SEC Info - Signet Jewelers Ltd. - ‘10-Q’ for 10/29/22

(in millions)

Pre-tax
amount

Tax
(expense)
benefit

After-tax
amount

Pre-tax
amount

Tax
(expense)
benefit

After-tax
amount

Net income

i 37.5

i 92.6

Other comprehensive income (loss):

Foreign currency translation adjustments

( i 18.6)

i —

( i 18.6)

( i 4.3)

i —

( i 4.3)

Available-for-sale securities:

Unrealized loss

( i 0.3)

i —

( i 0.3)

( i 0.1)

i —

( i 0.1)

Cash flow hedges:

Unrealized gain

i 0.8

( i 0.2)

i 0.6

i 0.4

i —

i 0.4

Reclassification adjustment for (gains) losses to earnings

( i 0.4)

i 0.2

( i 0.2)

i 0.1

i —

i 0.1

Pension plan:

Actuarial loss

i —

( i 72.9)

i 14.0

( i 58.9)

Reclassification adjustment for amortization of actuarial losses to earnings

i 1.0

( i 0.2)

i 0.8

i 1.0

( i 0.2)

i 0.8

Reclassification adjustment for amortization of net prior service costs to earnings

i 0.1

i —

i 0.1

i —

Total other comprehensive loss

( i 17.4)

( i 0.2)

( i 17.6)

( i 75.8)

i 13.8

( i 62.0)

Total comprehensive income

i 19.9

i 30.6

39 weeks ended

(in millions)

Pre-tax
amount

Tax
(expense)
benefit

After-tax
amount

Pre-tax
amount

Tax
(expense)
benefit

After-tax
amount

Net income

i 99.4

i 455.6

Other comprehensive income (loss):

Foreign currency translation adjustments

( i 42.5)

i —

( i 42.5)

i 3.1

i —

i 3.1

Available-for-sale securities:

Unrealized loss

( i 0.6)

i —

( i 0.6)

( i 0.2)

i —

( i 0.2)

Cash flow hedges:

Unrealized gain

i 2.6

( i 0.4)

i 2.2

i 0.2

i —

i 0.2

Reclassification adjustment for (gains) losses to earnings

( i 0.7)

i 0.2

( i 0.5)

i 0.6

( i 0.1)

i 0.5

Pension plan:

Actuarial loss

( i 0.5)

i 0.1

( i 0.4)

( i 72.9)

i 14.0

( i 58.9)

Reclassification adjustment for amortization of actuarial losses to earnings

i 3.0

( i 0.4)

i 2.6

i 1.4

( i 0.3)

i 1.1

Reclassification adjustment for amortization of net prior service costs to earnings

i 0.3

i —

i 0.3

i 0.1

i —

i 0.1

Reclassification adjustment for pension settlement loss to earnings

i 132.8

( i 25.2)

i 107.6

i —

Total other comprehensive income (loss)

i 94.4

( i 25.7)

i 68.7

( i 67.7)

i 13.6

( i 54.1)

Total comprehensive income

i 168.1

i 401.5

The accompanying notes are an integral part of these condensed consolidated financial statements.

SIGNET JEWELERS LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except par value per share amount)

Notes

Assets

Current assets:

Cash and cash equivalents

i 327.3

i 1,418.3

i 1,516.9

Accounts receivable

i 29.8

i 19.9

i 19.3

Other current assets

i 180.1

i 208.6

i 194.9

Income taxes

i 222.0

i 23.2

i 115.4

Inventories

i 2,429.0

i 2,060.4

i 2,148.3

Total current assets

i 3,188.2

i 3,730.4

i 3,994.8

Non-current assets:

Property, plant and equipment, net of accumulated depreciation and amortization of $ i 1,313.0 (January 29, 2022 and October 30, 2021: $ i 1,248.9 and $ i 1,275.1, respectively)

i 591.6

i 575.9

i 513.2

Operating lease right-of-use assets

i 1,091.5

i 1,206.6

i 1,195.3

Goodwill

i 752.3

i 484.6

i 245.0

Intangible assets, net

i 413.5

i 314.2

i 189.2

Other assets

i 275.8

i 226.1

i 215.0

Deferred tax assets

i 33.1

i 37.3

i 35.0

Total assets

i 6,346.0

i 6,575.1

i 6,387.5

Liabilities, Redeemable convertible preferred shares, and Shareholders’ equity

Current liabilities:

