new york investor day
TRANSCRIPT
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New York Investor DayWednesday, June 24, 2015
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James GrantVP, Investor RelationsSignet Jewelers
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Agenda
9:30 AM
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Executive PresentationsMark Light: CEO, Signet JewelersMichele Santana: CFO, Signet Jewelers
BreakEd Hrabak: President, Sterling DivisionGeorge Murray: President, Zale Division
BreakSeb Hobbs: Managing Director, U.K. Division
11:45 AM Question & Answer Session12:30 PM Lunch2:00 PM Buses Depart for Store Tour5:30 PM Buses Return from Store Tour
Forward Looking Statements & Other Disclosure Matters
Forward-Looking Statements - This presentation contains statements which are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, based upon management's beliefs and expectations as well as on assumptions made by and data currently available to management, include statements regarding, among other things, Signet's results of operation, financial condition, liquidity, prospects, growth, strategies and the industry in which Signet operates. The use of the words "expects," "intends," "anticipates," "estimates," "predicts," "believes," "should," "potential," "may," "forecast," "objective," "plan," or "target," and other similar expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to a number of risks and uncertainties, including but not limited to general economic conditions, risks relating to Signet being a Bermuda corporation, the merchandising, pricing and inventory policies followed by Signet, the reputation of Signet and its brands, the level of competition in the jewelry sector, the cost and availability of diamonds, gold and other precious metals, regulations relating to customer credit, seasonality of Signet's business, financial market risks, deterioration in customers’ financial condition, exchange rate fluctuations, changes in Signet's credit rating, changes in consumer attitudes regarding jewelry, management of social, ethical and environmental risks, security breaches and other disruptions to Signet's information technology infrastructure and databases, inadequacy in and disruptions to internal controls and systems, changes in assumptions used in making accounting estimates relating to items such as extended service plans and pensions, the impact of the acquisition of Zale Corporation on relationships, including with employees, suppliers, customers and competitors, the impact of stockholder litigation with respect to the acquisition of Zale Corporation, and our ability to successfully integrate Zale's operations and to realize synergies from the transaction. For a discussion of these and other risks and uncertainties which could cause actual results to differ materially from those expressed in any forward-looking statement, see the "Risk Factors" section of Signet's Fiscal 2015 Annual Report on Form 10-K filed with the SEC on March 26, 2015. Signet undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances, except as required by law.
Non-GAAP Measures - Certain financial measures used during this presentation are considered to be 'non-GAAP financial measures'. For a reconciliation of these to the most directly comparable GAAP financial measures, please refer to Signet’s Form 10-K dated March 26, 2015 andForm 10-Q dated June 3, 2015, filed with the SEC and available on Signet’s website, www.signetjewelers.com.
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Agenda
9:30 AM
5
Executive PresentationsMark Light: CEO, Signet JewelersMichele Santana: CFO, Signet Jewelers
BreakEd Hrabak: President, Sterling DivisionGeorge Murray: President, Zale Division
BreakSeb Hobbs: Managing Director, U.K. Division
11:45 AM Question & Answer Session12:30 PM Lunch2:00 PM Buses Depart for Store Tour5:30 PM Buses Return from Store Tour
Signet Representatives
6
Steve Becker:Michelle Chapa-Fowler:
Dave Clunk:Scott Davies:
Lynn Dennison:Cathy Fischer:
Tryna Kochanek:
Signet Chief Human Resources OfficerSenior Vice President of Merchandising, Zale DivisionSignet Senior Vice President of Real Estate & Store PlanningSenior Vice President of Marketing, Zale DivisionSignet Chief Legal, Compliance & Corporate Affairs OfficerSenior Vice President of Marketing, Sterling DivisionSenior Vice President of Field Operations, Sterling Division
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Signet Representatives
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Stuart Lee:Bill Luth:
Rory O’Donnell:Dawn Phillipson:
Denise Shaffer:Dan Shull:
Senior Vice President of Merchandising, Sterling DivisionSenior Vice President of Store Operations, Zale DivisionSignet ControllerSignet Manager Investor RelationsSignet TreasurerSignet Chief Information Officer
Signet Board Members in Attendance
7a
Helen McCluskey:Tom Plaskett:Robert Stack:Todd Stitzer:
Eugenia Ulasewicz:
Signet Board MemberSignet Board MemberSignet Board MemberSignet Chairman of the BoardSignet Board Member
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Mark LightCEO, Signet Jewelers
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Designed to Build Signet’s CoreStrengths for Long-Term Growth &
To Enhance Shareholder Value
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Vision 2020 Strategic Pillars
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Informs Every Plan & Initiative
• Conducted U.S. Market & Customer Segmentation Study• Refined Our View of Mid Market Based on Value of
Products Consumers Buy• Mid Market Represents Merchandise $100 - $10,000• Excludes Costume and Luxury Jewelry• 95% of Signet Sales Are In This Range
Strategy 1
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U.S. Mid-Market
• Independent Jewelers• Department Stores• Mass Merchants• Web Businesses
Our Competitors: Any Merchant That Sells Fine Jewelry in $100-$10,000 Range
$41.2 BillionStrategy 1
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Puerto Rico
U.K.Canada
U.S.A
Mid-Market Opportunities
Strategy 1
Outlet
Strip Mall
Stand Alone
Mall Off Mall
Power Centers
High Street
Bridal
Gifting
Self-Purchase
Signet Core
U.K.
