Hello. And welcome to the Signet Jewelers Second Quarter Fiscal 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Vinnie Sinisi. Please go ahead, sir.

Hey. Thanks very much, Alisa, and good morning, everyone. 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 disclosure in our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Except as required by law, we take -- 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 reconciliation of the non-GAAP to most directly comparable GAAP measures, investors should review the news release we posted on our website at www.signetjewelers.com/investors. And with that, I will turn the call over to Gina.

Thank you, Vinnie. Good morning, everyone. And thank you for joining us on our second quarter call this morning. Recall that in Q1 as stores closed we pivoted to a digital first strategy and accelerated many elements of our Path to Brilliance transformation. At the same time, we tightly managed cash and expenses to offset negative impacts of the COVID-19 pandemic and preserved our ability to invest in and grow our business. Now in Q2, we are seeing our strategic efforts yield results. Before I discuss our Q2 results, I want to first acknowledge and thank the Signet team. I am inspired everyday by our team’s agility to operate in this new retail environment and meet our customer’s needs, guided by our purpose and core values, safety, and the well-being of our team members and customers remains our top priority. This is why we launched our Love Takes Care safety program this quarter in partnership with leading healthcare experts to ensure that we are doing everything possible to create safe places to shop and work. Our teams care and compassion fueled the launch of our Signet team member relief fund for our colleagues most impacted by COVID. We activated our voice and partnered with the NAACP Legal and Defense Fund to fight racism as well as support a glad to call for equality and justice for all. We are resilient and I want to full heartily express my gratitude to our Signet team. Along with our vendor partners and loyal customers, our team is at the core of my belief that we will together emerge from this crisis stronger. I would like to now discuss our Q2 results as well as provide additional strategic perspective on how we are learning and using this dynamic environment to accelerate our transformation and…

Thanks, Gina. Hello, everyone. This morning I will provide details regarding our performance to help you better understand the trends we saw as the quarter progress. By month, same-store sales were down 68.5% in May, down 21.8% in June and down 1.3% in July. This included not only brick-and-mortar momentum as stores reopened to scale, but eCommerce remains strong with 72% sales growth over Q2 last year. Strength continued into August, with preliminary same-store sales up 10.9%, which includes 65.2% growth in eCommerce versus August of last year. Due to COVID-19, our design and service centers were closed until later in the quarter because of this revenue recognition related to our extended service plan programs with lower than last year and negatively impacted same-store sales by roughly 450 basis points. We expect some portion of this revenue to be recognized later in the year. However, we cannot estimate the amount due to the uncertain impact COVID may have on consumer behavior and our ability to keep stores open. Our Q2 gross margin of approximately $224 million or 25.2% of sales declined largely due to a deleveraging on fixed costs resulting from lower sales, as well as extended service plan revenues discussed earlier. The rate decline was partially offset for structural cost saving, lower occupancy costs and inventory related costs. SG&A was approximately $266 million, down $145 million last year. The improvement to SG&A was primarily driven by lower labor and advertising expenses. Non-GAAP operating loss was $41.7 million and excludes pretax charges of $21.3 million related to impairment of long-lived assets, as well as $28.7 million in restructuring charges related to the Path to Brilliance transformation plans. Interest expense for the quarter was $9.4 million, down roughly 7% year-over-year. Second quarter non-GAAP EPS was a loss of $1.13, compared to…

Thank you. [Operator Instructions] The first question today comes from Paul Lejuez of Citi. Please go ahead.

Thanks. It’s Tracy filling in for Paul. I had two questions. First, I was wondering if you could tell us what you are seeing from your eComm customers. I think you mentioned the conversion was higher and the basket was higher, but I was wondering are they buying different categories and what does the customer look like in terms of demographic, if it’s a new customer? And I guess, prior to that, if you could say, whether you are getting more of a new customer or existing customer there? And then secondly, as you look towards holiday, I wonder if you could give us a sense of the newness you expect in your collections this year versus last year? Thanks.

So, I will take the first question on eCommerce. It’s been very interesting. So, jewelry has traditionally not been a category. This very well developed in eCommerce, maximizing and kind of leveling out of about 15% of sales. We have been able to break through that in the quarter, of course, in purpose because stores were closed, but also using our new digital selling tools. The other things that are changing are that jewelry was traditionally a lower average retail price on purchase online. We are seeing higher average transaction value in this quarter than we have seen in the past. It’s particularly higher when those virtual sales are consulted sales. So the over 300,000 appointments that we did with virtual consultants have a higher average transaction value even in this quarter then a normal eComm purchase, and we are definitely seeing more new customers, 40% of purchases this quarter came from new customers, many of those online and our customers that are purchasing are typically younger and more multi-cultural than we have seen before. So we are working very hard to continue to improve our digital experience. We think our new marketing tools and prospecting, especially as some other jewelry retailers are struggling gives us a tremendous opportunity for new customer acquisition and potential for a longer-term share gain.

