SIGNET JEWELERS LIMITED The discussion and analysis in this Item 2 is intended to provide the reader with information that will assist in understanding the significant factors affecting the Company's consolidated operating results, financial condition, liquidity and capital resources. This discussion should be read in conjunction with our condensed consolidated financial statements and notes to the condensed consolidated financial statements included in Item 1. This discussion contains forward-looking statements and information. The Company's actual results could materially differ from those discussed in these forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those discussed in the "Forward-Looking Statements" below and elsewhere in this report, as well as in the "Risk Factors" section within Signet's Fiscal 2021 Annual Report on Form 10-K filed with theSEC onMarch 19, 2021 . This management's discussion and analysis provides comparisons of material changes in the condensed consolidated financial statements for the 13 and 39 weeks endedOctober 30, 2021 andOctober 31, 2020 . FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q 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, appear in a number of places throughout this document and include statements regarding, among other things, Signet's results of operations, 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," "preliminary," "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 which could cause the actual results to not be realized, including, but not limited to: the negative impacts that the COVID-19 pandemic has had, and could have in the future, on Signet's business, financial condition, profitability and cash flows; the effect of steps we take in response to the pandemic; the severity, duration and potential resurgence of the pandemic (including through variants), including whether it is necessary to temporarily reclose our stores, distribution centers and corporate facilities or for our suppliers and vendors to temporarily reclose their facilities; the pace of recovery when the pandemic subsides and the heightened impact it has on many of the risks described herein, including without limitation risks relating to disruptions in our supply chain, our ability to attract and retain labor especially if Federal COVID-19 vaccine mandates are implemented, consumer behaviors such as willingness to congregate in shopping centers and shifts in spending away from the jewelry category and the impact on demand of our products, our level of indebtedness and covenant compliance, availability of adequate capital, our ability to execute our business plans, our lease obligations and relationships with our landlords, and asset impairments; general economic or market conditions, including impacts of inflation or other pricing environment factors on the Company's costs; financial market risks; our ability to optimize Signet's transformation strategies; a decline in consumer spending or deterioration in consumer financial position, whether due to inflation or other factors; changes to regulations relating to customer credit; disruption in the availability of credit for customers and customer inability to meet credit payment obligations; our ability to achieve the benefits related to the outsourcing of the credit portfolio, including due to technology disruptions, future financial results and operating results and/or disruptions arising from changes to or termination of the relevant non-prime outsourcing agreement requiring transition to alternative arrangements through other providers or alternative payment options and our ability to successfully establish future arrangements for the forward-flow receivables; deterioration in the performance of individual businesses or of the Company's market value relative to its book value, resulting in impairments of long-lived assets or intangible assets or other adverse financial consequences; the volatility of our stock price; the impact of financial covenants, credit ratings or interest volatility on our ability to borrow; our ability to maintain adequate levels of liquidity for our cash needs, including debt obligations, payment of dividends, planned share repurchases and capital expenditures as well as the ability of our customers, suppliers and lenders to access sources of liquidity to provide for their own cash needs; changes in our credit rating; potential regulatory changes, global economic conditions or other developments related to theUnited Kingdom's exit from theEuropean Union ; exchange rate fluctuations; the cost, availability of and demand for diamonds, gold and other precious metals; stakeholder reactions to disclosure regarding the source and use of certain minerals; seasonality of Signet's business; the merchandising, pricing and inventory policies followed by Signet and failure to manage inventory levels; Signet's relationships with suppliers including the ability to continue to utilize extended payment terms and the ability to obtain merchandise that customers wish to purchase; the failure to adequately address the impact of existing tariffs and/or the imposition of additional duties, tariffs, taxes and other charges or other barriers to trade or impacts from trade relations; the level of competition and promotional activity in the jewelry sector; our ability to optimize Signet's multi-year strategy to gain market share, expand and improve existing services, innovate and achieve sustainable, long-term growth; the maintenance and continued innovation of Signet's OmniChannel retailing and ability to increase digital sales, as well as management of its digital marketing costs; changes in consumer attitudes regarding jewelry and failure to anticipate and keep pace with changing fashion trends; changes in the supply and consumer acceptance of and demand for gem quality lab created diamonds and adequate identification of the use of substitute products in our jewelry; ability to execute successful marketing programs and manage social media; the ability to optimize Signet's real estate footprint; the ability to satisfy the accounting requirements for "hedge accounting," or the default or insolvency of a counterparty to a hedging contract; the performance of and ability to recruit, train, motivate and retain qualified team members - particularly in regions 36 -------------------------------------------------------------------------------- Table of Contents experiencing low unemployment rates; management of social, ethical and environmental risks; the reputation of Signet and its banners; inadequacy in and disruptions to internal controls and systems, including related to the migration to new information technology systems which impact financial reporting; security breaches and other disruptions to Signet's information technology infrastructure and databases; an adverse development in legal or regulatory proceedings or tax matters, including any new claims or litigation brought by employees, suppliers, consumers or shareholders, regulatory initiatives or investigations, and ongoing compliance with regulations and any consent orders or other legal or regulatory decisions; failure to comply with labor regulations; collective bargaining activity; changes in corporate taxation rates, laws, rules or practices in the US and jurisdictions in which Signet's subsidiaries are incorporated, including developments related to the tax treatment of companies engaged in Internet commerce or deductions associated with payments to foreign related parties that are subject to a low effective tax rate; risks related to international laws and Signet being aBermuda corporation; difficulty or delay in executing or integrating an acquisition, including Diamonds Direct, or executing other major business or strategic initiatives; risks relating to the outcome of pending litigation; our ability to protect our intellectual property or physical assets; changes in assumptions used in making accounting estimates relating to items such as extended service plans and pensions; or the impact of weather-related incidents, natural disasters, strikes, protests, riots or terrorism, acts of war or another public health crisis or disease outbreak, epidemic or pandemic on Signet's business. 