Ladies and gentlemen, thank you for standing by. Welcome to the Signet Jewelers Fourth Quarter and Fiscal Year Results Conference Call. [Operator Instructions] Please note that this call is being recorded today, March 24, 2016 at 8:30 a.m. Eastern Time. I would now like to turn the meeting over to your host for today’s call, James Grant, VP of Investor Relations. Please go ahead, James.

Good morning and welcome to our fourth quarter and fiscal 2016 year end earnings call. On our call today are Mark Light, CEO and Michele Santana, CFO. The presentation deck we will be referencing is available under the Investors section of our website, signetjewelers.com. During today’s presentation, we will in places discuss Signet’s business outlook and make 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 will be filed later today with the SEC. We also draw your attention to Slide #2 in today’s presentation for additional information about forward-looking statements and non-GAAP measures. And now, I will turn the call over to Mark.

Thanks, James and good morning everyone. Signet Jewelers had excellent fourth quarter. Our results demonstrate our solid fundamentals and that we are managing all key operational aspects of the business. I will start with a few remarks on our financial highlights leaving with details from Michele and then get into the operating highlights. Our total sales in the fourth quarter increased by 5.1%, which was significantly higher than the jewelry market as a whole. We not only gained share we gained profitable market share. Signet comp sales increased by 4.9%, which was among the fastest growth of any U.S. retailers. Due to strong top line and prudent management of our expenses, our operating margin expanded by nearly 200 basis points and our earnings per share were up about 20% as well. Earnings growth was also among the top of the industry. While delivering a terrific fourth quarter, we also set the table for growth into the future. Our synergies from the Zale acquisitions are playing out faster than we first expected. We delivered $60 million of synergies in fiscal 2016, above previous expectations and we raised our multiyear synergy guidance. I will get to those details in a couple of minutes. Next, I would like to discuss the sales drivers of the fourth quarter. There are variety of related and overlapping initiatives that drove the fourth quarter performance, which included innovative merchandising, cross-selling, engaging marketing and solid store execution with superior customer service. Results were led by our Ever Us program, which is our much talked about new jewelry collection, which is offered across all of our national brands and leverages our scale in the jewelry industry. We use our customer knowledge and our expertise in jewelry design to develop an innovative two-stone diamond ring collection with marketing that appeal…

Thank you Mark and good morning everyone. So, let’s start with our fourth quarter sales performance. Signet’s comps increased 4.9% on top of a 4.2% comp increase in the prior year fourth quarter. Total sales increased 5.1%. And on a constant exchange basis, total sales increased 6.4% for the quarter. Now, looking at total sales and comp performance by operating segment let me share some additional color. In Sterling Jewelers, total sales increased 6.9% to $1.45 billion, which included a comp increase of 5%. Sales increases were driven by particular strength in diamond fashion jewelry, including Ever Us, diamond earrings and bracelets. This merchandise mix is droving higher average transaction value of 6% with a decline in the number of transactions of 2.3%. Innovative collections typically with higher ATV, such as our Ever Us, sold faster and gained relative share within our portfolio. The Zales jewelry operating segment’s total sales increased by 2.2% to $577 million and 5.2% on a constant currency exchange basis. On a geographic basis, our Zale U.S. sales increased 6.3% and cost increased by 5.4%. Our Canadian sales declined 15.8% and 0.4% on a constant currency basis with comp sales decline of 0.8%. Canada sales were impacted primarily by the Western region of Canada, where lower oil and gas prices led to a recession earlier this year. Across stores, sales were driven primarily by diamond fashion jewelry and bridal. Now similar to Sterling, this merchandise mix drove a higher transaction value of 6.2%, with a decline of 2.1% in the number of transactions. Piercing Pagoda total sales increased 8.3% to $78 million with comp sales of 6.4%. Sales increases were driven by gold and diamond jewelry and this merchandise mix drove a 10% increase in average transaction value, while transaction count declined 2.7%. Looking at our…

Thank you, Michele. To sum up, we had a great quarter and a wonderful year. We accomplished so much as I discussed on Slide 7 and 8. Best of all, we grew our adjusted EPS north of 20% for the full year and we anticipate hitting that mark again in the coming year. I sincerely want to congratulate and thank all of Signet team members for their hard work and the wonderful accomplishments. Last year was great and this year is looking even better. And with that, we will now take your questions.