So with respect to newness Tracy, we continue to see that we will have a consistent penetration of newness to last year. But importantly, what we have been able to do with our supply base is work with them to postpone some of our Mother’s Day launches, bring those in earlier in the season in the third quarter as well as work with them to ensure that we have our orders in and we get supply for the higher holiday selling season. So, we also have new launches -- more new launches within that penetration. So, we are feeling good about our ability to bring newness to the customers this coming holiday.

I will just add on that, one of the things that we are really focused on as part of our customer first strategy with an Path to Brilliance is getting kind of proprietary customer data, and our data indicates that 51% of jewelry customers are planning to shop earlier this holiday season than they have in the past, so we will be ready for that.

Thanks. Just one follow up on your comments that 40% of, I think, your eComm customers were new, did you mean new to Signet concept overall or just new to eComm at Signet?

New to Signet overall.

Great. Thank you.

The next question comes from Lorraine Hutchinson of Bank of America. Please go ahead.

Thanks. Good morning. I was hoping that you should comment on trends you are seeing in bridal both as the quarter progressed and then also if customers are seeming more willing to buy bridal, particularly engagements online versus prior periods?

So, I will start on that and then Joan you can jump in. We saw month-on-month improvements across the quarter in all of our folios including bridal. I would say, bridal has been particularly strong category for us online, especially as we have been able to bring counseled selling at scale. But it’s also been stronger in store, younger man are the most optimistic consumers right now and most interested in going back in stores. We are also seeing strong engagements happening. So our research indicates that over 50% of pre-engagement couples decided to quarantine together during COVID-19 and half of them say their relationship got stronger during COVID-19 with only 7% saying that their relationship worsened and that’s really we think a nice tailwind in our bridal business. We are also seeing a higher AUR in the bridal business in part because of our online consultation.

What I would add to that is we saw that continue as well into August, and interestingly we are seeing our best performance in some of our bigger brands which include Neil Lane, Le Vian, and Vera Wang, and we also continue to be pleased with the performance of the Chosen line at Jared.

We thought -- we have really upped our game over the last year in creating custom offerings for our customers. So now on Neil Lane and Vera Wang, for example, you can choose the diamond, choose the setting, really creative bespoke piece, and so that’s also been part of the driver in our strong bridal business.

Thanks. And then as you think about holiday, there will clearly still be some traffic constraints within your stores, and you spoke about your customers saying they’d shop earlier. So, what are the changes you are making to ensure that you can handle the types of volumes you usually see during those key holiday weeks and you can try to spread those out?

Look, I think, I mean, there is a lot of uncertainty in the back half of the year whether there will be resurgence of COVID, customer demand for more discretionary categories, the election, lots of things. So we are really focused on what we can control which is being ready to be the jewelry company that can serve customers this holiday season. Number one, our stores are safe. We have partnered with a leading healthcare authority and developed our proprietary program called Love Takes Care, which is really all about social distancing, both our store staff wearing masks and also complementary masks for customers and very frequent cleaning of high touch areas and every piece of jewelry. As Joan said earlier, we have shipped in our holiday newness earlier, and we feel very strongly about that newness. I think we have done a lot of learning over the last couple of years and very successfully last holiday to be more pinpointed in that newness and so that’s ready. We have gotten our online business ready. Our website are faster. They are easier to shop then they were a year ago. And as I mentioned in my prepared remarks, we have increased our eCommerce distribution capability, so that we can ship 5 times more packages this year anticipating that there will be more online sales. And then, also as I mentioned, we have been able to stand up virtual selling with more than half of our associates trained to be able to do that either from stores, if our stores are open or from their home, if our stores aren’t open. So we are ready and we are doing, obviously, a lot of work on new customer acquisition and prospecting to try to keep filling our funnel.