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" and "Forward-Looking Statements" sections of Signet's Fiscal 2021 Annual Report on Form 10-K filed with theSEC onMarch 19, 2021 and quarterly reports on Form 10-Q and the "Safe Harbor Statements" in current reports on Form 8-K filed with theSEC . Signet undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances, except as required by law. OVERVIEWSignet Jewelers Limited ("Signet" or the "Company") is the world's largest retailer of diamond jewelry. Signet is incorporated inBermuda . The Company, with 2,851 stores and kiosks as ofOctober 30, 2021 , manages its business by geography, a description of which follows: •The North America segment has 2,408 locations in the US and 94 locations inCanada as ofOctober 30, 2021 . •In the US, the segment primarily operates in malls and off-mall locations under the following banners: Kay (Kay Jewelers and Kay Outlet ); Zales (Zales Jewelers and Zales Outlet ); Jared (Jared The Galleria Of Jewelry andJared Vault ); JamesAllen.com; and Rocksbox. Additionally, in the US, the segment operates primarily mall-based kiosks under the Piercing Pagoda banner. •In Canada, the segment primarily operates under the Peoples banner (Peoples Jewellers ). •The International segment has 349 stores in theUK ,Republic of Ireland andChannel Islands as ofOctober 30, 2021 .Certain Company activities are managed in the "Other" segment for financial reporting purposes, including the Company's diamond sourcing function and its diamond polishing factory inBotswana . See Note 4 of Item 1 for additional information regarding the Company's reportable segments. Impacts of COVID-19 InDecember 2019 , a novel coronavirus ("COVID-19") was identified inWuhan, China . During Fiscal 2021, the Company experienced significant disruption to its business, specifically in its retail store operations through temporary closures during the first half of last year. By the end of the third quarter of Fiscal 2021, the Company had re-opened substantially all of its stores. However, during the fourth quarter of Fiscal 2021, both theUK and certain Canadian provinces re-established mandated temporary closure of non-essential businesses. TheUK stores began to reopen inApril 2021 and Canadian stores stores began reopening in the second quarter of Fiscal 2022. To date, the Company's operations have not been significantly impacted by the resurgence of the COVID-19 or any variants, including the most recent Omicron variant. The Company continues to actively monitor and manage the situation related to its store and support center operations focusing on the health and safety of its employees, customers, suppliers and shareholders, and considering all guidelines from state and federal government and health organizations. COVID-19 significantly altered the retail climate and the Company has been navigating that change by accelerating its application of the key strategic initiatives developed over the past three years including the Company's focus on becoming an OmniChannel leader, focusing on the needs of its customers, removing non-customer facing costs, and optimizing its real estate footprint. The Company continues to maintain its cost diligence efforts as the Company transitions to its new Inspiring Brilliance strategy, as further described below. During the past two years, the Company also took numerous actions to maximize its financial flexibility, bolster its liquidity and strengthen its balance sheet, both strategically and as temporary measures as a result of COVID-19. Refer to the Liquidity and Capital Resources section below for further information. 37 -------------------------------------------------------------------------------- Table of Contents Outlook Signet's same store sales grew 18.9% during the third quarter of Fiscal 2022 compared to the same quarter of Fiscal 2021, reflecting continued strong business momentum driven by the strength of Signet's connected commerce capabilities and the level of early holiday shopping as well as the traction from strategic initiatives such as new product launches. The Company's focus on its connected commerce shopping experience, both online and in-store, helped maintain strong conversion rates and improve average transaction values during the third quarter of Fiscal 2022. During the remainder of Fiscal 2022, the Company will continue implementing the initiatives under its Inspiring Brilliance strategy, which is focused on the achievement of sustainable, industry-leading growth. As described in the Purpose and Strategy section within Item 1 of Annual Report on Form 10-K for the year endedJanuary 30, 2021 filed with theSEC onMarch 19, 2021 , through its Inspiring Brilliance strategy, the Company will focus on leveraging its core strengths that it developed over the past three years with the goal of creating a broader mid-market and increasing Signet's share of that larger market as the industry leader. Signet continues to expect some shift of consumer discretionary spending away from the jewelry category toward experience-oriented categories in the fourth quarter; however, the Company has not experienced a significant impact to the current year results to date, and the timing and magnitude of any shift is difficult to predict. The Company believes that its "always-on" marketing strategy, combined with consumer inspired promotional events and the strength of the Company's product assortment, is expected to continue fueling a strong response from customers across merchandise categories and banners throughout the remainder of the year. Furthermore, the Company will continue its diligent and effective efforts to mitigate supply chain and retail labor pool disruption for the remainder of the year. The full extent of the COVID-19 pandemic impacts on the Company's business in the fourth quarter of Fiscal 2022 or longer term, and whether the strong results to date will continue, remains unclear. Continued uncertainties exist that could impact the Company's results of operations or cash flows, such as potential resurgence of COVID-19, including Omicron, in key trade areas, the ability to recruit and retain qualified team members, organized retail crime, extended duration of heightened unemployment in certain areas, pricing and inflationary environment changes impacting the Company (including, but not limited to, materials, labor, fulfillment and advertising costs) or the consumers' ability to spend. In addition, although the Company believes economic stimulus measures have had a positive impact on current year results, it is uncertain how long this impact will continue. Diamonds Direct acquisition OnNovember 17, 2021 , the Company finalized its acquisition ofDiamonds Direct USA Inc. ("Diamonds Direct") for cash consideration of$504.6 million , net of cash acquired, and subject to customary post-closing adjustments per the Transaction Agreement ("Transaction Agreement"). Diamonds Direct is an off-mall, destination jeweler in the US operating in 22 retail locations with a highly productive, efficient operating model with demonstrated growth and profitability which is expected to be immediately accretive to Signet following the acquisition date. Diamonds Direct's strong value proposition, extensive bridal offering and customer-centric, high-touch shopping experience is a destination for younger, luxury-oriented bridal shoppers. Diamonds Direct strategically expands Signet's market in accessible luxury and bridal, provides access to a new customer base and furthers Signet's opportunity to build lifetime customer relationships. Signet plans to grow Diamonds Direct while driving operating margin expansion over time through operating synergies in purchasing, targeted marketing, connected commerce and jewelry services. 