Sign in
SJ

SIGNET JEWELERS LTD (SIG)·Q1 2021 Earnings Summary

Executive Summary

  • Q1 FY2021 revenue was $852.1M, down 40.5% YoY, with GAAP EPS of $(3.83) and non-GAAP EPS of $(1.59); gross margin fell to 24.0% reflecting deleverage from COVID-driven store closures .
  • E-commerce remained a bright spot: $164.7M (+6.7% reported; +18.2% ex James Allen shutdown), with April e-commerce up 55% ex James Allen as virtual selling scaled quickly; reopened stores reached four-wall breakeven rapidly .
  • Liquidity was fortified to $1.0666B in cash (long-term debt $1.336B after a $900M revolver draw); common dividend suspended and fiscal guidance withheld amid uncertainty .
  • Management accelerated footprint optimization (at least 150 NA stores and 80 UK stores not reopening plus ≥150 additional closures in FY2021) and identified >$100M structural cost savings for FY2021 to persist beyond this year .

What Went Well and What Went Wrong

What Went Well

  • Digital-first omni-channel pivot: “We… accelerated our transformation into a digital-first, omni-channel retailer,” with >100,000 virtual appointments and April e-commerce up 55% ex James Allen; “virtual consultations… result in multifold higher conversion” .
  • Liquidity and cost control: Cash reached $1.1B; free cash flow was $(15.3)M despite broad closures; >$100M additional structural cost savings identified, with emphasis on zero-based budgeting and indirect spend .
  • Store reopen momentum: ~1,100 stores reopened by early June; “revenue able to cover four wall operating costs rather quickly,” supporting a plan to have ≥75% of the fleet open by end of June .

What Went Wrong

  • Severe sales disruption from COVID-19: Same store sales (SSS) down 38.9%, brick & mortar SSS down 44.6%; North America SSS -39.0% and transactions -34.5% while ATV fell 6.5% .
  • Margin deleverage and impairments: Gross margin rate declined 1,090 bps YoY to 24.0%; GAAP operating loss $(291.1)M included $136.3M preliminary impairments; non-GAAP operating loss $(142.5)M .
  • Credit penetration and international headwinds: Payment plan participation fell to 43.4% (prior year 50.0%) given lower online leasing; International SSS -37.5% and transactions -41.2% .

Financial Results

Sequential comparison

MetricQ3 2020Q4 2020Q1 2021
Revenue ($USD Millions)$1,187.7 $2,153.3 $852.1
GAAP Diluted EPS ($)$(0.84) $3.14 $(3.83)
Non-GAAP Diluted EPS ($)$(0.76) $3.67 $(1.59)
Gross Margin (%)31.0% 41.7% 24.0%
SG&A (% of Sales)33.5% 29.4% 42.1%
GAAP Operating Income (Loss) ($M)$(39.9) $223.2 $(291.1)
GAAP Operating Margin (%)(3.4)% 10.4% (34.2)%
Non-GAAP Operating Income (Loss) ($M)$(29.3) $270.3 $(142.5)
Non-GAAP Operating Margin (%)(2.5)% 12.6% (16.7)%

Year-over-year Q1 comparison

MetricQ1 2020Q1 2021
Revenue ($USD Millions)$1,431.7 $852.1
GAAP Diluted EPS ($)$(0.35) $(3.83)
Non-GAAP Diluted EPS ($)$0.08 $(1.59)
Same Store Sales (%)(1.3)% (38.9)%
Gross Margin ($USD Millions)$499.4 $204.2
GAAP Operating Income (Loss) ($USD Millions)$(2.6) $(291.1)
Non-GAAP Operating Income (Loss) ($USD Millions)$24.2 $(142.5)

Segment breakdown – Q1 FY2021

SegmentSales ($USD Millions)SSS Change (%)eCommerce Growth (%)ATV Change (%)Transactions Change (%)
North America$781.1 (39.0)% +4.3% (+15.8% ex James Allen) (6.5)% (34.5)%
International$64.9 (37.5)% +37.2% +2.7% (41.2)%
Other$6.1 nm nm nm nm

KPIs – Q1 FY2021

KPIValue
Total Same Store Sales change(38.9)%
eCommerce Revenue$164.7M
eCommerce Growth+6.7% (+18.2% ex James Allen)
April eCommerce Growth (ex James Allen)+55%
Payment Plan Participation (NA)43.4% vs 50.0% prior year
Cash and Cash Equivalents$1,066.6M
Long-term Debt$1,336.0M
Inventory$2,392.2M
GAAP Effective Tax Rate36.1%
Stores Open (early June)>1,100

