Good morning. My name is Lisa and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Signet Jewelers Second Quarter Fiscal 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Randi Abada, Senior Vice President of Investor Relations, you may begin your conference.

Thank you, Lisa. Good morning and welcome to our second quarter earnings conference call. On the call today are Signet's CEO, Gina Drosos; and CFO, Joan Hilson. During today's presentation, we will 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 our annual report on Form 10-K and quarterly reports on Form10-Q. Except as required by law, we undertake no obligation to revise or publicly update forward-looking statements in light of new information or future events. During the call, we will discuss certain non-GAAP financial measures. For further discussion of the non-GAAP financial measures as well as reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures, investors should review the news release we posted on our website at www.signetjewelers.com/investors. I will now turn the call over to Gina.

Thank you, Randi. Good morning, everyone, and thank you for joining today's call. To begin, I would like to thank all of our Signet team members for their support of our customers and for embracing and leading change as we continue to execute our transformation. In my remarks today, I'll start by discussing second quarter results and then preview our holiday plans and the progress toward our transformation. I'll wrap up with some brief comments on our financial guidance. We continue to execute with diligence on our transformation priorities. In the second quarter, we delivered results above our guidance for same-store sales, non-GAAP operating profit, and non-GAAP EPS and grew operating profit year-over-year. Also, adjusted free cash flow excluding last year's credit proceeds is up 243 million year-to-date, due to effective cost control and disciplined inventory management. Despite weak overall retail industry traffic trends, our transformation initiatives for merchandise and targeted digital marketing delivered improved traffic and sales performance as we moved through the quarter. The quarter started off slowly in May and significantly improved in July, with Signet's core North America banners outperforming industry traffic trends for the overall quarter. Importantly, we delivered positive North America same-store sales in the July Prime Day Promotional Week, both in-store and online. Here are some highlights of our sales performance. Total company same-store sales were down 1.5% in the second quarter. North America same-store sales were down 1%, inclusive of an 85 basis point unfavorable impact related to a timing change to revenue recognition on service plans, and a planned promotional timing shift into Q1 at Jared. eCommerce was up 9.9% in our North America banners, excluding James Allen, and up 4.4% on a consolidated basis. James Allen sales declined 1.5%, a sequential improvement from the first quarter as marketing and assortment…

Thanks, Gina. And good morning, everyone. In my remarks I will first cover the highlights of our second quarter financial results, then discuss our refinancing plans and conclude with guidance. In the second quarter, same-store sales declined 1.5%. In North America, Piercing Pagoda was up double-digits. Sales returned to low-single-digit same-store sales growth and we saw growth in eCommerce. Jared improved sequentially adjusted for a planned promotional timing shift and against a more difficult prior year comparison. Kay's same-store sales were down low-single-digits, with Kay's more significant product launches still expected to come in Q3 and Q4. International same-store sales continued to reflect the challenging operating environment in the UK. Revenue declined 3.9% reflecting lower same-store sales, the impact of net store closures and the impact of foreign exchange. Non-GAAP gross margin was down 60 basis points in the quarter and was impacted by two structural items. First, we continued our strategy of higher sales to third-parties of non-productive diamond inventory from our diamond polishing operations in Botswana to clear excess inventory and generate cash. Similar to the first quarter, this had an unfavorable 65 basis points impact on our gross margin rate. And secondly, as expected there was an unfavorable impact of 25 basis points related to the timing of revenue recognition on service plans. Stabilization and merchandise margin in our North America banner and transformation cost savings were offset by these structural impacts on non-GAAP gross margin. SG&A was down $33 million or 1.1% of sales on a year-over-year basis. This performance was driven by lower corporate and indirect spend as well as lower store staff costs primarily due to store closures. These favorable items were somewhat offset by a $5 million increase in credit costs as we did not anniversary the outsourcing of our non-prime credit business…

Thank you. [Operator Instructions]. And our first question comes from the line of Lorraine Hutchison from Hutchison. Your line is open.

Hi. This is David Buckley on for Lorraine this morning. Thanks for taking our question. Looking forward, what are the key factors to get the comp growing again? And then can you share any quarter-to-date commentary? Has the improvement that you saw in North America comps in second quarter continued into the third quarter?

Hi, David. It's Gina. I'll take that and then Joan you can chime in with anything incremental. I think the Path to Brilliance strategies that we're putting in place are beginning to get some traction and the key to getting to positive comp growth is really in the customer first and omni-channel initiatives. So, continuing to execute our merchandise strategy around bigger iconic brands, around having the right value offerings for shoppers, especially in key holiday periods and being more on trend. We've made some big moves into gold, into colored gemstones. Customers are very interested in those at this point in time and it's paying off for us. So, I think on the merchandising strategy, that's key. And then I'd also highlight on the marketing strategy, we did hire a new media agency at the beginning of this year, the intention was to leverage the proprietary data that Signet has as the world's largest specialty retail jeweler and be able to more efficiently and effectively target our media spend to the right customer journeys, so bridal messaging to bridal customers, gifting messaging to gifting customers, that agency is now fully on board. And so we're beginning to see those efforts take hold as we go into holiday. And then on omni-channel, first and foremost, it was to get us to the right platforms. We haven't had a great performance on particularly our Kay and Jared eComm platforms, over the last couple of holiday periods, as traffic really increases, we have on Zales and Pagoda, since moving to the hybris platform. And so, that along with the mobile investments that we've made, we think are really fundamental to getting us toward positive comps.

[Operator Instructions]. Our next question comes from the line of Paul Lejuez from Citigroup. Your line is open.

I am curious as we look out to next year on the SG&A line, are there any investments that need to be made to support the business, or should we expect that SG&A can actually be down next year? And I guess I'm kind of curious if you feel there are any places that may be pulled back a little bit too much that might be hurting topline where you might need to reinvest? Thanks.

So, Paul, I'll take that question. Well, we don't really provide SG&A guidance. A couple of things that I would say about our cost savings program. We have taken out of our cost non-customer facing costs, which we believe has been important in delivering the reinvestments that we need to make to support our top-line sales and our growth. So, as we invest in the hybris initiative and we invest in the Always On marketing strategy that Gina mentioned, that's how we have approached the transformation initiative and made very thoughtful and meaningful reductions in cost to support the growth for the company. As we look forward in terms of our investments in the business, we consider all of the operating model that you would think about in a retail company, right. We have store labor investments. We have our operating models in terms of evaluating our real estate strategies. So, we evaluate all of those components as we look forward into the future. So, as it stands right now, we are very comfortable with the cost savings initiatives that we’ve put in place.

Just a follow up. I'm curious, I think, when you ex-out some of the timing things in the gross margin line, gross margin was flattish, I believe if I heard you correctly. I was curious if you could talk specifically about merch margin and also by concept, which concepts you're seeing better merch margin on a year-over-year basis versus the remote pressure perhaps by the promotional environment? Thanks.

Sure. We are -- what we're pleased with is, we saw the stabilization in our North America gross merchandise margin which does also incorporate the impact of clearance sales. We would -- we've also embedded our updated view on the impact of clearance sales on our gross merchandise margin and inventory in our updated guidance for the third and fourth quarter and for the year. I would just remind you, Paul, that the 65 bps impact on margin that I mentioned from Botswana and that is also something that we continue to expect as we manage our way through the balance of the year.

And by concept, wondering if you can share any insights as to better or worse year-over-year?

No. What we can talk about is, is North America merchandise margin as stabilized.

And we have no further questions in queue. This will conclude today's conference call. You may now disconnect.