Good morning and welcome to the Signet Jewelers first quarter fiscal 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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 Vinny Sinisi, Senior Vice President, Investor Relations and Treasury. Please go ahead.

Great, thanks very much Jason, and good morning everyone. Welcome to our first quarter earnings conference call. On the call today are Signet’s CEO, Gina Drosos, and CFO Joan Hilson. During today’s presentation, we’ll make certain forward-looking statements. Any statements that are not historical fact are subject to a number of risks and uncertainties, and actual results may differ materially. We urge you to read risk factors, cautionary language, and other disclosures in our annual report on 10-K, quarterlies on 10-Q, and current reports on 8-K. 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’ll discuss certain non-GAAP financial measures. For further discussion of the non-GAAP measures as well as reconciliations of them to the most directly comparable GAAP measures, investors should review the news release we posted on our website at www.signetjewelers.com/investors. With that, I’ll turn the call over to Gina.

Thank you Vinny, and thanks to all of you who are on the call with us today. I also want to thank our Signet team members who continue to inspire me with their relentless dedication to our customers and to each other. We are embracing new capabilities in connected commerce with excellence, as evidenced in this quarter’s results. Thanks to our team, we built on the momentum of a very strong holiday performance and delivered both a strong Valentine’s Day and strong Mother’s Day by continuing to serve customers whenever, wherever, and however they choose to shop with us. Further to this, we are unlocking our team members’ potential. We know from listening and from our ongoing surveys that our team members are inspired by our purpose. They’re proud to be part of our organization, and they’re confident in the tightly integrated strategies that are guiding our growth. Our team members’ inspiration, pride, confidence, expertise, and growing digital capabilities are the most important drivers of my confidence in our long-term success. It is an honor to work at their side. As I review Signet’s performance in Q1, I want to leave you with three messages. Number one, we outperformed Q1 expectations and are raising our fiscal ’22 guidance today. Number two, we’re making steady progress in all four of our where to play strategic focus areas and all three of our how to win core strengths: consumer-inspired insights, connected commerce presence, and our culture of innovation and agility. We are continuing to expand these strengths because we know they are sources of competitive advantage. We’re outpacing market growth, and as a result we’re growing share. I’ll talk through each of these points, but first let’s look high level at the Q1 numbers. Total sales were $1.7 billion, an increase of…

Thanks Gina. Hello everyone. Inspiring Brilliance is advancing our transformation and has accelerated our growth to deliver a strong first quarter performance. Our top line is outpacing the U.S. specialty jewelry market and we believe we are winning share, particularly in the midmarket. There are four key highlights this quarter. First, our financial performance was strong in the quarter as we grew our top and bottom lines on a lower store base. We grew our top line through higher conversion and average order value despite lower traffic. Our top line strength was complemented by our continued cost discipline and leveraging of our fixed cost base. Second, our balance sheet is strong. Efficient use of working capital through inventory reduction and spend management delivered an increase in liquidity to last year. Third, we successfully executed new credit agreements resulting in benefits to our customers and favorable economics to Signet, reflected in our raise of cost savings guidance. Lastly, we’re committed to invest in Signet’s growth and are raising our capital expenditures for the fiscal year. We are investing in our talent, banner differentiation, and technology. We are also pleased to announce today the reinstatement of a common dividend, demonstrating our confidence in cash flows and business performance despite our conservative view of the back half. Turning to the quarter, first quarter total sales grew 98.2% over last year on a lower store base. Our sales growth was broad-based. We saw strong performance across formats, regions, channels, and categories. While overall jewelry category trends remain healthy, we continue to outpace the market growth. According to MasterCard data, the U.S. specialty jewelry market grew over 72% for the three months ending in April. Compared to that market growth, our U.S. banners grew total sales more than 109% this quarter. Our integrated strategic choices,…

[Operator instructions] Our first question comes from Paul Lejuez from Citi. Please go ahead.