38 -------------------------------------------------------------------------------- Table of Contents RESULTS OF OPERATIONS The following should be read in conjunction with the financial statements and related notes in Item 1 of this Quarterly Report on Form 10-Q, as well as the financial and other information included in Signet's Fiscal 2021 Annual Report on Form 10-K. Comparison of Third Quarter Fiscal 2022 to Third Quarter Fiscal 2021 •Same store sales: Up 18.9%. •Total sales:$1.54 billion , increased 18.3%. •Operating income:$106.9 million compared to$39.7 million in the prior year. •Diluted earnings per share:$1.45 compared to$0.02 in the prior year. Comparison of Third Quarter Fiscal 2022 Year to Date to Prior Year •Same store sales: Up 66.3%. •Total sales:$5.01 billion , increased 64.9%. •Operating income (loss):$501.0 million compared to$(349.6) million in the prior year. •Diluted earnings (loss) per share:$7.27 compared to$(5.67) in the prior year. Third Quarter Year to Date Fiscal 2022 Fiscal 2021 Fiscal 2022 Fiscal 2021 (in millions) $ % of sales $ % of sales $ % of sales $ % of sales Sales$ 1,537.8 100.0 %$ 1,300.3 100.0 %$ 5,014.7 100.0 %$ 3,040.4 100.0 % Cost of sales (962.2) (62.6) (863.8) (66.4) (3,043.1) (60.7) (2,176.0) (71.6) Restructuring charges - cost of sales - - (2.0) (0.2) - - (1.4) - Gross margin 575.6 37.4 434.5 33.4 1,971.6 39.3 863.0 28.4 Selling, general and administrative expenses (470.5) (30.6) (389.3) (29.9) (1,485.1) (29.6) (1,013.6) (33.3) Restructuring charges 1.7 0.1 (3.6) (0.3) 3.3 0.1 (45.2) (1.5) Asset impairments, net (0.7) - (1.5) (0.1) (2.0) - (158.1) (5.2) Other operating income, net 0.8 0.1 (0.4) - 13.2 0.3 4.3 0.1 Operating income (loss) 106.9 7.0 39.7 3.1 501.0 10.0 (349.6) (11.5) Interest expense, net (4.1) (0.3) (9.1) (0.7) (12.4) (0.2) (25.6) (0.8) Other non-operating expense, net (1.1) (0.1) - - (0.9) - 0.3 - Income (loss) before income taxes 101.7 6.6 30.6 2.4 487.7 9.7 (374.9) (12.3) Income tax benefit (expense) (9.1) (0.6) (21.3) (1.6) (32.1) (0.6) 105.4 3.5 Net income (loss)$ 92.6 6.0 %$ 9.3 0.7 %$ 455.6 9.1 %$ (269.5) (8.9) % Dividends on redeemable convertible preferred shares (8.7) nm (8.4) nm (25.9) nm (24.9) nm Net income (loss) attributable to common shareholders$ 83.9 5.5 %$ 0.9 0.1 %$ 429.7 8.6 %$ (294.4) (9.7) % nm Not meaningful. Third quarter sales Signet's total sales increased 18.3% year over year to$1.54 billion in the 13 weeks endedOctober 30, 2021 . Total sales at constant exchange rates increased 17.6%. Signet's same store sales increased 18.9%, compared to an increase of 15.1% in the prior year quarter. This growth reflects continued strong business momentum driven by the strength of Signet's connected commerce capabilities and the level of early holiday shopping as well as the traction from strategic initiatives such as new product launches. Furthermore, the Company's "always-on" marketing strategy, combined with consumer inspired promotional events as well as the strength of the Company's product assortment drove a strong response from customers across merchandise categories and banners during the third quarter. eCommerce sales in the third quarter of Fiscal 2022 were$273.1 million , up$34.3 million or 14.4%, compared to$238.8 million in the prior year quarter. eCommerce sales accounted for 17.8% of third quarter sales. Brick and mortar same store sales increased 20.3% from prior year third quarter. 39 -------------------------------------------------------------------------------- Table of Contents The increase in eCommerce sales reflects the enhanced eCommerce capabilities, digital first focus and connected commerce strategies that are resonating with customers. The Company's focus on its connected commerce shopping experience, both online and in-store, helped maintain improved conversion rates and average transaction values during the third quarter of Fiscal 2022. The breakdown of the sales performance by segment is set out in the table below: Change from previous year Same Non-same Total sales Exchange Total Total store store sales, at constant exchange translation sales sales Third Quarter of Fiscal 2022 sales net rate impact as reported (in millions) North America segment 19.8 % (2.1) % 17.7 % 0.2 % 17.9 %$ 1,394.2 International segment 8.8 % (1.5) % 7.3 % 5.8 % 13.1 %$ 120.9 Other segment (1) nm nm nm nm nm $ 22.7 Signet 18.9 % (1.3) % 17.6 % 0.7 % 18.3 %$ 1,537.8 (1) Includes sales from Signet's diamond sourcing initiative. nm Not meaningful. Average merchandise transaction value ("ATV") is defined as net merchandise sales on a same store basis divided by the total number of customer transactions. As such, changes from the prior year do not recompute within the table below. Average Merchandise Transaction Value(1)(2)
Merchandise Transactions
Average Value Change from previous year Change from previous year
Third Quarter Fiscal 2022 Fiscal 2021 Fiscal 2022 Fiscal 2021 Fiscal 2022 Fiscal 2021
North America segment $ 492 $ 427 15.2 % 0.5 % 3.5 % 14.3 %
International segment (3) £ 166 £ 176 (4.0) % 11.4 % 12.8 % (42.8) %
(1) Net merchandise sales within the North America segment include all
merchandise product sales, net of discounts and returns. In addition, excluded
from net merchandise sales are sales tax in the US, repair, extended service
plan, insurance, employee and other miscellaneous sales. As a result, the sum of
the changes will not agree to change in same store sales.
(2) Net merchandise sales within the International segment include all
merchandise product sales, including value added tax ("VAT"), net of discounts
and returns. In addition, excluded from net merchandise sales are repairs,
warranty, insurance, employee and other miscellaneous sales. As a result, the
sum of the changes will not agree to change in same store sales.
(3) Amounts for the International segment are denominated in British pounds.
North America sales
The North America segment's total sales were $1.39 billion compared to $1.18
billion in the prior year, or an increase of 17.9%. Same store sales increased
19.8% compared to an increase of 15.8% in the prior year. North America's ATV
and number of transactions increased 15.2% and 3.5%, respectively. All US
banners achieved strong third quarter sales, demonstrating that the Company's
banner value propositions, product newness, always-on marketing and connected
commerce experiences are resonating with customers.
eCommerce sales increased 14.9%, while brick and mortar same store sales
increased 21.5%.
International sales
The International segment's total sales increased 13.1% to $120.9 million
compared to $106.9 million in the prior year and increased 7.3% at constant
exchange rates. Same store sales increased 8.8% compared to an increase of 7.8%
in the prior year. In the International segment, the ATV decreased 4.0% year
over year, while the number of transactions increased 12.8%. Even though, the
ATV decreased slightly, the number of transactions increased as it reflects the
increase in foot traffic as all the UK stores reopened in April 2021 .
Year to date sales
Signet's total sales increased 64.9% to $5.01 billion compared to $3.04 billion
in the prior year. Total sales at constant exchange rates increased 63.6%.
Signet's same store sales increased 66.3%, compared to a decrease of 20.4% in
the prior year. This growth reflects a combination of traction from strategic
initiatives, as described above, as well as the reduction in government stimulus
and customer shift to spending on entertainment and travel are having less
impact to the current year results than previously anticipated by the Company.
eCommerce sales year to date were $955.6 million , up $282 million or 41.9%,
compared to $673.6 million in the prior year. eCommerce sales accounted for
19.1% of year to date sales, down from 22.2% of total sales in the prior year.
Brick and mortar same store sales increased 74.1% from the prior period.
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The increase in eCommerce sales reflects the accelerated enhancement of
eCommerce capabilities and a digital first focus, related to the Company's
connected commerce strategies that began in Fiscal 2021 and is resonating with
customers. The Company's focus on its connected commerce shopping experience,
both online and in-store, helped maintained improved conversion rates and
average transaction values throughout Fiscal 2022 year to date.
The breakdown of the sales performance is set out in the table below:
Change from previous year
Same Non-same Total sales Exchange Total Total
store store sales, at constant exchange translation sales sales
Year to date Fiscal 2022 sales net rate impact as reported (in millions)
North America segment 69.9 % (3.1) % 66.8 % 0.3 % 67.1 % $ 4,657.9
International segment 26.9 % (3.9) % 23.0 % 9.7 % 32.7 % $ 309.0
Other segment (1) nm nm nm nm nm $ 47.8
Signet 66.3 % (2.7) % 63.6 % 1.3 % 64.9 % $ 5,014.7 (1) Includes sales from Signet's diamond sourcing initiative. nm Not meaningful. As described above, changes from the prior year do not recompute within the table below.
Average Merchandise Transaction Value(1)(2) Merchandise Transactions
Average Value Change from previous year Change from previous year
Year to date Fiscal 2022 Fiscal 2022 Fiscal 2021 Fiscal 2022 Fiscal 2021 Fiscal 2022 Fiscal 2021
North America segment $ 449 $ 390 11.7 % (1.3) % 49.6 % (18.9) %
International segment (3) £ 165 £ 162 (2.4) % 6.6 % 25.9 % (41.9) %
(1) Net merchandise sales within the North America segment include all
merchandise product sales, net of discounts and returns. In addition, excluded
from net merchandise sales are sales tax in the US, repair, extended service
plan, insurance, employee and other miscellaneous sales. As a result, the sum of
the changes will not agree to change in same store sales.