Canada
U.S.
E-CommerceOmni-Channel
Low Tier Jewelry
Fine Mid-End Jewelry
Fine Branded Jewelry
Retail
Source Raw Materials
Manufacturing
Design
Warranties
Service/Repair
Custom Jewelry
Financing
Our Core
7A
• Signet’s Categories Where We Excel
• We Will Focus and Build On Our Core Strengths
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Continuously Improving Our Business
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• Positioning with Our Customer Base• Products • Organizational Structure
Strategy 1
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• Defining Highest Priority Growth Opportunities• Positioning Store Brands Across Divisions• Differentiating & Optimizing Store Brands• Strengthening Unique Value Position
Customer Segmentation Study
Strategy 1
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Bridal
Self Purchase
Gift-GivingJewelry Buying Occasions
Customer Segmentation Study
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Bridal
Signet’s Strengths
Approx.50% of Total Sales
25% Share of Bridal Mid-Market
Approx.50% of Total Sales
Gift-Giving
Customer Segmentation Study
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Sentimentalist Gifter Influencer Stylish Shopper
PracticalShopper
Differentiated on Attitudinal Basis
Customer Segmentation Study
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Looks For:• High Quality• Sentimental Value• Timeless Pieces
Sentimentalist
Customer Segmentation Study
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• Buys Jewelry Only as a Gift• Doesn’t Know Much About Jewelry• Doesn’t Enjoy Shopping
Gifter
Customer Segmentation Study
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• Buys Jewelry for Othersand Him/Herself
• Uses Jewelry to Show Status• Cares About Brands
Influencer
Customer Segmentation Study
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• Likes Extra “Bling” from Jewelry• Wears Jewelry Often• Jewelry is Part of an Outfit
Stylish Shopper
Customer Segmentation Study
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• Low-Key Purchaser• Likes Inexpensive, Every Day
Jewelry
Practical Shopper
Customer Segmentation Study
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Sentimentalist Gifter Influencer Stylish Shopper
PracticalShopper
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Not Defined By Age or IncomeEach Store Brand Attracts Certain Types of Customers
Customer Segmentation Study
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• Jewelry is a Highly Emotional Purchase• Customers Extend Trust if They Feel
Comfortable• Opportunities for New Marketing,
Store Design, Merchandise Assortments, and More
Customer Segmentation Study
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Product Development & Design Center
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• New York Based• Collaborates with Each
Business Unit to Identify and Create Industry Trends
• New Designs Exclusively Available at Signet Stores
Signet Jewelers
World’s Largest Seller of Diamond
Jewelry
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Signet Jewelers
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• Customer Segmentation Study Reinforced Focusing and Expanding on Core Strengths
• Building on Core Increases Shareholder Value
• Commitment to Customers and Shareholders is Unwavering
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Bridal SalesApprox. 50% of Signet Business
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Cross-Selling
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Cross-Selling Other Brands
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BridalThe Closest Thing to A Necessity in Jewelry
• Industry-Leading Supply Chain Capabilities
• Proven Effective Marketing• “Perfect Bridal Presentation”
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Credit
• Most Bridal Sales Involve Our Credit Program• Majority of Credit Portfolio is for Bridal• Bridal is a Critical Area to Develop Lifetime
Customers• Long-Term Growth Potential
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Best In Watches: U.K.
