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Signet Jewelers' First Quarter Results Exceed Expectations
Connected commerce strategy delivering growth across all channels First quarter eCommerce up 110.3% and brick & mortar same store sales up 105.7% Signet Jewelers Limited ("Signet") (NYSE: SIG), the world's largest retailer of diamond jewelry, recently announced its results for the 13 weeks ended May 1, 2021 ("first quarter Fiscal 2022"). "Our strong first quarter results demonstrate the momentum we are building as we continue Signet's transformation," said Virginia C. Drosos, Chief Executive Officer. "Thank you to all our team members for their relentless dedication to our customers and each other, and for embracing new capabilities with excellence as we drive innovation and sustainable long-term growth." "We delivered strong performance across our portfolio. While the jewelry category is experiencing meaningful growth, we are outpacing market growth and gaining share consistent with our Inspiring Brilliance strategy. Specifically, we are winning in our biggest banners through consumer-inspired differentiation, as evidenced by double-digit revenue growth in both Kay and Zales versus this time two years ago. We are successfully beginning to stretch the top and bottom boundaries of the mid-market as Jared continues to grow at higher price points and in custom design, and Piercing Pagoda delivered its best quarter ever accessing more value inspired self-purchasing shoppers. Further, our Connected Commerce strategy is resonating, delivering higher conversion rates and growth both online and in-stores. And finally, we are building a more innovative and agile culture with investments in talent, digital capabilities, newness in product assortment, and modern content and marketing channels that give us distinct competitive advantages. As I look ahead, I'm confident in our people and our strategy and believe 2021 will be another transformative year for Signet." Joan Hilson, Chief Financial and Strategy Officer, added, "We are entering this next phase of Signet's transformation from a position of financial strength. We are continuing to increase liquidity with ongoing cash, cost and inventory discipline, enabling accelerated investment in innovation and growth. Even as we expect some current tailwinds from stimulus and slower than anticipated return to travel and experience spending to subside in the back-half of 2021, we are confident in our ability to deliver strong shareholder return and generate cash. As such, our Board has approved reinstatement of a common dividend in the second quarter." First Quarter Fiscal 2022:
First Quarter 2022 Financial Results: Signet's total sales were $1.7 billion, up 98.2% year over year, in the 13 weeks ended May 1, 2021 on a reported basis and up 96.4% on a constant currency basis. Total same store sales increased 106.5% year over year. eCommerce sales were $346.3 million, up 110.3% from the prior year. Brick and mortar same store sales increased 105.7% year over year. By operating segment: North America
International
GAAP gross margin was $678.4 million, or 40.2% of sales, up 1,630 bps versus the prior year quarter and up 540 bps versus the first quarter of FY20. The majority of gross margin rate improvement is driven by leveraging of fixed costs such as occupancy. SGA was $512.0 million, or 30.3% of sales, up 1,180 bps favorable to the prior year quarter and 290 bps favorable to the first quarter of FY20. The rate improvement was primarily driven by more efficient operating hours and corresponding labor. GAAP operating income was $168.7 million or 10.0% of sales. The operating income compares to an operating loss of $299.6 million, or (35.2)% of sales in the prior year first quarter and operating loss of $2.6 million, or (0.2)% of sales in Q1 of FY20. Non-GAAP operating income was $168.9 million, or 10.0% of sales, compared to Non-GAAP operating loss of $142.5 million, or (16.7)% of sales in prior year first quarter and non-GAAP operating income of $24.2 million, or 1.7% of sales in Q1 of FY20. The current quarter income tax expense was $26.5 million compared to an income tax benefit of $109.5 million in the prior year first quarter driven by the year over year difference in pre-tax income. Further, the prior year income tax was also favorably impacted by the benefits of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). Diluted EPS was $2.23 on both a GAAP and non-GAAP basis. GAAP and non-GAAP diluted EPS in the quarter includes the dilutive impact of the preferred shares in the share count based on the level of net income this quarter. Balance Sheet and Statement of Cash Flows Highlights: Cash flow from operating activities of $161.1 million in Q1 FY22, up $169 million to FY21 and $56 million to FY20. Total liquidity was $2.5 billion at quarter end, consisting of cash of $1.3 billion with $1.2 billion available on the revolving credit facility. Ending inventory was $2.0 billion, a reduction of more than $370 million to Q1 of FY21. Long term debt was $146.8 million, compared to $1.3 billion at the prior year quarter end. Quarterly Dividend: Signet's Board of Directors has elected to reinstate the dividend program on the common shares and declared a quarterly cash dividend of $0.18 per share for the second quarter of Fiscal 2022, payable August 27, 2021 to shareholders of record on July 30, 2021, with an ex-dividend date of July 29, 2021. Fiscal 2022 Guidance: Forecasted non-GAAP operating income provided above excludes potential non-recurring charges. However, given the potential impact of non-recurring charges to the GAAP operating income, we cannot provide forecasted GAAP operating income or the probable significance of such items without unreasonable efforts. As such, we do not present a reconciliation of forecasted non-GAAP operating income to corresponding GAAP operating income. The Company's Second Quarter and Fiscal 2022 Outlook is based on the following assumptions:
Our Purpose and Sustainable Growth: As a company with a purpose-inspired business strategy, Signet is committed to ongoing leadership in Corporate Citizenship & Sustainability and views ESG initiatives as an important growth driver. As such, Signet released its first-ever Corporate Citizenship and Sustainability Report earlier this month, reflecting our continued leadership, prioritization and board oversight of these important ESG initiatives. Issued with the Sustainability report is a supplement including data disclosures in alignment with ESG reporting frameworks, as well as our 2030 Corporate Sustainability Goals which includes Human Capital Management and Climate Change goals. This set of 44 goals are set with 2030 targets in line with the Decade of Action to achieve the Sustainable Development Goals with one exception -- achieving net-zero greenhouse gas emissions by 2050. In line with Inspiring Love – Signet also took actions this past quarter to further enhance its commitment to advancing Diversity, Equity and Inclusion. Specifically, Signet announced the launch of its first ever Employee Experience which commits to providing team members with an exceptional place to work and further solidifies inclusiveness, and encourages individuality and diversity within a welcoming culture. As advocates for positive change in the communities Signet serves, the Company is committing to further advancing women's gender parity by joining Paradigm for Parity and aligning with their five-point action plan. Signet's first donation from its newly formed Signet Love Inspires Foundation was made this quarter to the Equal Justice Initiative, as there is much to be done to fight systemic racism. And, in line with our mission of Celebrating Life and Expressing Love for all, the Company is celebrating PRIDE month across Signet banners and endorsed the Human Rights Council's Business Statement on Anti-LGBTQ+ State Legislation. Lastly, as a global company with long-standing partners and vendors around the world, the Company donated to the Gajera Charitable Trust in India with the intention of support for COVID-19 relief efforts.
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