Loans and overdrafts

i —

i 0.3

Accounts payable

i 800.2

i 899.8

i 868.2

Accrued expenses and other current liabilities

i 623.2

i 501.6

i 469.2

Deferred revenue

i 335.3

i 341.3

i 307.0

Operating lease liabilities

i 266.1

i 300.0

i 304.4

Income taxes

i 22.7

i 28.0

i 22.7

Total current liabilities

i 2,047.5

i 2,070.7

i 1,971.8

Non-current liabilities:

Long-term debt

i 147.3

i 147.1

i 147.0

Operating lease liabilities

i 917.0

i 1,005.1

i 994.0

Other liabilities

i 98.8

i 117.6

i 129.1

Deferred revenue

i 878.1

i 857.6

i 813.2

Deferred tax liabilities

i 245.8

i 160.9

i 146.1

Total liabilities

i 4,334.5

i 4,359.0

i 4,201.2

Commitments and contingencies

Series A redeemable convertible preferred shares of $ i i i .01 / / par value: authorized i i i 500 / / shares, i 0.625 shares outstanding (January 29, 2022 and October 30, 2021: i i 0.625 / shares outstanding, respectively)

i 653.4

i 652.1

i 651.7

Shareholders’ equity:

Common shares of $ i i i .18 / / par value: authorized i i i 500 / / shares, i 45.9 shares outstanding (January 29, 2022 and October 30, 2021: i 49.9 and i 52.6 outstanding, respectively)

i 12.6

Additional paid-in capital

i 252.3

i 231.2

i 271.8

Other reserves

i 0.4

Treasury shares at cost: i 24.1 shares (January 29, 2022 and October 30, 2021: i 20.1 and i 17.4 shares, respectively)

( i 1,510.2)

( i 1,206.7)

( i 986.3)

Retained earnings

i 2,885.2

i 2,877.4

i 2,580.7

Accumulated other comprehensive loss

( i 282.2)

( i 350.9)

( i 344.6)

Total shareholders’ equity

i 1,358.1

i 1,564.0

i 1,534.6

Total liabilities, redeemable convertible preferred shares and shareholders’ equity

i 6,346.0

i 6,575.1

i 6,387.5

The accompanying notes are an integral part of these condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

39 weeks ended

(in millions)

Cash flows from operating activities

Net income

i 99.4

i 455.6

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization

i 123.5

i 122.9

Amortization of unfavorable contracts

( i 1.4)

( i 2.9)

Share-based compensation

i 34.3

i 36.4

Deferred taxation

i 63.2

( i 20.1)

Pension settlement loss

i 132.8

i —

Other non-cash movements

i 7.8

i 4.0

Changes in operating assets and liabilities, net of acquisitions:

(Increase) decrease in accounts receivable

( i 9.9)

i 13.0

Proceeds from sale of in-house finance receivables

i —

i 81.3

Decrease (increase) in other assets and other receivables

i 0.6

( i 12.9)

Increase in inventories

( i 305.6)

( i 112.1)

(Decrease) increase in accounts payable

( i 177.6)

i 36.8

Increase (decrease) in accrued expenses and other liabilities

i 105.6

( i 25.6)

Change in operating lease assets and liabilities

( i 5.9)

( i 59.9)

(Decrease) increase in deferred revenue

( i 7.0)

i 47.1

Change in income tax receivable and payable

( i 206.1)

( i 67.3)

Pension plan contributions

( i 9.2)

( i 12.4)

Net cash (used in) provided by operating activities

( i 155.5)

i 483.9

Investing activities

Purchase of property, plant and equipment

( i 94.3)

( i 50.5)

Acquisitions, net of cash acquired

( i 397.8)

( i 14.6)

Other investing activities, net

( i 16.3)

i 2.1

Net cash used in investing activities

( i 508.4)

( i 63.0)

Financing activities

Dividends paid on common shares

( i 27.4)

( i 9.5)

Dividends paid on redeemable convertible preferred shares

( i 24.6)

( i 16.4)

Repurchase of common shares

( i 311.2)

( i 41.1)

Payment of debt issuance costs

i —

( i 3.9)

Increase of bank overdrafts

i —

i 0.3

Other financing activities, net

( i 44.3)

( i 7.5)

Net cash used in financing activities

( i 407.5)

( i 78.1)

Cash and cash equivalents at beginning of period

i 1,418.3

i 1,172.5

(Decrease) increase in cash and cash equivalents

( i 1,071.4)

i 342.8

Effect of exchange rate changes on cash and cash equivalents

( i 19.6)

i 1.6

Cash and cash equivalents at end of period

i 327.3

i 1,516.9

The accompanying notes are an integral part of these condensed consolidated financial statements.