Hey, thanks guys. A couple questions. One, just remind us what percent of your product comes from India, what you’re seeing currently in terms of delays. Second, you mentioned you’re planning an increase in marketing spend. I’m curious if you could just size that for us? What are you comparing that to when you say an increase, how does it look versus 2019 levels? Then last, curious if you could just share the performance of stores that you’ve got that share a center with another one of your banners versus those that standalone in the center. Thanks.

Hi Paul. I’ll start out on the India question. We haven’t actually given a percentage of merchandise that comes from any different country, but let me answer your question in a different way. First and foremost, we’re very concerned about the families and teams of our India partners - it’s one of the reasons why we made the donation to the Gajera Trust that I offered earlier, or talked about earlier. We’ve also been in very close touch with our vendors on their production planning. We have actually pulled forward significantly our holiday orders, and what this does is, it gives our vendors the opportunity to better plan their production, and as they do that, they can create more social distancing, keep their employees safe, that kind of thing. As we look at their capacity, even as some of them are running in the 50% range or in the 70% range of capacity, we believe that we have secured sufficient capacity to deliver the orders that we need between now and holiday. Part of this comes because we’ve really strengthened our relationship with strategic vendors over the last couple of years, we’ve narrowed that vendor base, and as we’ve worked with those vendors, they’ve diversified their production capabilities so they’re not singularly in India for production. Many of them have expanded to other markets whether that’s China or Thailand or Vietnam, and so we’re able to access those production sites as well, so any disruption that we might see from this year, we’ve already factored into our guidance.

And Paul, with respect to marketing, our expense marketing increases and spend are reflected as well in our guidance, and I would remind you that as we said in the past, we can leverage our cost base on a slightly positive comp, so that’s in our thinking as well. In Q1, you can see that we were able to leverage our costs significantly, and that as well had an incremental marketing spend, so marketing for us is an effective mix of digital and social, and we are working that on a day-by-day, week-by-week basis with our marketing team, so we feel very good about our ability to be flexible and we’re holding the marketing spend within our guidance because of as the year progresses and the relative uncertainty of the back half, and the potential shift of customer behavior to travel and other experience-oriented categories, we believe that’s very important for us to maintain that flexibility. With respect to real estate and multiple banners in specific malls, as we said in the past for our data analytics, we look at our real estate on a trade area basis, and so we do have clearly, locations with multiple banners of Pagoda, Zales, Kay, Jared, JamesAllen, and what we find is that it’s based on the market. We don’t see a distinctive difference between banners within a specific mall, and as I mentioned in my remarks, we saw strong performance across category, geography, real estate, so we’re really not seeing a distinctive difference. It’s strong across all.

Got it, thank you. Good luck.

Thank you.

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

Congratulations on the nice progress. As you look at the average transaction value, up both obviously in North America and international, how are you thinking about pricing, and was it in any particular category where you’re seeing the change, and just any other particular category call-outs, particularly as we go into the back half of the year, and any product and marketing initiatives we should be watching for? Thank you.

Hi Dana, thanks so much. I’ll start on that one. The ATV increases that we’re seeing are actually broad-based, so we saw them both in brick and mortar and in ecommerce, and we saw them across our banners, and we saw it in both bridal and fashion. We would credit that to a couple of things. One is I think we’re doing a better job getting the right customers to the right banner based on all of our targeted marketing and our new, more distinctive banner value propositions, and then we’re better targeting the assortments that we have available in those banners. We anticipated that there would be some tailwinds from stimulus and tax refund checks, and we actually broadened our assortment to reach more price points so that when we had customers either interact with us online or in store, we could get higher conversion rates - that’s what we saw, and particularly when we have a counseled sale, so for example in ecomm when someone interacts with one of our virtual consultants versus just navigating fully on their own, we’re seeing that ATV is up substantially, so that consultation really makes a difference to give customers confidence in the product that they’re buying. So broad-based, and I think also reflective of some of the new strategies that we’re putting in place.

Then with respect to the product and marketing initiatives that I would just add on here, Dana, as Gina cited a point that in our biggest banners, we were able to attract 60% of our growth was related to new customers, so I think that speaks to the strength of marketing and reaching out to our customers at the right time and having the right offer for them to support that average transaction value growth.