The only thing I would add on to that, Gina, is just flexible fulfillment work and the capabilities that we are investing in, 90% of our SKUs will be available for buy online, pickup in store for all of our U.S. banners. And our SNDC [ph] will be able to ship eCommerce orders increasing capacity, as Joan said. As well as, we have automated ship from store product to our customers and in not all of our banners but have provided a more improved manual approach in the after banners. So that’s our meaningful improvement for ours. And as we said, able eComm purchasing, we have expanded our credit options and have extended warranty plans online as well. So we have put forth lot of thought and a lot of effort into understanding how the customers may want to shop this holiday to prepare for them to shop however they would like to.

Thank you.

[Operator Instructions] The next question comes from Dana Telsey of Telsey Advisory Group. Please go ahead.

Good morning, everyone, and nice to see the progress. As you think about holiday season marketing spend, shipping costs, we have heard of earlier deadlines. How are you planning shipping costs, advertising this year as compared to last year? And also product introductions this year how are they different this year than last year, whether it is in terms of category or timing of introductions? Thank you.

Hi, Dana. Thank you. So couple of things, I would say, on that. One is earlier, so as I mentioned, we are getting our new products available in September online and in stores. In terms of newness, we are seeing big trends towards more meaningful and sentimental jewelry. I think COVID-19 has really caused customers to focus on relationships in new and different ways, with jewelry has been trending. So we have new launches across all of our banners. I am really excited about the journey collection that we have in Zales, journey kind of showcasing that life goes on and that we are resilient through a period like this. We also have very strong launches of sentimental concepts in both K. and in Jared. So I think we are adapting to this environment. I mentioned that we are strengthening our custom offering. We are seeing people more often want to customize their jewelry whether it’s engraving or choosing a diamond and I have spoke ring setting for their partners, so that’s another evolution that we have made and I don’t know Joan if you have anything to add to that.

No. I would only say on the shipping cost, we are aware of that. We have it in our plans and are working through that. We have -- we see that as we mentioned bringing in products a bit earlier and working with the vendors on that timing just to smooth it out a bit, Dana. And then, with respect to our marketing, we have an effective marketing mix. We believe that has a balance of nice balance of digital, social and linear to serve our customers and make sure we are speaking to them wherever they are and whatever time as they need to. So I don’t know if Gina, if you want to add anything on marketing.

Yeah. I mean just to say that over the last couple of years we have really switch to more than always on strategy. So while Signet used to spend the vast majority of our marketing in Q4, we have shifted to a much more balanced marketing message across the year and much more digital. So we can do more with less via our customer data platform, our dynamic content optimization really getting the right messaging to the right customers at the right time.

Thank you.

The next question comes from Ike Boruchow of Wells Fargo. Please go ahead.

Hey. Good morning, everyone. A couple of questions, so I am sorry if I missed this on the quarter-to-date the 10.9%, did you break that out stores versus eComm, I am just curious if there is any more color there? And then just on margins, I guess, in August on those very strong sales regarding commentary on merchandise margins on the home steady, is there anything going on from a promotional standpoint? And then I guess the last question of the three, apologies, now that you have got new occupancy savings and the comps are positive like should we begin to assume that your gross margins should be able to stabilize and maybe even begin to improve as we worked through the back half of the year? Thank you.

So I will take the first question. We did say that eCommerce sales held strong in August. I was particularly pleased to see that. So we have got to scale on our store re-openings by mid-July. We got to just north of 90% of stores opened and eCommerce sales held at over 65% in August. So to me this is the reinforcement of our belief that it’s the combination of Signet store footprint, our recognized jewelry expertise and these new digital capabilities, which is a competitive advantage for us in the jewelry category, given customer’s integrated shopping journey, which is both in-store and given the importance of trust and counseling especially in bridal sales. Joan take the…

With respect to margin, I know as we mentioned in the prepared remarks, that we -- it declined largely due to deleveraging on fixed cost, as well as both of those cost associated with the stores and distribution. It was also down this quarter on a merged margin level as a result of our clearance efforts and a higher penetration this year than last year. And we will continue to work through our plans and promote as we see appropriate throughout each quarter. And at this time we cannot give guidance on gross margin, but we remain committed to inventory discipline and inventory management, and working on efficiencies on our core replenishment as well.

Got it. Thank you.

Thank you. And now that’s the last question. I would like to turn the floor to Gina Drosos for any closing comments.

Great. Well, thanks everyone for joining us this morning. We are pleased with the progress we have made in Q2 and are well-prepared to serve our customers this holiday season and beyond. Again, to our Signet team members, we thank you for your extraordinary contributions and for your continued passion and commitment to our mission and core values. And to everyone listening we wish you and your families continued health and safety. Thank you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.