[Operator Instructions] Your first question comes from the line of Scott Krasik with Buckingham Research. Your line is open.

Yes. Hi, everyone. Thanks. Congratulations.

Thank you.

So, I just wanted to ask about sort of customer acquisition, advertising, obviously you made a bit of a strategy shift around holiday and I think that you have continued it. So maybe talk about the opportunity there and additional opportunities if there are?

Sure, Scott. Thank you, again. When it comes to what we are doing on customer acquisition through our advertising specifically, the learnings that we have gotten from our segmentation study has really helped us out to focusing on our store brands primary customer. So for example, in Zales, we have a primary customer and we have adjusted our advertising creative to capture more of the Zales segmented primary customer, which is different than that of Kay’s and Jared and we have got wonderful reactions of consumers and from our store staff just seeing people coming in and really reacting to the ad so well and we did the same for Jared as well. And also Kay was kind of on the mark the most with their customer segmentation. So, with the guy being the hero in the ads and everything else. So, what we did is not only did we enhance the creative, we also increased our marketing spend. So, we increased our spend for Zales this fourth quarter. We increased our spend for Jared this fourth quarter. And Kay is kind of at a point where we don’t think it’s beneficial to increase the spend. What we did is we spread Kay’s advertising to start earlier in October and to talk about the bridal business, which we believe that definitely benefited Kay’s throughout the fourth quarter. So, it’s about increasing our marketing spend thoughtfully and targeted. It’s about enhancing our creative to make sure we are capturing that segmented customer better within our store banners.

Okay. And then just sort of following up, thanks, on the enhanced store operations maybe specifically to Jared, still not seeing some of the trends you are seeing in the other division. So, maybe talk about the outlook for Jared specifically over the next 6 to 9 months?

Sure. Jared, you got to understand, Jared is different in the mall and that by the way is competitive in competitors set of Jared is primarily obviously outside the mall. And if you look at the jewelry industry as a whole and I mentioned it earlier, if you look at Jared for the year, Jared actually captured profitable market share and it’s compared to the overarching jewelry industry. And again, the majority of Jared customers is outside the mall and the majority of jewelry customers are outside the mall. So, to compare Jared and Kay and Zales is just not really a fair comparative. That being said, we did have a lot of good learnings through our segmentation study that shared with us that we need to talk to and communicate with those customers differently both from a marketing perspective and from a selling perspective. And we had some enhancements to our selling techniques in our Jared stores. We think it’s doing better, but this is a transitional stage for Jared. We are actually very excited by Jared opportunity this year. These transitions don’t happen overnight, but we believe come to the fourth quarter that Jared has a lot of wonderful advantages that we have announced already that we are going to have Pandora shop-in-shops on our stores and we believe Pandora is a tremendous partner and will increase our food traffic coming into our stores. We have now are putting Vera Wang is now in our Jared stores. We have unique advertising for Jared, Vera Wang and we also are going to have some more unique Vera Wang product within our Jared stores and we also have a very special program that is perfectly targeted to the Jared customer that we call the Chosen Diamond. We will talk more about this, but it was tested in the fourth quarter did extremely well and it’s where our customer can literally track their diamond from the point in the mine that it came out of to our cutting factor in Botswana and track it all the way to the point where it’s on their beautiful spouses or spouse-to-be’s hand. So, we are very excited about what’s going to happen for Jared this year, but it takes time to transition the business. But I want to end with we still believe Jared is capturing profitable market share when you compare to the overarching jewelry industry.

Okay. Well, good luck with that. Thank you.

Thank you very much.

Thanks, Scott.

Your next question comes from the line of Lorraine Hutchinson from Bank of America Merrill Lynch. Your line is open.

Thank you. Good morning, everyone.

Good morning.

Your full year comp guidance implies acceleration from the first quarter, 3 to 4. What do you see as the biggest drivers of this whether from a banner or a product perspective?

Well, thank you, Lorraine. A lot of it comes from what I have just said to you. In our business, it’s a lot of business happened last year is really all targeted to the back half of the year. A lot of our initiatives, the benefits of the synergies that we are getting, the benefits of the changes I just mentioned, discuss relates to what we are doing in Jared’s are all really do we build up and you get a lot of those benefits to the back end of the year in the fourth quarter and primarily a lot of the synergies that we discussed. So, that’s the majority. I hope Michele, do you have any?