(2) Net merchandise sales within the International segment include all
merchandise product sales, including VAT, net of discounts and returns. In
addition, excluded from net merchandise sales are repairs, warranty, insurance,
employee and other miscellaneous sales. As a result, the sum of the changes will
not agree to change in same store sales.
(3) Amounts for the International segment are denominated in British pounds.
North America sales
The North America segment's total sales were $4.66 billion compared to $2.8
billion in the prior year, up 67.1%. Same store sales increased 69.9% compared
to a decrease of 20.2% in the prior year. North America's ATV increased 11.7%,
while the number of transactions increased 49.6%. All US banners achieved strong
sales in the 39 weeks ended October 30, 2021 , demonstrating that the Company
banner value propositions, product newness, always-on marketing and connected
commerce experiences are resonating with customers. The increase year over year
also reflects the impact from the temporary closures of all North America stores
beginning March 23, 2020 .
eCommerce sales increased 41.9%, while brick and mortar same store sales
increased 74.1%.
International sales
The International segment's total sales increased 32.7% to $309.0 million
compared to $232.8 million in the prior year and increased 23.0% at constant
exchange rates. Same store sales increased 26.9% compared to a decrease of 23.1%
in the prior year. The ATV decreased 2.4% over prior year, while the number of
transactions increased 25.9%. Even though, the ATV decreased slightly, the
number of transactions increased as it reflects the reopening of all UK stores
in April 2021 . In the prior year, all UK stores temporarily closed on March 24,
2020 and began reopening in the second quarter of Fiscal 2022.
Gross margin
In the third quarter of Fiscal 2022, gross margin was $575.6 million or 37.4% of
sales compared to $434.5 million or 33.4% of sales in the prior year comparable
period. In the 39 weeks ended October 30, 2021 , gross margin was $2.0 billion or
39.3% of sales compared to $863.0 million or 28.4% of sales in the prior year
comparable period. The increase in gross margin rate for both the 13 and 39
weeks ended October 30, 2021 , compared to prior year, was primarily driven by a
strong business momentum boosting sales as well as providing leverage on fixed
costs, such as occupancy, further enhanced by merchandise and inventory
strategies. Overall margins also benefited from merchandise margin rate
expansion through reduced clearance and favorable merchandise and services mix.
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Selling, general and administrative expenses ("SG&A")
In the third quarter of Fiscal 2022, SG&A was $470.5 million or 30.6% of sales
compared to $389.3 million or 29.9% of sales in prior year quarter. The increase
in SG&A for the 13 weeks ended October 30, 2021 , compared to the prior year
quarter, was primarily due to advertising, payroll and investments in
digital/IT. This was partially offset by the benefits of structural cost savings
from the Company's transformation activities, such as more efficient operating
hours.
In the 39 weeks ended October 30, 2021 , SG&A was $1.5 billion or 29.6% of sales
compared to $1,013.6 million or 33.3% of sales in the prior year comparable
period. The increase in SG&A for the 39 weeks ended October 30, 2021 , compared
to the prior year, was primarily due to advertising, payroll and investments in
digital/IT, as well as increased variable costs such as store staffing costs and
private label credit costs, which were higher as a result of the significant
sales volume increase from the prior year as noted above. This was partially
offset by the benefits of structural cost savings from the Company's
transformation activities, such as more efficient operating hours, contributing
to the improvement in the current full year SG&A as a percentage of sales.
Restructuring charges
During the first quarter of Fiscal 2019, Signet launched a three-year
comprehensive transformation plan, called "Signet Path to Brilliance" (the
"Plan"), to, among other objectives, reposition the Company to be a share
gaining, OmniChannel jewelry category leader. The Plan was substantially
completed as of the end of Fiscal 2021. Credits to restructuring expense of $1.7
million and $3.3 million were recognized in the 13 and 39 weeks ended
October 30, 2021 , respectively, and related to the adjustment of previously
recognized Plan liabilities. Restructuring expenses of $3.6 million and $45.2
million were recognized in the 13 and 39 weeks ended October 31, 2020 ,
respectively. Charges primarily related to store closures, severance costs, and
professional fees for legal and consulting services related to the Plan. See
Note 5 for additional information.
Asset impairments, net
The Company recorded a pre-tax asset impairment charges of $0.7 million and
$1.5 million during the 13 weeks ended October 30, 2021 and October 31, 2020 ,
respectively. All amounts related to long-lived asset impairments for certain
stores (including the gain on termination of leases).
Asset impairment charges of $2.0 million and $158.1 million were recognized in
the 39 weeks ended October 30, 2021 and October 31, 2020 , respectively. For the
39 weeks ended October 30, 2021 , all amounts relate to long-lived asset
impairments for certain stores (including the gain on termination of leases).
For the 39 weeks ended October 31, 2020 , the Company recorded charges related to
the impairment of goodwill, intangible assets and long-lived assets of $10.7
million , $83.3 million and $64.1 million , respectively.
See Notes 14 and 16 for additional information on the asset impairments.
Other operating income, net
For the 13 and 39 weeks ended October 30, 2021 , other operating income, net, was
$0.8 million and $13.2 million , respectively, primarily driven by interest
income on the Company's non-prime credit card portfolio and the receipt of UK
government subsidies granted for restrictions imposed on non-essential
businesses. For the 39 weeks ended October 31, 2020 , other operating income, net
was $4.3 million primarily driven by gains recognized as a result of the Company
liquidating derivative financial instruments primarily related to forecasted
commodity purchases that were deemed no longer effective in light of the
economic impacts of COVID-19. These gains were offset by a charge related to the
proposed settlement of previously disclosed shareholder litigation matters. See
Note 17 and Note 22 for additional information on these matters.
Operating income (loss)
For the 13 weeks ended October 30, 2021 , operating income was $106.9 million or
7.0% of sales, compared to $39.7 million or 3.1% of sales in the prior year
third quarter. This increase reflects continued strong business momentum driven
by the strength of Signet's connected commerce capabilities and the level of
early holiday shopping, as well as the traction from strategic initiatives such
as new product launches. Furthermore, the Company's "always-on" marketing
strategy, combined with consumer inspired promotional events and the strength of
the Company's product assortment, drove a strong response from customers across
merchandise categories and banners during the third quarter. This increase was
partially offset by the previously noted higher advertising, payroll and
investments in digital/IT.
During the 39 weeks ended October 30, 2021 , operating income (loss) was $501.0
million or 10.0% of sales compared to $(349.6) million or (11.5)% of sales in
the prior year comparable period. This increase reflects a significant sales
volume increase from the prior year as described above, as well as the favorable
impact of structural cost savings. This favorability was partially offset by
higher advertising, payroll and investments in digital/IT, as well as higher
variable costs such as store staffing costs and private label credit
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costs on the higher volume. In addition, included in the operating loss for the
39 weeks ended October 31, 2020 , was $158.1 million and $45.2 million of asset
impairment charges and restructuring charges, respectively, as previously noted.