Got it, and just one follow-up. Inventory levels, how are you planning inventory levels in the second quarter and balance of the year?

What we’re really pleased with, Dana, is that we’ve been able to continue on our working capital disciplines and the lifecycle management, and as Gina said inventory management is now institutionalized and as we think about that, that means the flexible fulfillment, the ship from store automation, buy online pick-up in store, and then having our inventory, all of our product -- nearly all of our product available to all of our customers irrespective of channel is what we’re going to continue to work through and drive our assortment and drive our inventory efficiency. Importantly, this is opening up our ability and the product team’s ability to bring in a more frequent flow of new product, and particularly important as well, when we think about the self purchaser and the fashion customer, so really pleased with how the inventory is being managed by the teams.

I guess the one thing I would add on that is lifecycle management, where also because we’re accessing product across our store base nationally, we’re able to move more quickly through a markdown cycle, and so we’re seeing that happen in a higher margin way, which is also a benefit for the business.

Thank you.

The next question comes from Tim Vierengel from Northcoast Research. Please go ahead.

Good morning and thank you for taking my question. I was wondering if you guys could just spend a minute walking us through your capex, the increase there, and maybe in a longer term sense give us an idea of where you feel you are, maybe in terms of a baseball analogy, what inning we are in, in terms of the investments you want to make into technology and stuff there. Thanks.

With respect to our capital investment and our increase, it’s really about continuing to drive on digital and technology innovation, and we spoke about at our investor day our harmonization process is still underway. We believe we have some time to go on that, another year or so, and then the digital investments are ongoing and we are pulling forward and accelerating the things that we believe have the greatest opportunity for growth and can better serve our customers and remove friction and just integrate connected commerce in a more powerful way. That’s our focus, and that will continue throughout the next couple of years, and really it supports our vision in Inspiring Brilliance that we’re looking to connect our customer wherever and whenever and however they want to shop, Tim.

And I think in terms of the longer term question that you asked, we are a company who is hungry and believes in continual improvement, so I think no matter what phase of the transformation we were in, I would say third inning. That’s because we feel good about the progress that we’re making, we’ve laid a strong foundation, we believe that we are building competitive strengths that are enduring and can lead to long term, sustainable growth, but we always think about the hard work ahead to really make that a reality and never lose sight of the goal, which of course is winning the World Series. Thanks for the opportunity on the sports analogy!

That’s great color, I appreciate that. I guess one little thing - you mentioned merchandise margin was up during the quarter. It seems across all of retail, retailers are getting the prices they want with limited promotional activity. Can you walk us through whether your guys’ promotional strategy has changed as you’ve seen the demand just surge, at least short term? I think long term, you kind of indicated that you’d manage it to in order to capture better sales, but can you just walk us through how you guys are thinking about promotions one more time?

Sure, thank you. From the perspective of merch margin, the life cycle management itself is helping to really improve--our margin is benefiting from the life cycle management activity, but from a promotional perspective, what we found is that we are--because of that, we are able to have leaner markdowns and able to--you know, you can see that in our average transaction value, so promotions we’re not necessarily pulling back but it’s not as widely cast when we do run a promotion - that’s number one. Two, the assortment itself and the newness is really--the customer is responding to it, so the need for promotion is less and we’re really pleased with that. As Gina said earlier, the ATV or the assortment lift that we’re seeing is broad-based, so it’s across fashion and core product in bridal, so it’s really a healthy inventory, it’s great lifecycle management by the team, and continued evaluation of where we need to take our price points.

Thank you.

Again if you have a question, please press star then one. The next question comes from Lorraine Hutchinson from Bank of America. Please go ahead.

Thanks, good morning. I wanted to follow up on the commentary on the enhanced relationship with your credit partners. What’s the mix of sales from each type of credit at this point, and can you compare the profitability of sales to your various payment options?