• Watch Sales Make Up Over 30% of U.K. Sales
• Watch Business Continues to Grow
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Best In the Digital Ecosystem
• Omni-Channel Approach• Internet is Often First Interaction
Customers Have With Us• Most Customers Complete Their
Purchases in Our Stores• Physical Stores Will Always Be Our
Most Important Element
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Customers Use Websites & Social Media to Experience Merchandise Prior to Visiting Stores
Maximize Impressions, OptimizeIn-Store Experience, Drive Sales
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Customers Order On-Line and ShipHome, or Pick Up in Stores
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Our Growth
1987Acquisition of
Sterling Jewelers
Acquisition of 82 Westhall Stores
1988Acquisition of56 Osterman
Stores
1989Acquisition of 90 Weisfield Stores
1990Acquisition of
506 Kay Jewelers and
JB Robinson Stores
1993Jared The Galleria
Of Jewelry is Introduced
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Our Growth
2000Acquisition of 137 Marks & Morgan
Stores
2003Sterling Becomes
the Largest Specialty Jeweler
in the U.S.
2012Acquisition of 102 Ultra Diamonds Outlet Stores
2014Acquisition of
Over 1,600 Zale Corp. Stores
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Signet: 3,600 Stores
2015: $2.1M
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Average Store Sales
1990: $900K
Largest Retail Jewelry Store Brand
in America1,100 Locations
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Revenue
$1.2 Billion
Largest Jewelry Store Brand in America 250 Locations
4th
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Signet’s Growth
• Organic Growth & Acquisitions are Key Driversof Our Success
• Each Integration Accelerates Our Execution Curve• Zale is Youngest Business Unit on Signet Execution Curve• U.K. Focusing on Growth Bar that Sterling Set• Sterling Setting & Raising the Growth Bar• Centralized Real Estate Program
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Our People, Our Foundation
• The Best & Brightest Team Members
• Trained to Achieve& Advance
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“Signetization”
The ongoing process of identifying, creating, sharing and integrating, together, every best practice and using our corporate assets to the greatest benefitof our Team Members and Signet Jewelers.
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One Company
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Corporate Social Responsibility
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Corporate Social Responsibility
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Corporate Social Responsibility
We are a Profitable Company Committed to Doing the Right Thing on Behalf of Our Customers, Our Investors, Our Team Members and the People in the Communities Where We Operate Aroundthe World.
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Expand Our Footprint
People, Purpose, Passion
Digital EcosystemBest In BridalMaximize
Mid-Market
Acquisition of Zale
Integration of Ultra Acquisition
Resulted in Thriving Outlet
Footprint
Entered Canada
Signetize the Company
Successful Collaboration on
Key Areas of Focus and Divisions
Corporate Social Responsibility
Initiatives
First Customer Interaction-
Critical Touch Point
Mobile and Tablet Optimized
Websites
Expanded Social Media
Complements Physical Store
Experience
Vertical Integration of Diamond Supply
Chain
Diamond Sales Training/Perfect
Bridal Presentation
New Brands and Cross-Selling
(Vera Wang LOVE)
Build On Our Core Strengths
Customer Segmentation
Innovation and Jewelry Brand
Expansion
Identify and Create Industry
Trends
Vision 2020 Achievements Summary
Michele SantanaCFO, Signet Jewelers
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U.S. Jewelry Market
2
2014 3 YR CAGR 5 YR CAGR 10 YR CAGR
Signet $5.7B 15.2% 11.9% 6.7%
Total Jewelry & Watch Market $78.1B 4.0% 5.3% 3.3%
Total Retail Market $5,208.4B 4.2% 5.1% 3.1%
$78.1 Billion
Market Data Source: U.S. Bureau of Economic Analysis and U.S. Census Bureau. 2014 Data is Preliminary and Subject to Revision.
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Signet Jewelers Historical Long Term Growth
$3,273.6 $3,437.4$3,749.2
$3,983.4$4,209.2
$5,736.3
$264.5$372.5
$507.4$560.5 $570.5
$576.6
$0
$200
$400
$600
$800
$1,000
$1,200
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
FY10 FY11 FY12 FY13 FY14 FY15
Sales Operating Income
5 Year Sales CAGR: 12%
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Signet Jewelers Market Share
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U.S. Total Jewelry
Market Share1 2001 2005 2009 2010 2011 2012 2013 2014
Signet 3.4% 3.8% 4.2% 4.4% 4.4% 4.5% 4.6% 6.1%2
1 Share of U.S. Jewelry Market as Estimated by the U.S. Bureau of Economic Analysis, based on U.S. Sales as Disclosed in SEC filings.2 2014 Includes a Partial Year of Sales from Zale U.S. and Piercing Pagoda from June-January due to the Acquisition on May 29, 2014.