Signet's operating income (loss) by segment for the third quarter is as follows:
Fiscal 2022 Fiscal 2021
% of segment % of segment
(in millions) $ sales $ sales
North America segment (1) $ 123.8 8.9 % $ 52.9 4.5 %
International segment (2) 0.2 0.2 % 1.6 1.5 %
Other segment (3) (0.4) nm 1.3 nm
Corporate and unallocated expenses (4) (16.7) nm (16.1) nm
Operating income (loss) $ 106.9 7.0 % $ 39.7 3.1 %
Signet's operating income (loss) by segment for the year to date period is as follows:
Fiscal 2022 Fiscal 2021
% of segment % of segment
(in millions) $ sales $ sales
North America segment (1) $ 573.1 12.3 % $ (238.3) (8.6) %
International segment (2) (4.0) (1.3) % (52.6) (22.6) %
Other segment (3) (1.4) nm 0.8 nm
Corporate and unallocated expenses (4) (66.7) nm (59.5) nm
Operating income (loss) $ 501.0 10.0 % $ (349.6) (11.5) %
(1) Operating income (loss) during the 13 and 39 weeks ended October 30, 2021
includes $2.6 million of acquisition-related expenses in connection with the
Diamonds Direct acquisition; and $0.7 million and $2.0 million , respectively, of
net asset impairments. Operating income (loss) during the 39 weeks ended
October 30, 2021 includes: $1.1 million of transaction-related expenses in
connection with the Rocksbox acquisition; $1.4 million of gains associated with
the sale of customer in-house finance receivables; and $(1.0) million to
restructuring expense, primarily related to adjustments to previously recognized
restructuring liabilities. See Note 1, Note 5, Note 11 and Note 14 for
additional information.
Operating income (loss) during the 13 and 39 weeks ended October 31, 2020
includes: a $2.2 million and $1.6 million charge, respectively, related to
inventory charges recorded in conjunction with the Company's restructuring
activities; charges of $0.7 million and $37.3 million , respectively, primarily
related to severance, professional fees and store closure costs recorded in
conjunction with the Company's restructuring activities; and asset impairment
charges of $1.5 million and $136.9 million , respectively. See Note 5, Note 14
and Note 16 for additional information.
(2) Operating income (loss) during the 13 and 39 weeks ended October 31, 2020
includes charges of $3.0 million and $7.6 million , respectively, related to
severance and store closure costs recorded in conjunction with the Company's
restructuring activities, and asset impairment charges of $21.2 million during
the 39 weeks ended October 31, 2020 . See Note 5, Note 14 and Note 16 for
additional information.
(3) Operating income (loss) during the 13 and 39 weeks ended October 31, 2020
includes a $0.2 million benefit recognized due to a change in inventory reserves
previously recognized as part of the Company's restructuring activities. See
Note 5 for additional information.
(4) Operating income (loss) during the 13 and 39 weeks ended October 30, 2021
includes $(1.7) million and $(2.3) million , respectively, to restructuring
expense, primarily related to adjustments to previously recognized restructuring
liabilities. See Note 5 for additional information.
Operating income (loss) during the 39 weeks ended October 31, 2020 includes a
net charge of $7.5 million related to the settlement of previously disclosed
shareholder litigation matters, inclusive of expected insurance proceeds.
Operating income (loss) during the 13 and 39 weeks ended October 31, 2020
includes a credit of $0.1 million and net charge of $0.3 million , respectively,
primarily related to severance and professional services recorded in conjunction
with the Company's restructuring activities. See Note 5 and Note 21 for
additional information.
nm Not meaningful.
Interest expense, net
For the 13 and 39 weeks ended October 30, 2021 , net interest expense was $4.1
million and $12.4 million , respectively, compared to $9.1 million and $25.6
million in the 13 and 39 weeks ended October 31, 2020 , respectively. The
decrease in Fiscal 2022 is primarily due to lower average borrowings compared to
prior year.
Income taxes
In the third quarter of Fiscal 2022, income tax expense was $9.1 million , an
effective tax rate ("ETR") of 8.9%, compared to the income tax expense of $21.3
million , an ETR of 69.6%, in the prior year comparable period. The ETR for the
13 weeks ended October 30, 2021 was lower than the US federal income tax rate
primarily due to additional benefits of the CARES Act of $12.4 million related
to carry back of the net operating losses incurred in Fiscal 2021, which was
finalized and recognized as a discrete item during the third quarter of Fiscal
2022. The ETR for the 13 weeks ended October 31, 2020 was unfavorably impacted
by the reduction in the anticipated benefit of the CARES Act for rate benefit of
the net operating losses incurred in Fiscal 2021 projected to be carried
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Table of Contents back to tax years with higher enacted tax rates and increase in valuation allowance recorded against certain US and state deferred tax assets.
In the 39 weeks endedOctober 30, 2021 , income tax expense was$32.1 million , an ETR of 6.6%, compared to an income tax benefit of$105.4 million , an ETR of 28.1%, in the prior year comparable period. The ETR for the 39 weeks endedOctober 30, 2021 was lower than the US federal income tax rate primarily due to the favorable impact of the reversal of the valuation allowance recorded against certain state deferred tax assets. In the first quarter of Fiscal 2021, the Company recorded a valuation allowance on certain state deferred tax assets based primarily on its three-year cumulative loss position. During the second quarter of Fiscal 2022, the Company evaluated evidence to consider the reversal of the valuation allowance on its state net deferred tax assets and determined that there was sufficient positive evidence to conclude that it is more likely than not its state deferred tax assets are realizable. In determining the likelihood of future realization of the state deferred tax assets, the Company considered both positive and negative evidence. As a result, the Company believed that the weight of the positive evidence, including the cumulative income position in the three most recent years as ofJuly 31, 2021 and forecasts for a sustained level of future taxable income, was sufficient to overcome the weight of the negative evidence, and thus recorded a$49.8 million tax benefit to release the valuation allowance against the Company's state deferred tax assets in the second quarter of Fiscal 2022. The year to date ETR in the prior year comparable period was primarily impacted by the anticipated tax benefit of$97.4 million relating to the CARES Act offset by the unfavorable impact of the valuation allowance recorded against certain US and state deferred tax assets of$66.9 million and the impairment of goodwill which was not deductible for tax purposes. Refer to Note 10 for additional information. NON-GAAP MEASURES Signet provides certain non-GAAP information in reporting its financial results to give investors additional data to evaluate its operations. The Company believes that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating historical trends and current period performance. For these reasons, internal management reporting also includes non-GAAP measures. Items may be excluded from GAAP financial measures when the Company believes this provides greater clarity to management and investors. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for the GAAP financial measures presented in the Company's consolidated financial statements and other publicly filed reports. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies. 1. Net cash (debt) Net cash (debt) is a non-GAAP measure defined as the total of cash and cash equivalents less loans, overdrafts and long-term debt. Management considers this metric to be helpful in understanding the total indebtedness of the Company after consideration of liquidity available from cash balances on-hand. (in millions) October 30, 2021 January 30, 2021 October 31, 2020 Cash and cash equivalents $ 1,516.9 $ 1,172.5 $ 1,332.6 Less: Loans and overdrafts (0.3) - (3.6) Less: Long-term debt (147.0) (146.7) (1,036.2) Net cash (debt) $ 1,369.6 $ 1,025.8 $ 292.8 44
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2. Free cash flow and adjusted free cash flow
Free cash flow is a non-GAAP measure defined as the net cash provided by
operating activities less purchases of property, plant and equipment. Management
considers this helpful in understanding how the business is generating cash from
its operating and investing activities that can be used to meet the financing
needs of the business. Adjusted free cash flow, a non-GAAP measure, excludes the
proceeds from the sale of in-house finance receivables. Free cash flow and
adjusted free cash flow are indicators frequently used by management in
evaluating its overall liquidity needs and determining appropriate capital
allocation strategies. Free cash flow and adjusted free cash flow do not
represent the residual cash flow available for discretionary purposes.