What we can see is that the customer right now, Lorraine, is really--there’s a mix shift in bank card use versus PLCC versus leasing, and we’re seeing the customer being able to make a choice, which is what’s really important for us, is for them to have a choice and have opportunities to buy jewelry through whatever works best for them. With the change in providers, what we’re seeing--or the change in the agreements and the new agreements we just signed, we’re seeing that the economic benefit is that ADS and Genesis, through the second look program with Genesis and ADS is the prime provider, they’re able to offer that to a wider array of customers that would have been purchased through the non-prime provider in the past, so that’s where the benefit is coming from. We’re really pleased with the opportunity to harmonize that program as well across our customer base, so it’s a customer benefit that we can also offer more promotional programs with them. The other benefit that I would just highlight, as I mentioned in my remarks, is that with the non-binding letter of intent, that would--as we move forward and get to a definitive agreement, that would remove consumer credit risk from our balance sheet, importantly.

The other thing I would just add is from the consumer perspective, the variety of finance options that we are now offering is highly appealing. It was a much more narrow set in the past, but for example, online attachment rate for financing alternatives historically has always been lower, but we’re seeing that grow dramatically, and particularly among Gen Z customers we’re seeing our Affirm split pay product grow. About 60% of the usage of that product is Gen Z, so we’re really thinking more strategically about having a mix of financing options that appeal to customers across channels and across demographics.

Thank you.

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

Hey, good morning everyone. I guess just two questions from me. On the back half comp guidance, can you just maybe give us some insights into how you’re thinking about the negative comp, meaning traffic, how you expect it to worsen. Just kind of curious what’s going through your thought process, because the business is obviously doing so well in real time but you obviously have some tough compares, so any help there would be great. Then maybe Joan, just on inflation, clearly there is inflation in a lot of the key inputs that you have - gold, silver, diamonds. Can you talk about that? Is that impacting you this year, is that more of a 2022 dynamic that we need to keep in mind? Just anything there would also be helpful.

Great, thanks Ike. As you noted, the back half of the year remains hard to predict, for the reasons that I detailed, but we think there are both headwinds and tailwinds. As we think about the tailwinds, consumers coming back to the office and the shopping that might entail may include accessorizing as well. We see, to your point on gold, we see continued strength in gold and believe that that is a solid trend, and it’s also a fashion trend so from a fashion perspective, we think that there is strength there. But as we think about the headwinds, the larger headwinds, the pent-up demand for experience-based sectors like vacations and restaurants and movies, that’s the unknown that we’re just preparing for, and as we mentioned, we’re prepared to--we have marketing in place, as reflected in our guidance, to do what we can do to control that. Also as you mentioned, we did have back half comp last year that was a positive 10%, so we believe that we need to conservatively plan, be realistic, but do the things that we can do within our strategies to drive our business. We are having traction, as we’ve mentioned, with our Inspiring Brilliance strategy, so we’re seeing that come to life through our marketing, our product and our new capabilities, and as we mentioned, we’re growing market share, so we’ll lean into the good things that we’re doing and control the things that we can.

And on inflation?

On inflation, what we’re seeing is very interesting. There is elasticity in gold, and the strength in gold is something that we’re able to work through from a pricing perspective and really work with our vendor base to present product to our customers that enables them to continue to buy gold, even with rising prices, so that’s that. Then as we look the vendor networks that we do have, our relationships are very strong and we’re able to work with our vendor teams to put product together to satisfy our customers and continue to drive the economics that we need to drive to support our business.

I guess what I’m asking is the inventory turns for you guys is very slow, so the inflation we’re seeing now is really going to come through next year. Is there anything from an AUC perspective that we should keep in mind, that you’ll be coming up against, I guess 12 months from now?

What we’re seeing is that we’re able to navigate currently, and so as we’re buying through our product now, that we’re able to work our way through it. We’ll continue to do so as we progress through the year, and if we see anything different, we’ll be sure to work through that and comment on it in the future.

Okay, thanks.

This concludes our question and answer session. I would like to turn the conference back over to Gina Drosos for any closing remarks.

Well, thank you again everyone for your questions and your ongoing engagement in our business. We were pleased with our organization’s performance this past quarter and confident in our ability to deliver the guidance we’ve shared here today. I want to thank our team members and partners for their dedication, agility and excellence as we move into this next phase of our transformation. Thank you.

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