No, I think that’s really it when you think about the seasonality of the back half. And we talked about on the synergy flow through that, that will when we did the pre-announcement kind of flow with the seasonality more back half loaded and so that’s why you see the acceleration in the annual guidance from the Q1.

Great. And then as you model gross margin for this year, what type of bad debt reserve hit are you incorporating into that guidance?

Yes. So again, we don’t guide by particular line item in the P&L. What I would tell you is we went out, we have given you the top line, we have given you the bottom line. To give you a little bit more, I guess, a directional basis that might help you is I would say that we probably expect the trends to be broadly similar when you look at a net bad debt expense and finance charge income of what you have seen this past year.

Thank you.

You are welcome.

Thank you.

Your next question comes from the line of Ike Boruchow from Wells Fargo. Your line is open.

Yes, hi, everyone. Good morning. Congratulations. I guess, Michele, just a question for you. So, just going back to your Analyst Day when the synergy number was about 150 to 175, I think you talked about the fiscal ‘18 Zale margin being about a 9% margin. So, now that you have commented that the synergies are roughly $75 million higher, how should we think about the Zale margin, because I know those synergies are kind of spread around, but the majorities in Zale? Can you just help us is that 9% still the number we should think about or now should we start thinking low double-digits?

Yes. So, good morning, Ike. So, a couple of things. When we talked about back in the IR data, 9% margin that was just looking at the flow-through of synergies and what we said is when you look at other growth within the Zale business, that, that was really more like the 12% or so number. So, that’s in my mind, I think of it more as a 12 versus the 9. And then we said long-term, we saw the Zale margin getting to 15%. So, the one thing, Ike, I would say is that and Mark had mentioned this in the prepared remarks, the synergies are flowing across our business division. And so that’s not to say that I have just cautioned you to think that the majority of this is flowing through sales. It really is across all of it. With that said, sure, the higher synergies does imply that there is higher, medium, and long-term operating margin expectations. And so I think if you take that upwardly revised synergy guidance and just flow it through, split it and flow it through from the guidance we gave on IR Day, you will get the updated and we will get you to the updated margin number.

Got it. And then you had commented that medium to longer term, you were thinking more of a mid-teens margin, just the follow-up question will be are you thinking higher than that now or are you just thinking more we can realize that maybe sooner?

What I would tell you is there is always two pieces, right, is it more and is it quicker? So, we are seeing the acceleration and part of the synergies. We upped the synergy guidance. And just by the pure mathematics of that, you would have to assume that the margin increases.

Okay, great. Congratulations.

Thanks, Ike.

Thank you.

Your next question comes from the line of Simon Bowler with Exane. Your line is open.

Hi, team. Just a quick question for myself, just with regard to the increase in square footage growth in the year ahead, just wondering if that’s a timing impact that’s coming through there or whether you have got a view that actually your square footage potential when we compare to what you have previously communicated at Investor Day is beyond that, that we have heard before?

Yes, good morning, Simon and thank you. No, it’s more of the first, Simon. We believe that now that we have a better handle on the Zales operation, we believe we have an opportunity to grow our brands faster and farther. And with this year, the numbers on a gross basis is up to 178 stores this year and Michele mentioned it. The majority of that is coming from our Kay stores as we see Kay mall opportunities. We are also going to open up a good amount of Jared stores this year. We are going to open up a good amount of Zales stores this year. And we will be opening some Piercing Pagoda stores this year. So, we have stronger and better confidence in our business models and we are – so, it’s an increase of rate not moving stores growth up earlier, it is just pure increase of growth of our company going forward.

And I know you don’t want to give kind of multiyear or out-year guidance, but in terms therefore when we are thinking about modeling kind of year 2, 3, 4 beyond, we should be thinking of higher rates than the notion perhaps your communication before might have implied?

We are not going to give any specifics, but I will tell you that obviously the more and more confidence we get in the business and the more and more confidence we have in our models, specifically in Zales, we will see a potential opportunity of increasing that run-rate. Look we said this before, Simon, we believe the mid-market in the U.S., let’s just talk the U.S. is a $41 billion market opportunity. Through Signet Jewelers, through all of our brands last year, we did about $5.5 billion. We see tremendous opportunity to grow within our existing brands, within our segmented customers, within the U.S. and the other markets that we operate in, but specifically see tremendous opportunity of capturing more profitable market share in the latter years in the U.S. for certain with our existing brands.