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Fiscal 2021 Financial Guidance (Revenue/EPS/Margins)FY2021Not providing (Q4 FY2020) Not providing Maintained
Common DividendFY2021Suspended (Q4 FY2020) Suspended Maintained
Preferred DividendAug FY2021May paid in kind (Q4 FY2020) August paid in kind Maintained
Capital ExpendituresFY2021n/a~50% reduction vs last year Lowered
Store FootprintFY2021~150 closures planned in FY2020 ≥150 NA not reopening, 80 UK not reopening; plus ≥150 additional closures FY2021 Raised closures

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 FY2020; Q-1: Q4 FY2020)Current Period (Q1 FY2021)Trend
Omni-channel & DigitalHybris platform rollout; eComm penetration up; targeted digital marketing 100k virtual appointments; April eComm +55% ex James Allen; higher virtual conversion Accelerating
Real Estate FootprintClose ~150 stores in FY2020; reduce exposure to lower-grade malls 1,100+ stores reopened; ≥150 NA and 80 UK not reopening; ≥150 more closures Accelerated closures
Liquidity & CashRefinancing to ABR; extend maturities; lower interest expense Cash $1.1B; revolver draw; FCF $(15)M; preserve cash Strengthened liquidity
Credit PortfolioNon-prime outsourcing neutral impact CarVal/Castlelake buy add-ons; SIG retains new accounts (~2.5% of sales); Genesis servicing Transitioning model
Tariffs/MacroList 4 tariffs mitigated; no pass-through; reduce China exposure to mid-teens COVID impacts dominate operations and demand Macro headwinds persist
Product PerformanceFashion/gold strength; flagship brands driving comps Bridal resilient; virtual wedding interest; curated assortment Resilient online demand
Regulatory/LegalShareholder litigation settlement ($240M, primarily insured) No new developments Neutral/resolved
Supply Chain & FulfillmentFlexible fulfillment: unlock store inventory; BOPIS planned James Allen DC shutdown affected eComm; alternate sourcing added Improving execution

Management Commentary

  • “We…accelerated our transformation into a digital-first, omni-channel retailer” and “rapidly adapt[ed]…with new technology, virtual consultation and selling solutions” .
  • “Since COVID-19, our store teams…held over 100,000 virtual appointments…virtual consultations are resulting in multifold higher conversion” .
  • “We currently have $1.1 billion in cash and equivalents and had negative free cash flow of only $15 million in the quarter” .
  • “We will not reopen at least 150 North America stores and 80 UK stores…[and are] committed to closing at least an additional 150 stores by the end of the fiscal year” .
  • “We…identified more than $100 million of additional structural cost savings within this fiscal year” .
  • “Revenue [of reopened stores was] able to cover four wall operating costs rather quickly” .

Q&A Highlights

  • Reopen trajectory and profitability: Management expects ≥75% of fleet open by end of June; reopened stores are four-wall breakeven quickly .
  • Footprint analysis: Closures driven by a “Greenfield analysis” to re-optimize markets for customer-first coverage rather than purely internal profitability metrics .
  • Credit structure: CarVal/Castlelake to purchase add-ons for existing accounts; SIG to retain new accounts (~2.5% of FY2021 sales) with Genesis servicing; expanding leasing online by ~September .
  • SG&A structural changes: Leaner staffing, altered store hours, and virtual selling to structurally reduce SG&A; continued landlord negotiations to reduce occupancy costs .
  • Bridal demand: Continued interest in engagements; early success in Jared virtual wedding program .

Estimates Context

  • S&P Global consensus estimates for Q1 FY2021 EPS and revenue were unavailable at time of analysis due to access limits, so estimate comparisons are not included. Values would normally be retrieved from S&P Global.

Key Takeaways for Investors

  • COVID shock created acute revenue and margin pressure, but omni-channel capabilities and virtual selling mitigated impacts and are likely durable drivers of mix and conversion .
  • Liquidity is ample ($1.1B cash) with maturities extended; aggressive cost actions and capex cuts underpin near-term flexibility and lower breakeven thresholds .
  • Accelerated footprint optimization (≥380 closures/NRs in FY2021) should improve long-term productivity and occupancy leverage, though near-term sales displacement is expected .
  • Credit portfolio transition concentrates new accounts on balance sheet with enhanced underwriting and alternative financing (leasing/Affirm), reducing risk while preserving availability .
  • International remains pressured; North America recovery depends on store reopen cadence and continued strength in digital/virtual selling .
  • With guidance suspended and dividends halted, near-term catalysts are operational execution (digital, reopen productivity, cost takeout) and visibility on demand normalization .
  • Watch for inventory newness into summer/holiday, footprint reformat tests (e.g., Jared + James Allen), and landlord outcomes to drive margin trajectory .