Signet Jewelers Ltd SIG
Q1 2012 Earnings Call Transcript

Transcript Call Date 05/26/2011

Operator: Good day, ladies and gentlemen, and welcome to the Signet Jewelers' First Quarter Results Conference Call. For your information, today's call is being recorded.

At this time, I would like to turn the conference over to Mr. Tim Jackson. Please go ahead, sir.

Tim Jackson - IR: Good morning, and welcome to the conference call. I am Tim Jackson, Investor Relations Director. With me are Mike Barnes, CEO and Ron Ristau, CFO.

The presentation deck we will be talking to today is available from the webcast section of the Company's website.

Before I hand over to Mike, I will give the Safe Harbor statement. During today’s presentation, we will in places discuss Signet's business outlook and certain forward-looking statements. Any statements that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially.

We urge you to read the risk factors, cautionary language and other disclosures in the Annual Report on Form 10-K that was filed with the SEC on March 30, 2011. We also draw your attention to this slide.

Michael W. Barnes - CEO: Thanks Tim. We’re very pleased with the great results in our first quarter, which reflects the ongoing success of our business driven by our competitive advantages. Fourth quarter total Signet same store sales were up 10.2% led by the U.S. with the 12.5% comp store sales increase and followed by the U.K., which comped up 0.2%. Operating margin was 13.4%, an increase of 310 basis points. This represents a record performance for the first quarter.

Income before taxes were $117.8 million for a $43.7 million increase or 59%. Diluted earnings per share were $0.87, up $0.29 or a 50% increase. Free cash flow was $92.4 million.

Now, I’ll speak to the results a little bit more detail starting with the U.S. division performance. Total sales for the U.S. were $738 million, up $75.5 million, an increase of 11.4%. Kay had an outstanding performance and increased same store sales by 13.9%, up from the positive 4.2% growth achieved in the first quarter of fiscal 2011. Jared again performed very well with comps up 11.8% following a 15.9% increase last year.

Overall, U.S. same store sales increased 12.5% compared to an increase of 7.3% last year. This great sales performance was driven by both returning customers and a continuing influx of new customers to our concepts.

Average selling price, excluding the charm bracelet category, was up 11.8% for Kay, 7.7% for Jared and 13.7% for the regional brands. This reflects both price increases and consumers trading up our pricing architecture including to new higher price point merchandise in the bridal category.

Operating income was a $126.2 million, up $37.8 million, which was a 42.8% increase. The operating margin increased by 380 basis points to 17.1%.

Now, turning to the merchandise initiatives that drove this performance; we believe that one cornerstone of our success continues to be the bridal category. In this category, success is built on providing an outstanding customer experience and our established competitive strengths are well attuned to the bridal customer.

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