Very clear. Thanks Mark.

Thank you.

Your next question comes from the line of Anne Samuel with JPMorgan. Your line is open.

Hi, guys. Congrats on a great quarter.

Thank you.

On quarter-to-date so far you gave a little bit of comment about it in the release, but we have been hearing from a handful of retailers that the domestic consumer is returning to a more normal trend kind of relative to the fourth quarter. Can you provide any color on if you are seeing a similar improvement in the consumer environment?

Well, obviously, Anne, if you take a look at our guidance at 3% to 4%, we are seeing similar trends of the fourth quarter, not obviously as robust as you saw, but we are seeing similar trends. I mentioned this on my prepared statements that we have the benefit that over 50% of our business is in bridal category. And it is the closest thing that Michele said that we have is a necessity. So, that is the nice stabilizing business that we have that I believe other retailers will have the benefit of that business. So, to answer your question, in our guidance, we are seeing 3% to 4% in the first quarter. So, those are the type of run-rates we believe we are going to experience.

Great, thanks. And then just one question on the gross margin line, when you think about the core business outside of the synergy benefits, can you provide any color on what puts and takes you are seeing there? Are you continuing to see favorable commodity cost benefits? Thanks so much.

Sure, Anne. So again, Mark had in his remarks mentioned this and I just caution anybody from we don’t operate our – we don’t operate Signet as a pre-acquisition company and a new entity. Our synergies flow across all of our divisions. And so I really don’t want to go through and try to breakout gross margin expectations based on that. In the comments, the prepared comments we talked about, we are really excited about our gross margin expansion that we expect to see in fiscal 2017. And when we think about that expansion, it will primarily be driven by synergies as we move forward. Commodity cost is always a factor in our gross margin. What I would say though think about that we are on the average inventory cost, so changes in gold don’t flow-through as quick in our P&L. This is primarily a synergy driven gross margin expansion on both sides.

Great. Thanks so much.

Thank you.

Your next question comes from the line of Jeff Stein with Northcoast Research. Your line is open.

Good morning, guys and again I appreciate the detail on the credit. So, question for Michele on the guidance and this is just kind of back of the envelope. And I am wondering if perhaps maybe you are being a little bit conservative on your guidance, because if you take the $6.85, $6.86 that you earned and then you tax effect the synergies – and let’s say we use the midpoint of the synergy savings – that’s about $1.30. And then you have got the ADS credit benefit this year that you didn’t have last year, that’s another $0.20. The way I am adding it up, it looks to me like you are getting a $1.50 lift from synergies and credit and that would take you to about an $8.40 number. So, it would seem like you are just kind of adding the synergies and the credit benefit with no organic growth from the core business. So, I am wondering if I am looking at it the right way or perhaps missing something.

Well, here is what I would say, Jeff. Again, it goes on the heels I really, really caution anybody from taking the synergies and trying to look at the synergies and then what’s happening in the organic growth. This is very much integrated. It’s not split that way and it really is not a fair characterization as we don’t operate our business as I mentioned before in a pre-acquisition mode and a new one. Synergies flow across our business. And so for example and I know Mark also provided this during the prepared remarks, a portion of our revenue includes revenue synergies, such as cross-selling. He gave Ever Us as an example, which is a permanent part of our business and so that’s in our synergy number. It’s mutually benefiting all of our divisions across the board. So, you really can’t start pursing out what’s core and what’s not core. The other comment I would say, Jeff, is just keep in mind this is the first time that we are issuing annual guidance and it is early in the year. So stay tuned, we will see how the year develops. And also, just want to remind you that when you look at the annual guidance we did provide the EPS growth range I mentioned of 20% to 25%.

Right, right. Just one more follow-up question real quick and that is do you have a depreciation and amortization estimate for the current fiscal year?

You know what, I don’t actually have one handy, but that’s something we can probably circle back with you on, Jeff.

Great, thank you very much.

Thank you.

Thank you.

Your next question comes from the line of Oliver Chen with Cowen and Company. Your line is open.