SIGNET JEWELERS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in millions)

Common
shares at
par value

Additional
paid-in
capital

Other
reserves

Treasury
shares

Retained
earnings

Accumulated other
comprehensive
loss

Total
shareholders’
equity

Balance at January 29, 2022

i 12.6

i 231.2

i 0.4

( i 1,206.7)

i 2,877.4

( i 350.9)

i 1,564.0

Net loss

—

( i 83.5)

—

( i 83.5)

Other comprehensive income

—

i 91.2

Dividends declared:

Common shares, $ i 0.20/share

—

( i 9.3)

—

( i 9.3)

Preferred shares, $ i 13.14/share

—

( i 8.6)

—

( i 8.6)

Repurchase of common shares

—

i 50.0

—

( i 318.2)

—

( i 268.2)

Net settlement of equity-based awards

—

( i 54.9)

—

i 50.7

( i 35.1)

—

( i 39.3)

Share-based compensation expense

—

i 10.5

—

i 10.5

Balance at April 30, 2022

i 12.6

i 236.8

i 0.4

( i 1,474.2)

i 2,740.9

( i 259.7)

i 1,256.8

Net income

—

i 145.4

—

i 145.4

Other comprehensive loss

—

( i 4.9)

Dividends declared:

Common shares, $ i 0.20/share

—

( i 9.2)

—

( i 9.2)

Preferred shares, $ i 13.14/share

—

( i 8.6)

—

( i 8.6)

Repurchase of common shares

—

( i 22.8)

—

( i 22.8)

Net settlement of equity-based awards

—

( i 3.6)

—

i 2.6

( i 0.2)

—

( i 1.2)

Share-based compensation expense

—

i 12.4

—

i 12.4

Balance at July 30, 2022

i 12.6

i 245.6

i 0.4

( i 1,494.4)

i 2,868.3

( i 264.6)

i 1,367.9

Net income

—

i 37.5

—

i 37.5

Other comprehensive loss

—

( i 17.6)

Dividends declared:

Common shares, $ i 0.20/share

—

( i 9.2)

—

( i 9.2)

Preferred shares, $ i 13.14/share

—

( i 8.7)

—

( i 8.7)

Repurchase of common shares

—

i —

—

( i 20.2)

—

( i 20.2)

Net settlement of equity-based awards

—

( i 4.7)

—

i 4.4

( i 2.7)

—

( i 3.0)

Share-based compensation expense

—

i 11.4

—

i 11.4

Balance at October 29, 2022

i 12.6

i 252.3

i 0.4

( i 1,510.2)

i 2,885.2

( i 282.2)

i 1,358.1

(in millions)

Common
shares at
par value

Additional
paid-in
capital

Other
reserves

Treasury
shares

Retained
earnings

Accumulated
other
comprehensive
loss

Total
shareholders’
equity

Balance at January 30, 2021

i 12.6

i 258.8

i 0.4

( i 980.2)

i 2,189.2

( i 290.5)

i 1,190.3

Net income

—

i 138.4

—

i 138.4

Other comprehensive income

—

i 6.9

Dividends declared:

Preferred shares, $ i 13.14/share

—

( i 8.6)

—

( i 8.6)

Net settlement of equity-based awards

—

( i 14.6)

—

i 15.0

( i 14.8)

—

( i 14.4)

Share-based compensation expense

—

i 8.0

—

i 8.0

Balance at May 1, 2021

i 12.6

i 252.2

i 0.4

( i 965.2)

i 2,304.2

( i 283.6)

i 1,320.6

Net income

—

i 224.6

—

i 224.6

Other comprehensive income

—

i 1.0

Dividends declared:

Common shares, $ i 0.18/share

—

( i 9.5)