39 weeks ended
October 30, October 31,
(in millions) 2021 2020
Net cash provided by operating activities $ 483.9 $ 606.7
Purchase of property, plant and equipment (50.5) (41.1)
Free cash flow 433.4 565.6
Proceeds from sale of in-house finance receivables (81.3) -
Adjusted free cash flow $ 352.1 $ 565.6
3. Earnings before interest, income taxes, depreciation and amortization
("EBITDA") and adjusted EBITDA
EBITDA is a non-GAAP measure defined as earnings before interest and income
taxes, depreciation and amortization. EBITDA is an important indicator of
operating performance as it excludes the effects of financing and investing
activities by eliminating the effects of interest, depreciation and amortization
costs. Adjusted EBITDA, as revised by the Company in Fiscal 2021, is a non-GAAP
measure, defined as earnings before interest and income taxes, depreciation and
amortization, share-based compensation expense, non-operating income (expense)
and certain non-GAAP accounting adjustments. Reviewed in conjunction with net
income (loss) and operating income (loss), management believes that EBITDA and
adjusted EBITDA help in enhancing investors' ability to evaluate and analyze
trends regarding Signet's business and performance based on its current
operations. The revisions made in Fiscal 2021 and the Company's overall
methodology are further described in Item 7 of the Signet's Fiscal 2021 Annual
Report on Form 10-K. All periods below have been presented consistently with the
revised calculation of adjusted EBITDA, as defined above.
13 weeks ended 39 weeks ended
October 30, October 31, October 30, October 31,
(in millions) 2021 2020 2021 2020
Net income (loss) $ 92.6 $ 9.3 $ 455.6 $ (269.5)
Income tax expense (benefit) 9.1 21.3 32.1 (105.4)
Interest expense, net 4.1 9.1 12.4 25.6
Depreciation and amortization 39.2 45.5 122.9 130.3
Amortization of unfavorable contracts (0.5) (1.4) (2.9) (4.1)
EBITDA $ 144.5 $ 83.8 $ 620.1 $ (223.1)
Other non-operating expense, net 1.1 - 0.9 (0.3)
Share-based compensation 10.9 3.3 36.4 9.6
Other accounting adjustments
Restructuring charges - cost of sales - 2.0 - 1.4
Restructuring charges (1.7) 3.6 (3.3) 45.2
Asset impairments, net (1) - 1.5 (0.3) 158.1
Rocksbox transaction-related costs - - 1.1 -
Gain on sale of in-house finance receivables - - (1.4) -
Shareholder settlement - - - 7.5
Adjusted EBITDA $ 154.8 $ 94.2 $ 653.5 $ (1.6)
1) Includes ROU asset impairment gains, net recorded due to various impacts of
COVID-19 to the Company's business and related gains on terminations or
modifications of leases, resulting from previously recorded impairments of the
right of use assets in Fiscal 2021.
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4. Non-GAAP operating income (loss)
Non-GAAP operating income (loss) is a non-GAAP measure defined as operating
income (loss) excluding the impact of significant and unusual items which
management believes are not necessarily reflective of operational performance
during a period. Management finds the information useful when analyzing
financial results in order to appropriately evaluate the performance of the
business without the impact of significant and unusual items. In particular,
management believes the consideration of measures that exclude such expenses can
assist in the comparison of operational performance in different periods which
may or may not include such expenses.
13 weeks ended 39 weeks ended
October 30, October 31, October 30, October 31,
(in millions) 2021 2020 2021 2020
Operating income (loss) $ 106.9 $ 39.7 $ 501.0 $ (349.6)
Gain on sale of in-house finance receivables - - (1.4) -
Restructuring charges - cost of sales - 2.0 - 1.4
Restructuring charges (1.7) 3.6 (3.3) 45.2
Asset impairments, net (1) - 1.5 (0.3) 158.1
Rocksbox transaction-related costs - - 1.1 -
Shareholder settlement - - - 7.5
Non-GAAP operating income (loss) $ 105.2 (1) Includes ROU asset impairment gains, net recorded due to various impacts of COVID-19 to the Company's business and related gains on terminations or modifications of leases, resulting from previously recorded impairments of the right of use assets in Fiscal 2021. LIQUIDITY AND CAPITAL RESOURCES Overview The Company's primary sources of liquidity are cash on hand, cash provided by operations and availability under its senior unsecured asset-based revolving credit facility (the "ABL Revolving Facility"). As ofOctober 30, 2021 , the Company had approximately$1.5 billion of cash and cash equivalents and$147.9 million of outstanding debt, with$1.2 billion of availability under its ABL Revolving Facility. The tenets of Signet's capital strategy are: 1) investing in its business to drive growth in line with the Company's overall business strategy; 2) ensuring adequate liquidity through a strong cash position and financial flexibility under its debt arrangements; and 3) returning excess cash to shareholders. Over time, Signet's strategy is to reduce its adjusted leverage ratio (a non-GAAP measure as defined in Item 7 of the Signet's Fiscal 2021 Annual Report on Form 10-K) to below 3.0x. During the past three years under its Path-to-Brilliance transformation plan, the Company delivered substantially against its strategic priorities to establish the Company as the OmniChannel jewelry category leader and position its business for sustainable long-term growth. The investments and new capabilities built during the past three years laid the foundation for stronger than expected results and momentum beginning in the second half of Fiscal 2021, including prioritizing digital investments in both technology and talent, enhancing its new and modernized eCommerce platform and optimizing a connected commerce shopping journey for its customers. The Company's cash discipline has also led to more efficient working capital, through both the extension of payment days with the Company's vendor base, as well through continued inventory reduction efforts. In addition, structural cost reductions during the past three years of the Company's transformation strategy generated annual structural costs savings of approximately$300 million . As the Company transitions to the next phase of its strategy, Inspiring Brilliance, it will continue to focus on working capital efficiency, optimizing its real estate footprint, and prioritizing transformational productivity to drive future cost savings opportunities, all of which are expected to be used to fuel strategic investments, grow the business, and enhance liquidity. During Fiscal 2022, the Company made significant progress in line with its Inspiring Brilliance growth strategy through two key financial milestones. First, the Company renegotiated its$1.5 billion ABL Facility, as further described in Note 19, to extend the maturity until 2026 and allow overall greater financial flexibility to grow the business and provide an additional option to address the 2024 maturities for its 4.70% senior unsecured notes ("Senior Notes") and Preferred Shares, if necessary. Second, as described in Note 11, the Company entered into amended and restated receivable purchase agreements with CarVal andCastlelake regarding the purchase of add-on receivables on such Investors' existing accounts, as well as the purchase of the Company-owned credit card receivables portfolio for accounts that had been originated through Fiscal 2021. These agreements provide Signet with improved terms for the next two years, as well as fully remove consumer credit risk from the balance sheet. During the second 46 -------------------------------------------------------------------------------- Table of Contents quarter of Fiscal 2022, Signet received cash proceeds of$57.8 million for the sale of these customer in-house finance receivables, as well as received$23.5 million from the Investors for the payment obligation of the remaining 5% of the receivables previously purchased inJune 2018 . During Fiscal 2022 the Company also remained committed to its goal to return excess cash to shareholders. The Company has declared the first, second and third quarter Fiscal 2022 preferred share dividend payable in cash, and beginning in the second quarter of Fiscal 2022, elected to reinstate the dividend program on its common shares. In addition, onAugust 23, 2021 , the Board authorized a reinstatement of repurchases under the Company's 2017 Share Repurchase Program (the "2017 Program"), as well as an increase in the remaining amount of shares authorized for repurchase under the 2017 Program from$165.6 million to$225 