Congrats on a really strong finish to a great year. Mark, as do you look forward to the second half of this year, what would you isolate as a key product or marketing initiatives and just general ideas that will be good for us to prioritize in our mind as catalysts? And Michele, as investors continue to think about the credit metrics, as we model our thoughts for next year, how should that net impact line look and allowance as a percentage of ending accounts receivables, just expectations for how that should trend? And I think, it’s interesting how you have ADS on the Zale Corp side and Sterling is internal. So, how do you think about ROIC when you compare those two businesses and you think about your corporate and financial strategies? Thanks.

Thank you, Oliver. I will take the marketing and merchandising question, obviously. On the marketing front, Oliver, in the second half, there are several things. First of all, we are continuing to refine our creative to get closer and closer and get continued REITs from our segmented customer as it relates to Kay, Zales and Jared’s. And by the way, we just did a segmented study, segmentation study in the UK for both our H.Samuel brand and our Ernest Jones brands and we also are conducting and just finished a study of our Peoples brand in the United Kingdom – excuse me, in Canada. So, we will continue to refine our creative to make sure we are penetrating and connecting more to those segmented customer appropriate to the appropriate banners. In addition to that, we will continue to invest thoughtfully and strategically in targeted additional marketing spend for all of our brands where appropriate. So, on the marketing side, it’s continued refinement of the creative to connect to the segmented customer and increased investment in TV media and an increased investment digital, we are putting a lot of time, money and effort behind our omni-channel experiencing and making sure that there is a connectivity from the digital perspective whether it be online to in-store and then the connectivity is we are putting a lot of investments in the special omni-channel experiences that can only be differentiated by us. On the merchandising side, we have a lot of exciting news. I mentioned that the extensions in Ever Us. I will tell you that historically in the jewelry industry, when a beacon program is announced and a beacon program in the past for those of you who don’t understand or are tied to jewelry industry are programs like the past, present and…

Alright. So, I will take the credit. So again, what I mentioned in the prepared remarks, we are seeing stability in our credit metrics and very confident in terms of our credit portfolio performance, all of which is factored in our Q1 and our annual guidance. So with that said, I think this kind of hit on also the heels of Lorraine’s question, but directionally, in Q1, when you see the relationship of our net bad debt expense and finance charge income, we’d expect that to be broadly in line with last year, I think there is a timing of an account sale in last year’s numbers, so you have to take that into effect and it would be broadly the same. And on a full year basis, as a percentage of sales, that net relationship of bad debt and finance charge will also be broadly in line with fiscal ‘16. And I would make the same comment when you think about the allowance as a percentage of our receivable. Getting into ROI in terms and the hybrid approach that we have with ADS and our in-house, which really is a unique case for us. First of all I think, Oliver, it’s really important to note that our overall credit portfolio is still highly profitable and we have successfully managed this portfolio over 30 years in all types of business cycles. The virtues of having our in-house credit program, given the sales and earnings flow-through when you think about the interest income, the lifetime value of our credit customers, how it complements our best in bridal strategy, I mean all of these factors really provide a competitive advantage for us to operate this in-house credit program. Now with that said and as you mentioned, we have ADS that’s providing the credit in Zale, so we do have this optimal test case in front of us and this hybrid model will allow us to continue to evaluate the pros and cons of an in-house credit program. And this is no different than any other aspect of our business that we always are continuing to evaluate our business in ways to enhance shareholder value.

Thank you, that’s super helpful. And approval rates on the credit customer and the FICO scores they have been consistent, is that correct, we just had an investor incoming on this topic and I wanted you to elaborate there if possible?

Yes. They have and so this is obviously one of the new credit metrics that we have disclosed and you will see that in the 10-K that’s filed later today. Again FICO is an element, it is not the only element that we use in terms of our underwriting, but we have seen a very consistent trend in terms of our FICO scores for a number of years.

Okay. And Mark, just finally, omni-channel comp like a really great ongoing initiatives, what are the next chapters here, I know that customer has a special element of trust whether it’s in-store pickup is the key role, but what do you think are the major strategic efforts over the medium term and is mobile a big part of the opportunity ahead? Thanks.