• Gaining Share in World’s Largest Jewelry Market
• Biggest Opportunities Remain in U.S.
5,000
5,500
6,000
6,500
7,000
7,500
8,000
8,500
2009 2010 2011 2012 2013 2014
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Jewelry Market Size: Canada
CA
D B
illio
n
5 Year CAGR: 4.6%
Source: Passport Euromonitor International
5.8B
7.2B
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Jewelry Market Size: Canada
CA
D B
illio
n
5 Year CAGR: 4.6%
Source: Passport Euromonitor International
2019
5 Year CAGR: 3.4%
8.6B
5.8B
7.2B
5,000
5,500
6,000
6,500
7,000
7,500
8,000
8,500
2009 2010 2011 2012 2013 2014
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Jewelry & Watch Market Size: U.K.
Mar
ket V
alue
(£m
)
Source: Mintel Group Ltd.
4,100
4,200
4,300
4,400
4,500
4,600
4,700
2009 2010 2011 2012 2013 2014
5 Year CAGR: 0.8%
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U.K. Jewelry & Watch Market
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• Precious Metals are More Affordable
• Millennial Spending is Growing
Signet Jewelers
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• Precedent of Profitable Growth
• Consistent Growth in Sales & Operating Profit
• Balancing Shareholder Distribution with Investments Back Into the Business
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2% to 3%
to $1.14
to ($x)
($x)
to $x
[28% to 29%]
[$275M to $325M]
[2% to 3%]
Financial Guidance
Q2 FY16
FY16
Effective Tax RateCapital ExpendituresNet Selling Square Footage Growth
Same Store SalesEPSAdjustments:
Purchase AccountingTransaction Costs
Adjusted EPS (EPS Less Adjustments Per Share)*
2% to 3%$0.99 to $1.05
($0.05)($0.07) to ($0.06)
$1.11 to $1.16
28% to 29%$275M to $325M
2% to 3%* Non-GAAP Measure. See SEC Filings for Reconciliation
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$150M - $175M in Operating Profit
Contribution
Estimated Synergy Sources by Functional Area
Gross Margin
50%
ExpenseReduction
20%Repair Services and Brand Cross-Selling
30%
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$150M - $175M in Operating Profit
Contribution
Estimated Total Net Synergy Timing
0%
20%
40%
60%
80%
100%
FYE16 FYE17 FYE18
100%
60%
20%
Cadence of Synergies
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1. Re-Investing Into the Business
2. Implementing Critical Information Technology
3. Time for Supply Chain Initiatives to Flow Through Financial Statements
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Operating Profit Synergies
• Majority will be Achieved by Zale Division
• By End of FY18, Zale Division Expected to be at 9% Operating Margin
• Synergies Alone will Help Achieve Medium-Term Operating Margin Milestone
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• Will Expand• Greater Sales
Productivity• Expansion of Zale
Division Store Base
Medium to Long Term
9%Medium
Term
15%LongTerm
Zale Division Operating Margin
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Zale Division Operating Margin
Medium to Long Term• Strengthening and Expanding
Zales Brand Footprint
• Operating Margins Over Long Term Similar to Sterling Division, Less Credit Contribution of 400 Basis Points
U.K. Division Operating Margin
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• Increased Store Productivity
• SG&A Reductions
• Greater Real Estate Efficiency
• Higher Sales and Gross Profit Per Store
10%Medium Term
FY10 FY11 FY12 FY13 FY14 FY15
7.7% 8.2% 7.8% 5.6% 6.2% 7.0%
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Sterling Division Operating Margin
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• Operating Margin Dipped in FY14 Due to Ultra Acquisition
• Rebounded in FY15
• Operating Margins Will Continue to Expand at Slow & Steady Pace
FY10 FY11 FY12 FY13 FY14 FY15
8.8% 12.5% 15.8% 16.7% 15.7% 16.6%
19%Long Term
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Real Estate
Physical Store and In-Store Purchasing Experience is Our Most Important Sales Channel
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Global Store Square Footage Expected to Grow 2% to 3% Over Last Year, Primarily in Sterling Division
Operates in 39 States Power Centers, Mixed-Use Lifestyle Centers & Outlets
FY16 Real Estate
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Real Estate: Sterling Division FY16
Growth in New Developments Adjacentto High Profile Malls & Smaller Trade Areas
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FY16
Square Footage: Slight Increase
Better Operating Performance and More Favorable Lease Deals
Square Footage: Unchanged
Real Estate: Zale & U.K. Divisions
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Real Estate: Zale & U.K. Divisions
Over 40 New Units This Year
FY16
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FY18 Est.