million . The Company repurchased$41.1 million of shares under the 2017 Program during the third quarter of Fiscal 2022. See Note 7 for more details. As described above, the Company acquired Diamonds Direct onNovember 17, 2021 for cash consideration of$504.6 million , net of cash acquired, and subject to customary post-closing adjustments per the Transaction Agreement. The acquisition of Diamonds Direct accelerates the Company's growth through expansion of the Company's market in accessible luxury and bridal, in line with its "Inspiring Brilliance" strategy. The Company believes that cash on hand, cash flows from operations and available borrowings under the ABL Revolving Facility will be sufficient to meet its ongoing business requirements for at least the 12 months following the date of this report, including funding working capital needs, projected investments in the business (including capital expenditures), debt service, and returns to shareholders through either dividends or the share repurchases. Primary sources and uses of operating cash flows Operating activities provide the primary source of cash for the Company and are influenced by a number of factors, the most significant of which are operating income and changes in working capital items, such as: •changes in the level of inventory as a result of sales and other strategic initiatives; •changes and timing of accounts payable and accrued expenses, including variable compensation; and •changes in deferred revenue, reflective of the revenue from performance of extended service plans. Signet derives most of its operating cash flows through the sale of merchandise and extended service plans. As a retail business, Signet receives cash when it makes a sale to a customer or when the payment has been processed by Signet or the relevant bank if the payment is made by third-party credit or debit card. As further discussed in Note 11, the Company has outsourced its entire credit card portfolio, and it receives cash from its outsourced financing partners (net of applicable fees) within two days of the customer sale. Offsetting these receipts, the Company's largest operating expenses are the purchase of inventory, store occupancy costs (including rent), and payroll and payroll-related benefits. Summary cash flow The following table provides a summary of Signet's cash flow activity for Fiscal 2022 and Fiscal 2021: 39 weeks ended October 30, October 31, (in millions) 2021 2020 Net cash provided by operating activities$ 483.9 $ 606.7 Net cash used in investing activities (63.0) (37.7) Net cash (used in) provided by financing activities (78.1) 395.1 Increase in cash and cash equivalents $
342.8
Cash and cash equivalents at beginning of period$ 1,172.5 $ 374.5 Increase in cash and cash equivalents 342.8 964.1 Effect of exchange rate changes on cash and cash equivalents 1.6 (6.0) Cash and cash equivalents at end of period $
1,516.9
Operating activities Net cash provided by operating activities was$483.9 million compared to net cash provided by operating activities of$606.7 million in the prior year comparable period. This decrease, as further described below, is primarily due to reduced cash inflows from working capital compared to the prior period as the Company worked to preserve cash as a result of business disruptions from the impacts of the pandemic, partially offset by higher net income in the current year period. 47 -------------------------------------------------------------------------------- Table of Contents •Net income was$455.6 million compared to net loss of$269.5 million in the prior year period, an increase of$725.1 million . •Deferred taxes was a use of$20.1 million in the current period, compared to a source of$149.1 million in the prior year period. Changes in current income taxes was a use of$67.3 million in the current period compared to a use of$99.7 million in the prior year. The year over year change was primarily the result of the net operating loss carryback filed in the first quarter of Fiscal 2021 in accordance with the provisions of the CARES Act. This carryback resulted in collection of$164 million in the third quarter of Fiscal 2021, compared to estimated income tax payments of$118 million year to date in Fiscal 2022. Refer to Note 10 for more information. •During the second quarter of Fiscal 2022, the Company sold its existing customer in-house finance receivables, as well as collected the payment obligation of the remaining 5% of the receivables previously sold inJune 2018 . This resulted in cash proceeds of$81.3 million . See Note 11 for further information. •Cash used by inventory was$112.1 million compared to a source of$151.1 million in the prior year period. Inventory increased in the current year as a result of higher sales volume and as the Company builds inventory in preparation for the holiday shopping season, including the pull forward of purchases to mitigate potential supply chain disruptions. Inventory decreased in the prior year primarily due to store closures and cash management initiatives implemented as a result of COVID-19. •Cash provided by accounts payable was$36.8 million compared to cash provided of$325.2 million in the prior year period. In the prior year period, as a result of cash management initiatives implemented as a result of the COVID-19, the Company began utilizing extended terms with its vendors and have maintained these extended terms throughout the current year. •Cash provided by other assets and other receivables was$188.2 million in the prior year period and was driven primarily by the collection of insurance proceeds related to the shareholder litigation settlement described in Note 22. Offsetting these cash proceeds was the payment of the settlement amount during the prior year period, which resulted in cash used by accrued expenses and other liabilities of$192.5 million . •Cash used for operating leases was$59.9 million in Fiscal 2022, compared to cash provided of$43.9 million in the prior year period, driven by the Company's deferral of rent payments due beginning inApril 2020 , a substantial portion of which has been repaid to date during Fiscal 2022. See Note 15 for further information. Investing activities Net cash used in investing activities for the 39 weeks endedOctober 30, 2021 was$63.0 million compared to net cash used in investing activities of$37.7 million in the prior period. Cash used in Fiscal 2022 was primarily related to the acquisition ofRocksbox Inc. for$14.6 million (net of cash acquired) and capital expenditures of$50.5 million . Capital expenditures are associated with new stores, remodels of existing stores, and strategic capital investments in digital and IT. The Company reduced planned capital expenditures in Fiscal 2021 due to uncertainty around COVID-19; however, Signet has planned Fiscal 2022 capital investments in the range of$190 million to$200 million , of which$140 million to$145 million relates to capital expenditures for technology and banner differentiation, and$50 million to$55 million relates to digital and cloud innovation. Stores opened and closed in the 39 weeks endedOctober 30, 2021 : Store count by segment January 30, 2021 Openings Closures October 30, 2021 North America segment (1) 2,481 47 (26) 2,502 International segment (1) 352 - (3) 349 Signet 2,833 47 (29) 2,851 (1) The net change in selling square footage for Fiscal 2022 year to date for theNorth America and International segments was (0.4%) and (0.7%), respectively. Financing activities Net cash used in financing activities for the 39 weeks endedOctober 30, 2021 was$78.1 million , primarily due to the repurchase of common shares of$41.1 million and preferred and common dividends paid of$25.9 million . Net cash provided by financing activities for the 39 weeks endedOctober 31, 2020 was$395.1 million , consisted primarily of net borrowings of$435.8 million partially offset by$27.1 million for dividend payments on common and preferred shares. See further information on debt movements below. 