Thank you, Oliver. Yes, mobile is huge. Obviously, I think most business, but definitely in ours, more and more of our omni-channel experience is starting on mobile and it’s transitioning more and more going there. And it’s just tying the experiences, Oliver. You will see us this year we will be working on enhancing our Zale’s e-commerce platform and working on making sure that we have more connectivity to our e-commerce sites and to the activity going on in stores. So you will see a lot more of the connectivity of our stores to our online experience and tying everything together. Now, it’s going to take time, we can’t do this all overnight, Oliver. But we have – we will be sharing more with you once we have some more of tests vetted out. But we see omni-channel being a critical part of the jewelry experience. And I have said this before, but arguably in our business, more than any other retail, because we know that a vast majority of jewelry and diamond customers go online first. They need to educate themselves online is one of the things that we have done as we put together a website called Jewelry Wise, which is an educational website that just answers customers questions about diamonds or emeralds or gold and questions they have and just experiencing – letting customer experience education about our products is another way and collecting all of this education in-store and online.

Thank you, best regards and hanks for the details. And it sounds really exciting ahead, thanks.

Thank you, Oliver.

Thank you.

Your next question comes from the line of Dorothy Lakner with Topeka Capital Markets. Your line is open.

Thanks. Good morning everyone and congratulations as well. I wondered if you could provide a little bit more color on your cross-selling efforts, I know you have spoken a lot about Vera Wang and how well that’s done, obviously Ever Us is being sold across all banners, but kind of where are you in the process and what else might we look forward to in as you move forward. And then additionally, just any color you could provide on – you talked about new store concepts performing well, I just wondered if you could provide a little bit more color on that? Thank you.

Sure. Thank you, Dorothy. On cross-sell, first of all as you mentioned, Vera Wang has been a tremendous success, specifically in our Jared stores and is doing very well in the Ernest Jones stores in the United Kingdom. So we see an authority to taking Vera Wang Love and like I said in Jared, making it – refine it a little more and make it a little bit different for the Jared customers. We see exciting opportunity for that. And our UK stores are just – the test is doing well and we see rolling Vera Wang into all of our UK Ernest Jones stores. Neil Lane has been doing very well in our stores in Canada. We have Neil Lane in all of our Peoples stores in Canada. We have Open Hearts by Jane Seymour in all of our stores in Canada and we are doing very, very well with both of those brands in our Canadian Peoples stores. We also see opportunity – we continue to test Neil Lane in our Zales stores. We are not fully rolling it out now, because we are still going to make sure that there is no major cannibalization going on. But to your point efforts like Ever Us is just critical to the success of our cross-selling. It just reinforces the importance of making sure that we have the opportunity to show something that, because there are products in our industry that are just in every brand everywhere, solitaire rings or solitaire pendants and we believe there are certain brands that we can develop and certain designs and trends we can develop like Ever Us that will be able to be sold in all of our brands and that’s critical to the importance of our business. And we continue to test, Dorothy, we will be continuing looking and testing all of our different opportunities for cross-selling, but those are some of the major, major lifts. As far as the new stores go, our Kay stores, our Kay off-mall stores, our Kay stores continue to do very well. Our Jared stores continue to perform well. We are just now ramping up, you will see a ramp up opening about – projected to open about 30 new Zales stores this year and we are feeling pretty good about opening the Zales stores. We will see we didn’t open up many last year, but we will see how they do. So, this year is a good year for us that we are opening up a lot of Kay off-mall stores, which as Michele said, it gives us the highest return and we see great consistency in the performance. So, Kay off-mall continues to do well. And Jared continues to do well. We are just getting into Zales and Piercing Pagoda we are very excited about the opportunities of new Piercing Pagoda’s stores and our new store designs behind the Piercing Pagoda brand.

Thank you and good luck.

Thank you, Dorothy.

Your next question comes from the line of Brian Tunick with Royal Bank. Your line is open.

Yes, can you guys hear me?

Yes, we can.

Yes.

Alright. Super, thanks. Good morning and again thanks for the clarity. I guess following up on the credit book again, the question of should you guys own it, should you guys sell it? Can you maybe talk about, is that an ongoing conversation? I am sure the last 5 or 6 months you probably have that conversation more, but can you maybe talk about the pros and cons of owning the credit book when you look at customer-centric companies like Nordstrom that has sold theirs? Can you maybe talk about how you think about that? And then also on the composition of the comp, the negative transactions, can you maybe parse out are you seeing any difference in mall versus outlet or strip centers just sort of what’s happening within the transaction component? Thanks very much.