3,5793,679
FY15
Net Store Growth
• Growth Driven by Zales, Kay, Jared• Modest Kiosk Growth• International (Canada, U.K.)
Minimal Change• Material Declines in Regional
Store Brands
3 Year CAGR: 1%
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Select Store Concept Growth
KAY
1,094
ZALES
716
HS/EJ
498
KAY
1,128
ZALES
724
HS/EJ
501
KAY
1,162
ZALES
736
HS/EJ
496
KAY
1,186
ZALES
789
HS/EJ
491
JARED
253JARED
274JARED
285JARED
294
FY16 Est.FY15 FY17 Est. FYE18 Est.
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North American Real Estate
• Team Consolidated
• New Structure Allows Us to Synergize the Analysis and Decision-Making
• Every New Store is Expected to Deliver 20% InternalRate of Return
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• Zale Division Expected to Improve Productivity
• 300 More Zales Stores Long-Term
• 50 Sterling Division Regional Stores Converted to Zales
• Signet Conversions and Remodels Require 25% IRR
North American Real Estate
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• Kay Locations a Bit More Desirable, Some withBetter Locations in Mall
• No Significant Repositioning for Zales Stores
• Landlords More Flexible for Strong Retailersin Less-Than-Top Malls
• Increasing Square Footage Among Core Store Brands
North American Real Estate
3131
• Continuing to Manage-Down Regional Store Brand Count
• 269 RegionalStore Brands from Past Acquisitions at End of FY15
Historical Regional Store Profile
Opened / AcquiredClosed / Converted
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• Will Continue to Convert and Close Regional Stores, Preserving 50 for Long Term
• Well-Diversified Real Estate Portfolio
• Significant Opportunities for Our Major Store Brandsin a Variety of Real Estate Formats
North American Real Estate
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Credit Programs
In-House Credit Program: Sterling Division
Third Party Credit Program: Zale and U.K. Divisions
We Keep ReceivablesOff Our Balance Sheet
We Take On Risk and Rewards
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33
Credit Programs
• Hybrid Model Allows Usto Compare & Contrast Effectiveness of Different Approaches
• Gives Us Working Capital and Diversifies Risk
34
Credit Programs
• In-House Credit for 20+ Years • Proprietary Model Utilizing Same
Tools as Financial Institutions• Provides Us a History of How
Borrowers Behave in the Repayment of Jewelry Loans
• Jewelry Loan is an Emotional Loan
Sterling Division
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35
Credit ProgramsSterling Division
Most In-House Creditis Linked to Bridal
Bridal Sales UseOur Credit
75%
Credit Salesare Bridal
60%
36
Credit ProgramsSterling Division
FY10 FY11 FY12 FY13 FY14 FY15Average Monthly Collection Rate 12.5% 12.6% 12.7% 12.4% 12.1% 11.9%
Allowance for Doubtful Accounts as % of Accounts Receivable
7.8% 6.8% 6.8% 6.8% 6.7% 6.8%
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Credit ProgramsZale Division
• Alliance Data Systems in U.S.• TD in Canada• ADS: Zale’s Merchant Costs
$22M1 LESS Annually, Due toMore Favorable Terms
• Benefits from Partner’s CRMand Training
Third-Party Providers
1 Not Included in Synergies
39
Key Capital Allocation Strategy Tenets
• Adjusted Debt* / Adjusted EBITDAR* at or Below 3.5x
• Distribute 70% - 80% of Annual Free Cash Flow to Shareholders
• Increase Dividend Consistently
• Repurchase $100M - $150M of SIG Stock This Fiscal Year
• Evaluate Utilizing Additional Capacity Under Signet’s ABS Beginning in FY17
Committed To Maintaining Investment Grade Rating* Non-GAAP Measure. See SEC Filings for Reconciliation
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40
Leverage Ratio Expected Improvement
• Full-Year Effect of Zale Division Profitability• Incremental Adjusted EBITDAR* Generation
• At or Below 3.5x by End of FY16• Leveraging Our Balance Sheet
• Strategic Initiatives• Repurchasing Incremental Stock• Delivering Shareholder Value• Asset-Backed Securitization Facility for Borrowing
* Non-GAAP Measure. See SEC Filings for Reconciliation
15 Minute BreakUp Next…
43
Ed Hrabak
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Ed HrabakPresident,Sterling Division
1
Sterling Division
2
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3
Sterling Division
FY15 Total Comp Sales
Up 4.8%FY15 Operating Profit
Up 12.9%$624 Million
5
Sterling Division
FY16 Q1 Comp Sales
Up 2.3%Basis Points
FY16 Q1 Operating Profit
Up 50