—

( i 9.5)

Preferred shares, $ i 13.14/share

—

( i 8.6)

—

( i 8.6)

Net settlement of equity based awards

—

( i 2.9)

—

i 14.2

( i 1.4)

—

i 9.9

Share-based compensation expense

—

i 17.5

—

i 17.5

Balance at July 31, 2021

i 12.6

i 266.8

i 0.4

( i 951.0)

i 2,509.3

( i 282.6)

i 1,555.5

Net income

—

i 92.6

—

i 92.6

Other comprehensive loss

—

( i 62.0)

Dividends declared:

Common shares, $ i 0.18/share

—

( i 9.5)

—

( i 9.5)

Preferred shares, $ i 13.14/share

—

( i 8.7)

—

( i 8.7)

Repurchase of common shares

—

( i 41.1)

—

( i 41.1)

Net settlement of equity based awards

—

( i 5.9)

—

i 5.8

( i 3.0)

—

( i 3.1)

Share-based compensation expense

—

i 10.9

—

i 10.9

Balance at October 30, 2021

i 12.6

i 271.8

i 0.4

( i 986.3)

i 2,580.7

( i 344.6)

i 1,534.6

The accompanying notes are an integral part of these condensed consolidated financial statements.

SIGNET JEWELERS LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. i Organization and principal accounting policies

Signet Jewelers Limited (“Signet” or the “Company”), a holding company incorporated in Bermuda, is the world’s largest retailer of diamond jewelry. The Company operates through its 100% owned subsidiaries with sales primarily in the United States (“US”), United Kingdom (“UK”) and Canada. Signet manages its business as i three reportable segments: North America, International, and Other. The “Other” reportable segment primarily consists of subsidiaries involved in the purchasing and conversion of rough diamonds to polished stones. See Note 5 for additional discussion of the Company’s reportable segments.

Signet’s business is seasonal, with the fourth quarter historically accounting for approximately i 35- i 40% of annual sales as well as accounting for a substantial portion of the annual operating profit.

Risks and Uncertainties - COVID-19

In December 2019, a novel coronavirus (“COVID-19”) was identified in Wuhan, China. During Fiscal 2021, the Company experienced significant disruption to its business, specifically in its retail store operations through temporary closures during the first half of the year. By the end of the third quarter of Fiscal 2021, the Company had re-opened substantially all of its stores. However, during the fourth quarter of Fiscal 2021, both the UK and certain Canadian provinces re-established mandated temporary closure of non-essential businesses. The UK stores began to reopen in April 2021, while the Canadian stores began reopening in the second quarter of Fiscal 2022.

The full extent and duration of the impact of COVID-19 on the Company’s operations and financial performance remains dependent upon the extent and duration of factors such as changes in customer behavior and potential shifts in discretionary spending, the post-pandemic impact of inflation from macroeconomic factors, the impact on the Company’s global supply chain, as well as the risk of possible resurgence of COVID-19 (including through variants). The Company will continue to evaluate the impact of COVID-19 on its business, results of operations and cash flows throughout Fiscal 2023 Fiscal 2023, including the potential impacts on various estimates and assumptions inherent in the preparation of the condensed consolidated financial statements.

Basis of preparation

The condensed consolidated financial statements of Signet are prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with US generally accepted accounting principles (“US GAAP”) have been condensed or omitted from this report, as is permitted by such rules and regulations. Intercompany transactions and balances have been eliminated in consolidation. Signet has reclassified certain prior year amounts to conform to the current year presentation. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods. The results for interim periods are not necessarily indicative of the results that may be expected for any other interim period. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in Signet’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022 filed with the SEC on March 17, 2022.

The preparation of these condensed consolidated financial statements, in conformity with US GAAP and SEC regulations for interim reporting, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Estimates and assumptions are primarily made in relation to the valuation of inventories, deferred revenue, derivatives, employee benefits, income taxes, contingencies, leases, asset impairments for goodwill, indefinite-lived intangible and long-lived assets and the depreciation and amortization of long-lived assets.

The Company’s fiscal year ends on the Saturday nearest to January 31st. Fiscal 2023 and Fiscal 2022 refer to the 52 week periods ending January 28, 2023 and ended January 29, 2022, respectively. Within these condensed consolidated financial statements, the third quarter and year to date period of the relevant fiscal years 2023 and 2022 refer to the 13 and 39 weeks ended October 29, 2022 and October 30, 2021, respectively.