Sure, Brian. So – and first of all, I can’t speak to Nordstrom in terms of why they made the decision to do what they did with their credit portfolio. I can only speak to Signet’s in-house credit, which we really do view as the competitive advantages for all the reasons that I have covered. How much it really complements our Best in Bridal strategy. And when you look at the scale that we have and the rich history that we have in terms of our borrowers, we believe that it still makes good sense for us. It still remains highly profitable for us. And as we said, we have managed this portfolio in all types of environments. But with that said and it is no different than any other aspect of our business or any – it’s no different than what we have done in the past that we are always continuing to evaluate ways that we enhance our operating income, shareholder value. So, that’s where I would leave that discussion in terms of the in-house credit performance. In terms of your question on the transaction, I mean, that’s something – we are just not going to go down to the details in terms of how those transactions were off-mall, in-mall, I would leave it at that.

And we have time for one more question and that question will come from the line of Lindsay Drucker Mann with Goldman Sachs. Your line is open.

Thanks. Good morning, guys.

Good morning.

I wanted to just ask you touched on a lot of this, but just to get a better perspective on in 3Q, we saw the net profitability of your credit book weaken year-over-year and in 4Q, it improved. What exactly happened between 3Q and 4Q that drove that sequential improvement?

Sure, sure. So, when we backed up and we had mentioned in Q3, a lot of that was what’s magnified by the size of the quarter. But with that said, we did see – I mean experienced higher bad debt expense and that – component of that was driven by the credit receivable mix. So when we move to fourth quarter and as we had expected to see improvement in our credit metrics, we did. But it all didn’t happen in Q4. What we did is we started deploying credit marketing initiatives in Q3 and really these initiatives were aimed at more of the higher or better quality credit customers to favorably influence what our credit mix was. And so some of these types of initiatives were in like in Jared, you get 10% off, it was hey credit card reactivations, reminder you have open to buy with us, come in and make a purchase. So a lot of those initiatives just combined with credit execution really drove the favorable results that we saw in Q4 as it related to the metrics. And, as I mentioned we continue to see the stability in our credit metrics and very confident in terms of our credit portfolio performance as we move into fiscal 2017.

I think you had also talked about better collections rates, can you touch on that process?

Yes. So, in terms of the actual collection rate, the number I provided for the fiscal year in the prepared remarks is down over last year. But what we have seen in the fourth quarter and it’s not so much from a rate perspective, but there is always nuances in terms of the effectiveness of customer collection and so that was just one element I would say in the fourth quarter that did help influence the credit metrics.

Okay. And then just a quick follow-up, could you talk about what’s your average unit cost outlook is or input cost for fiscal ’17. And then I think you had also touched on the opportunity to take a bit of pricing selectively across your portfolio, how you are feeling about that? Thanks.

Sure. So overall, we have mentioned that we do expect to have gross margin expansion so that would obviously encompasses our estimate or views in terms of input costs. I think we know and what I would call out on gold, gold has been increasing, but what I would say is remind everyone with the average inventory cost method we are on, we are not prone to sharp increases or decreases that flow through immediately in the P&L. So I think we feel good in terms of where we sit on the gross margin. Diamonds, I think we are kind of maybe flat, small increase from that point. I don’t know Mark if there is anything you want to add on, on the diamond side?

No, I think you are right. I think the info [ph] right now, in the polished diamond market is small single-digit increases potentially flattish it depends on what the marketplace looks like go into the future.

Yes. And that’s an area where in the past, we have been successful on the heels of commodity cost increases, pricing that negates the – any margin impact we would see.

Which everything is built into our guidance.

Absolutely.

And opportunity for price increases this year?

There are potentially opportunities for price increases which is – everything is built into our annual guidance, but yes there is opportunity for price increases.

Okay. Thanks guys.

Thank you, Lindsay.

Thank you.

We have no further questions at this time. I will now turn the call back over to Mr. Light.

Sorry about that. With that, I will say thank you to all of you for taking part of this call. Our next scheduled call is on May 26, where we will review our first quarter earnings results. Thanks again, and goodbye.

Thank you. Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.