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Best Practices
8
Every Kiss Begins with Kay
Diamond PricingStandardization
Consumer R&D
QA Process – Synthetic Testing
Brand Boutiquesand Marketing
Media Buying
Diamond Quality Alignment
Best Practices
9
Market Researchand Development
Marketing Campaigns
Operational Training
Style Innovation
ProductDevelopmentand Testing
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Sterling Competitive Strengths
Outstanding Customer Experience10
Customer Segmentation Study
“Sentimentalist”
11
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12
“Gifter”
Customer Segmentation Study
13
“Stylish Shopper”
Customer Segmentation Study
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“Stylish Shopper”
14
“Gifter”“Sentimentalist”
Customer Segmentation Study
Sterling Competitive Strengths
Industry Leading Merchandising15
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Product Development & Design Team
17
Keeps Us On-Trend andCreates New Industry TrendsNew York - Based
18
Launching This Holiday Season
Product Development & Design Team
Trend-Creating “Must Have”
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FY15: 32% of Sterling Total Sales19
Sterling Competitive Strengths
Branded, Differentiated Merchandise
2009
2010
2012
20082001
20142013
20
Continued Enhancements to Branded Merchandise Programs
Branded Merchandise Roll-Out
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Best in Bridal
21
Branded Bridal Merchandise Grew 40 Basis Points Faster than Non-Branded Bridal in FY15
Top Branded & Differentiated Programs
Strengthening Our Existing Brands withProduct Extensions and Consistent Marketing
22
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Miracle Links
25
Symbolize and Commemorate theUnique Bond Between Mother & Child
Custom Jewelry
28
Sterling Competitive Strengths
One-of-a-Kind Pieces
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Custom Jewelry
29
1. Idea Generation
2. Computer Aided Design
3. Wax Mold
4. Finished Piece
Formalized Process
Advertising Support
The Diamond Journey
30
New Merchandise InitiativePhotographic Journey of a Customer’s Diamond from Rough to Finished Piece
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Omni-Channel Customer Engagement
31
Sterling Competitive Strengths
32
New Store Format
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33
New Store Format
34
Outlets
• 157 Outlet Stores• 11 New Outlet Stores• 31 Conversions to Jared Vault
FY15: Sterling Division
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35
Outlets
Same as Non-Outlet
Previously Ownedor Clearance
ManufacturedFor Outlet20%
20% 60%
36
New Mall Concepts
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35
Digital Ecosystem
• 40% of e-Commerce SalesPicked Up In Stores
• Store Associates Selling Online Merchandise via Tablets
• Optimized Websites
e-Commerce Sales Up 20% in FY15
38
Sterling Competitive Strengths
Signet Polished Diamond Office, India
• Gaining Direct Access to the Most Desirable Diamonds• Securing a Long-Term Supply of Diamonds to Support
Signet’s Worldwide Growth• Strategically Accumulating Diamonds
• Reacting to the Market on a Daily Basis• Consistent Availability of Merchandise at Great
Values for Our Customers
Diamond Supply Chain Capabilities
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40
Signet Diamond Factory Botswana
• Acquiring Rough Diamonds• Manufacturing Polished Diamonds in Our Factory• Knowledge and Control of the Production Process• Unmatched, Consistent Supply of Diamonds• Sourcing Diamonds for All Signet Divisions
Sterling Competitive Strengths
Diamond Supply Chain Capabilities
42
Sterling Competitive Strengths
Store Concepts
Merchandise
e-Commerce In-House Credit
Supply Chain
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43
PEOPLEOur Most Important Competitive Strength
Sterling Competitive Strengths
44
TRUST is the #1 Reason Customers BuyJewelry Where They Do
Our PEOPLE Best TrainedMotivated Rewarded
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George MurrayPresident,Zale Division
1
Zale Division
2
U.S. and Puerto Rico
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Zale Division
3
Canada
4
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Zale Corporation
5
• Operated in Our Target Mid-Market
• Vera Wang Love Bridal Program -Best in Bridal Goal
• Opportunity to Expand Signet’s Footprint - Canada
What Made Zale Attractive to Signet?
