FY2025 | Q1 FY2024 | | :--- | :--- | :--- | | Operating Income (GAAP) | $49.8 | $101.7 | | Restructuring & Asset Impairments | $6.5 | $0.0 | | Integration-related expenses | $0.2 | $7.8 | | Litigation charges | $0.0 | $(3.0) | | Adjusted Operating Income (Non-GAAP) | $57.8 | $106.5 | Reconciliation of GAAP to Adjusted Diluted EPS | Metric | Q1 FY2025 | Q1 FY2024 | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $(0.90) | $1.79 | | Restructuring & other charges | $0.17 | $0.08 | | Deemed dividend on redemption of Preferred Shares | $1.91 | $0.00 | | Dilution effect | $(0.03) | $0.00 | | Tax Impact | $(0.04) | $(0.09) | | Adjusted Diluted EPS (Non-GAAP) | $1.11 | $1.78 | Liquidity and Capital Resources The company maintains strong liquidity with $729.3 million in cash after significant share redemptions and repurchases - The company's capital allocation priorities are to invest in the business, optimize capital structure, and return cash to shareholders[143] - In Q1 FY2025, the company redeemed half of its Preferred Shares for $414.1 million in cash[148] - The quarterly common dividend was increased from $0.23 to $0.29 per share for Fiscal 2025[150] Summary Cash Flow (in millions) | Metric | 13 weeks ended May 4, 2024 | 13 weeks ended April 29, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(158.2) | $(381.8) | | Net cash used in investing activities | $(21.5) | $(27.1) | | Net cash used in financing activities | $(467.5) | $(100.7) | | Decrease in cash and cash equivalents | $(647.2) | $(509.6) | Quantitative and Qualitative Disclosures about Market Risk The company manages market risks from currency, interest rates, and commodity prices using derivatives, with no material changes to its risk profile - The company is exposed to market risks including foreign currency exchange rates, interest rates, and precious metal prices[177] - Signet uses forward foreign currency exchange contracts to manage currency exposure for its UK and Canadian operations[178] - The company's market risk profile has not materially changed from what was disclosed in its Fiscal 2024 Annual Report on Form 10-K[180] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls in Q1 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of May 4, 2024[182] - No material changes were made to the company's internal control over financial reporting during the first quarter of Fiscal 2025[183] PART II OTHER INFORMATION Legal Proceedings Pending legal proceedings are not expected to have a material adverse effect on the company's financial condition - The company does not expect any pending legal proceedings to have a material adverse effect on its financial condition or results of operations[92] Risk Factors No material changes to the company's risk factors have occurred since the last annual report - No material changes have occurred in the company's risk factors since the filing of its last Annual Report on Form 10-K[187] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 73,440 common shares in Q1, with $853.6 million remaining under its repurchase authorization Q1 FY2025 Share Repurchases | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Feb 4 - Mar 2, 2024 | 41,536 | $102.91 | | Mar 3 - Mar 30, 2024 | 31,904 | $98.74 | | Total Q1 | 73,440 | $101.09 | - As of May 4, 2024, approximately $853.6 million remains authorized for repurchase under the company's share repurchase programs[188] Other Information Several directors and officers adopted Rule 10b5-1 trading plans during the first quarter to sell common shares - Multiple directors and officers, including the CIO, CDO, and Group President, adopted Rule 10b5-1 trading plans during Q1 FY2025[189] Exhibits This section lists filed exhibits, including officer certifications and details on Series A Convertible Preference Shares - Key exhibits filed include the Amended Certificate of Designation for Series A Convertible Preference Shares and certifications by the CEO and CFO[191]