48 -------------------------------------------------------------------------------- Table of Contents Movement in cash and indebtedness Cash and cash equivalents atOctober 30, 2021 were$1.5 billion compared to$1.3 billion as ofOctober 31, 2020 . Signet has cash and cash equivalents invested in various 'AAA' rated government money market funds and at a number of large, highly rated financial institutions. The amount invested in each liquidity fund or at each financial institution takes into account the credit rating and size of the liquidity fund or financial institution and is invested for short-term durations. As further described in Note 19, onJuly 28, 2021 , the Company entered into an agreement to amend the ABL Revolving Facility. The amendment extends the maturity of the ABL Revolving Facility toJuly 28, 2026 and allows the Company to increase the size of the ABL Revolving Facility by up to$600 million . AtOctober 30, 2021 , Signet had$147.9 million of outstanding debt, consisting almost entirely of$147.6 million of Senior Notes. AtOctober 31, 2020 , Signet had$1.0 billion of outstanding debt, consisting of$147.6 million of Senior Notes,$790.0 million on the ABL Revolving Facility,$100.0 million on the FILO Term Loan Facility and$3.6 million of bank overdrafts. OnMarch 19, 2020 , as a prudent measure in response to COVID-19 to increase the Company's financial flexibility and bolster its cash position, the Company elected to access$900 million on the ABL Revolving Facility. Subsequently in Fiscal 2021, the Company fully repaid the$100 million FILO Term Loan Facility and the outstanding balance of the ABL Revolving Facility. Refer to Note 19 for further information regarding the Company's indebtedness. The Company had stand-by letters of credit outstanding of$18.8 million as ofOctober 30, 2021 that reduces borrowing capacity under the ABL Revolving Facility. Net cash was$1.4 billion as ofOctober 30, 2021 compared to net cash of$292.8 million as ofOctober 31, 2020 . Refer to the non-GAAP measures discussed above for the definition of net cash (debt) and reconciliation to its most comparable financial measure presented in accordance with GAAP. As ofOctober 30, 2021 ,January 30, 2021 andOctober 31, 2020 , the Company was in compliance with all debt covenants. SEASONALITY Signet's business is seasonal, with the fourth quarter historically accounting for approximately 35-40% of annual sales as well as accounts for a substantial portion of the annual operating profit. However, in Fiscal 2022, Signet has experienced shifts in discretionary spending and consumer behavior that may cause the fourth quarter to account for a lower percentage of annual sales and profits. The "Holiday Season" consists of results for the months of November and December, with December being the highest volume month of the year. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its accounting policies, estimates and judgments, including those related to the valuation of accounts receivables, inventories, deferred revenue, derivatives, employee benefits, income taxes, contingencies, asset impairments, leases, indefinite-lived intangible assets, depreciation and amortization of long-lived assets and accounting for business combinations. Management bases the estimates and judgments on historical experience and various other factors believed to be reasonable under the circumstances. Actual results may differ from these estimates. There have been no material changes to the critical accounting policies and estimates disclosed in Signet's Annual Report on Form 10-K for the fiscal year endedJanuary 30, 2021 filed with theSEC onMarch 19, 2021 . SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION The Company and certain of its subsidiaries, which are listed on Exhibit 22.1 to this Quarterly Report on Form 10-Q, have guaranteed obligations under the Senior Notes. The Senior Notes were issued bySignet UK Finance plc (the "Issuer"). The Senior Notes rank senior to the Preferred Shares (as defined in Note 6) and Common Shares. The Senior Notes are effectively subordinated to our existing and future secured indebtedness to the extent of the assets securing that indebtedness. The Senior Notes are fully and unconditionally guaranteed on a joint and several basis by the Company, as the parent entity ( the "Parent") of the Issuer, and certain of its subsidiary guarantors (each, a "Guarantor" and collectively, the "Guarantors"). The Senior Notes are structurally subordinated to all existing and future debt and other liabilities, including trade payables, of our subsidiaries that do not guarantee the Senior Notes (the "Non-Guarantors"). The Non-Guarantors will have no obligation, contingent or otherwise, to pay amounts due under the Senior Notes or to make funds available to pay those amounts. Certain Non-Guarantors may be limited in their ability to remit funds to us by means of dividends, advances or loans due to required foreign government and/or currency exchange board approvals or limitations in credit agreements or other debt instruments of those subsidiaries. 49 -------------------------------------------------------------------------------- Table of Contents The Guarantors jointly and severally irrevocably and unconditionally guarantee on a senior unsecured basis the performance and full and punctual payment when due of all obligations of Issuer, as defined in the Indenture, in accordance with the Senior Notes and the related Indentures, as supplemented, whether for payment of principal of or interest on the Senior Notes when due and any and all costs and expenses incurred by the trustee or any holder of the Senior Notes in enforcing any rights under the guarantees (collectively, the "Guarantees"). The Guarantees and Guarantors are subject to release in limited circumstances only upon the occurrence of certain customary conditions. Although the Guarantees provide the holders of Senior Notes with a direct unsecured claim against the assets of the Guarantors, under US federal bankruptcy law and comparable provisions of US state fraudulent transfer laws, in certain circumstances a court could cancel a Guarantee and order the return of any payments made thereunder to the Guarantor or to a fund for the benefit of its creditors. A court might take these actions if it found, among other things, that when the Guarantors incurred the debt evidenced by their Guarantee (i) they received less than reasonably equivalent value or fair consideration for the incurrence of the debt and (ii) any one of the following conditions was satisfied: •the Guarantor entity was insolvent or rendered insolvent by reason of the incurrence; •the Guarantor entity was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital; or •the Guarantor entity intended to incur or believed (or reasonably should have believed) that it would incur, debts beyond its ability to pay as those debts matured. In applying the above factors, a court would likely find that a Guarantor did not receive fair consideration or reasonably equivalent value for its Guarantee, except to the extent that it benefited directly or indirectly from the issuance of the Senior Notes. The determination of whether a Guarantor was or was not rendered insolvent when it entered into its Guarantee will vary depending on the law of the jurisdiction being applied. Generally, an entity would be considered insolvent if the sum of its debts (including contingent or unliquidated debts) is greater than all of its assets at a fair valuation or if the present fair salable value of its assets is less than the amount that will be required to pay its probable liability on its existing debts, including contingent or unliquidated debts, as they mature. If a court canceled a Guarantee, the holders of the Senior Notes would no longer have a claim against that Guarantor or its assets. Each Guarantee is limited, by its terms, to an amount not to exceed the maximum amount that can be guaranteed by the applicable Guarantor without rendering the Guarantee, as it relates to that Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. Each Guarantor is a consolidated subsidiary of Parent at the date of each balance sheet presented. The following tables present summarized financial information for Parent, Issuer, and the Guarantors on a combined basis after elimination of (i) intercompany transactions and balances among Parent, Issuer, and the Guarantors and (ii) equity in earnings from and investments in any Non-Guarantor. Summarized Balance Sheets (in millions) October 30, 2021 January 30, 2021 Total current assets$ 4,068.0 $ 3,799.6 Total non-current assets 2,253.8 2,475.9 Total current liabilities 2,276.2 2,357.1 Total non-current liabilities 3,453.6 3,578.7 Redeemable preferred stock 651.7 642.3 Total due from Non-Guarantors (1) 381.2 395.9 Total due to Non-Guarantors (1) 1,646.8 1,695.0
(1) Amounts included in asset and liability subtotals above.
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