6
• Jewelry Operational Best Practices
• Research Insights
• Increased Capital
• Consistent Growth Strategy
• Proven, Experienced Leadership
How Signet Can Drive Zale Results
Zale Corporation
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Zale Division
7
• Signet Took Over Operations May 2014
• Youngest Division on the “Execution Curve”
• Gap is Narrowing Due to Operational Integration and Synergies
• Gap will Continue to Narrow with Increased Sales Productivity & Square Footage Growth
Zale Division Accomplishments
8
• Reduced Unproductive Jewelry Designs and Inventory
• Increased Productive Designsand Inventory
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9
Zale Division Accomplishments
Re-launch
9B
Zale Division Accomplishments
Re-positioning
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10
• New Advertising Creative
• More Efficient Media Buying
• More Relevant Media Placement
Marketing
Zale Division Accomplishments
Marketing Priorities
11
• Build Momentum in Vera Wang
• Support Signet Trend Creating Initiative
• Launch Campaigns Targeted at “Influencer” Customer
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12
Our People
2014 Managers’ Leadership Conference
2014 Managers’ Leadership Conference
13
• “Demystified” the Acquisitionand Plans for Zale
• Set the Tone for Collaborative Leadership Style
• Shared Signet’s Mission, Core Values & Vision 2020 Strategy
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Team Member Benefits
14
• Updated Sales Training Focused on Merchandise Features & Benefits
• Enhanced Rewards Program
• “Promotion from Within” Leadership Development
15
Centralized Functions
Signet Polished Diamond Office India
• Signet Sources Loose Stonesfor Zale Division
• Negotiations are Centralized• Diamond Buying Team Provides
Insights on Costs
Diamond Supply Chain
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16
• Consolidating Vendor Base• Utilizing Jared Design & Service
Centers• Dedicated Repair Facility
Repair
Centralized Functions
17
• Centralized Media Buying Team • Better Rates• Improved Quality of Placements
Media Buying
Centralized Functions
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Real Estate
18
Store Capital Decisions Centralized Through One Real Estate Team & Executive Committee
Centralized Functions
19
Differentiation of Zale BenefitsOur Unique Customer Identities
Centralized Functions
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20
Technology
• Seamless Interactions Throughout the Shopping Experience
• Cloud-Based Platform• Omni-Channel Engagement for
Our Customers
New e-Commerce System Platform
21
Technology
• Powerful Tool and Training to Enhance the Customer Experience
Tablets for Stores
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22
Customer Relationship Management
Let’s Get Started Input InformationSelect Store
Of ReferenceFind and Add
ItemJewelry Box Is
Created
The Jewelry Box
22A
Customer Relationship Management
PGSE: Preferred Guest Special Events
Specific Sales Weekends Occurring Throughout the Year
Preferred Dollars
Promote Purchases During Traditionally Slower Sales Times
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23
Real Estate
• Updated Promotional Advertising• Cross-Coupon Campaign Offers
Between Piercing Pagoda & Zales
New Piercing Pagoda Kiosk Design
New Zales Store Concept Coming Soon!
24
Field Operations
• District Managers are Now Coaches• DMs Provide Training on Diamond Presentations
and Evaluate Team Member Execution• Benefits, Compensation & Rewards Structure
are Being Refined
• Maximizing Sales through Customer Serviceby Adding Floor Hours
• Testing Assistant Managers in High Volume Stores
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25
Merchandising
• New York Product Development and Design Center Creating Original Jewelry for Zale
26
Growth Through
• Collaboration• Integration of Best Practices• Transparent Communication• New Signet Leadership• Annual Sales Incentive Trips
for Team Members
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27
Customer Segmentation
“Influencer”• Looks Forward to Buying Jewelry • Cares About Merchandise Brands• Uses Jewelry to Show Status
28
Customer Segmentation
“Stylish Shopper”• Uses Jewelry to Accessorize an Outfit• Loves Many Different Kinds of Jewelry• Wears Jewelry Often
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29
Customer Segmentation
• Customer Identities are Informing Every Strategic Initiative
• Adjusting Merchandise Mix, Presentation & Marketing to Target Our Unique Customers
“Stylish Shopper”“Influencer”
30
• Cross-Selling Sterling Division Merchandise Brands
• District Manager Visits Showing Positive Results
• Merchandise Brand Managementand Media Buys
Strategic Initiatives
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31
Strategic Initiatives
• Enhancing Product Mix
• Offering Some Zales Merchandise• Unstoppable Love• Shaquille O’Neal• Petite LeVian
33
Advertising & Marketing
• Differentiated Store and Merchandise Brands Through Targeted Marketing
• Sector Leading Share of Advertising Voice
• Majority of TV Marketing Investment in Zales and Peoples
• Targeting Audiences Based on Customer Segmentation Data
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Zale Division
34
Zale Division
35
FY16 Q1 Comp Sales
Up 5.6%
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Zale Division
36
15 Minute BreakUp Next…
36A
Seb Hobbs
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Seb HobbsManaging Director, U.K. Division
1
U.K. Division
2
1#Middle Market Customer
2#Upper Middle Market Customer
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U.K. Division
3
Up 5.3%FY15 Total Comp Sales
7.0%FY15 Operating Margin
Up 80 Basis Points
U.K. Division
5
Up 6.2%FY16 Q1 Same Store Sales
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General Election ResultsFavorable for Business
U.K. Division
6
May 2015
U.K. Division
7
• Close Collaboration withSterling Since 2013
• Implemented Best Practices
• U.K. Division is Case Study for Reinvigorating a Business
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U.K. Division
8
• Sharpened Focus and Refined Direction
• Targeting Mid-Market Jewelry Customers in RevitalizedSelling Culture
Best in Watches
Best in Bridal
Best in Bridal
9
• Rebalanced Resources in Favorof Bridal and Diamonds
• Improved Bridal Presentations, POP Displays, Brand Management and In-Store Bridal Events
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10
Cross-Selling Merchandise Brands
11
Cross-Selling Merchandise Brands
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12
U.K. Customer Preferences
• Delicate Jewelry
• Smaller Pendants and Center Stones
13
Cross-Selling Merchandise Brands
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14
U.K. Division
• Buying Diamonds Through Signet’s Centralized Sourcing Process
• Utilizing Sterling Best Practices for Repair
15
U.K. Division
• 30% of Total Sales • Strong Growth• Procuring the Right Brands in Fashion,
Premier & Luxury • Effective Marketing & Promotions• Improved In-Store Presentations
Watches
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16
U.K. Division
• Watch Boutiques• Shop-In-Shop Fixtures
Watches
17
Evolving How We Sell
• New, Proactive Selling Environment• Perfect Bridal Presentation• Training Programs Emphasizing
Diamonds and Bridal• “5 for 5 Standards” – Key Performance
Indicators
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18
Annual Leadership Conference
• More Face-to-Face Collaboration
• More Training• First Ever Signet
Incentive Trip
19
District Manager Responsibilities
• Focused on Selling Skills and Coaching
• Renewed Focus on Selling Diamonds
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20
Sales Performance Success
Omni-Channel Selling Strategy
21
Store Remodels
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22
New Stores
• New Model • Very Successful• Strong, Viable
Sales Channel
Outlets
23
Our Stores
Fewer Store Closings Due to Improved Lease Terms
and Operating Results
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23
e-Commerce
• Greater Percentage of Overall Sales Than U.S.
• 140 Basis Points Higher Penetration than Sterling and Zale Combined
• Website Improvements Include Responsive Design
• Improved Search Function• Larger Merchandise Images
25
Marketing
• Signet Remains the Largest Jewelry Advertiser in the U.K. Market
• Added Branded Diamonds
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26
Marketing
• Increased FY15 Fourth Quarter Marketing Investment
• Five New H.Samuel TV Commercials
27
Our Team Delivers Superior Results
Collaboration
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28
Our Team Delivers Superior Results
• Best and Brightest Team Members• Industry-Leading Training & Rewards• Pay for Performance Environment• Fixed and Variable Compensation
Weighted to Reward the Best Performers• New Leadership Development Schools• Promotion from Within Environment
29
Leadership Conference
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30
Our Future
• Collaboration and Commitment toOur Vision 2020 Strategies Empower Us
• Our Results are Repeatable!
Q & A
31