Foreign currency translation

The financial position and operating results of certain foreign operations, including certain subsidiaries operating in the UK as part of the International reportable segment and Canada as part of the North America reportable segment, are consolidated using the local currency as the functional currency. Assets and liabilities are translated at the rates of exchange on the balance sheet date, and revenues and expenses are translated at the monthly average rates of exchange during the period. Resulting translation gains or losses are included in the accompanying condensed consolidated statements of shareholders’ equity as a component of accumulated other comprehensive income (loss) (“AOCI”). Gains or losses resulting from foreign currency transactions are included in other operating income (expense) within the condensed consolidated statements of operations.

See Note 9 for additional information regarding the Company’s foreign currency translation.

Investment in Sasmat

During the 13 weeks ended July 30, 2022, the Company acquired a i 25% interest in Sasmat Retail, S.L (“Sasmat”) for $ i 17.1 million in cash. Sasmat is a Spanish jewelry retailer specializing in online selling, with i five brick and mortar locations. Under the terms of the agreement, the Company has the option to acquire the remaining i 75% of Sasmat exercisable at the earlier of i three years or upon Sasmat reaching certain revenue targets as defined in the agreement. The Company is applying the equity method of accounting to the Sasmat investment. The Sasmat investment is recorded within other noncurrent assets in the condensed consolidated balance sheets. The Sasmat investment did not have a material impact on Signet’s condensed consolidated statements of operations during the 13 and 39 weeks ended October 29, 2022.

2. i New accounting pronouncements

The following section provides a description of new accounting pronouncements ("Accounting Standard Update" or "ASU") issued by the Financial Accounting Standards Board ("FASB") that are applicable to the Company.

New accounting pronouncements recently adopted

There were no new accounting pronouncements adopted during Fiscal 2023 that have had a material impact on the Company’s financial position or results of operations.

New accounting pronouncements issued but not yet adopted

There are no new accounting pronouncements issued but not yet adopted that are expected to have a material impact on the Company’s financial position or results of operations in future periods.

3. i Revenue recognition

The following table provides the Company’s total sales, disaggregated by banner, for the 13 and 39 weeks ended October 29, 2022 and October 30, 2021:

13 weeks ended October 29, 2022

13 weeks ended October 30, 2021

(in millions)

North America

International

Other

Consolidated

North America

International

Other

Consolidated

Sales by banner:

Kay

i 535.6

i —

i 535.6

i 573.4

i —

i 573.4

Zales

i 263.2

i —

i 263.2

i 291.9

i —

i 291.9

Jared

i 267.7

i —

i 267.7

i 277.1

i —

i 277.1

Digital banners(1)

i 156.6

i —

i 156.6

i 90.4

Diamonds Direct

i 106.4

i —

i 106.4

i —

Banter by Piercing Pagoda

i 82.9

i —

i 82.9

i 111.4

i —

i 111.4

Peoples

i 40.0

i —

i 40.0

i 45.9

i —

i 45.9

International segment banners

i —

i 95.3

i —

i 95.3

i —

i 120.9

i —

i 120.9

Other (2)

i 12.4

i —

i 22.6

i 35.0

i 4.1

i —

i 22.7

i 26.8

Total sales

i 1,464.8

i 95.3

i 22.6

i 1,582.7

i 1,394.2

i 120.9

i 22.7

i 1,537.8

39 weeks ended October 29, 2022

39 weeks ended October 30, 2021

(in millions)

North America

International

Other

Consolidated

North America

International

Other

Consolidated

Sales by banner:

Kay

i 1,820.4

i —

i 1,820.4

i 1,923.8

i —

i 1,923.8

Zales

i 929.0

i —

i 929.0

i 1,030.0

i —

i 1,030.0

Jared

i 885.3

i —

i 885.3

i 873.1

i —

i 873.1

Digital banners(1)

i 338.5

i 300.7

Diamonds Direct

i 325.7

i —

i 325.7

i —

Banter by Piercing Pagoda

i 302.1

i —

i 302.1

i 399.0

i —

i 399.0

Peoples

i 133.2

i —

i 133.2

i 121.9

i —

i 121.9

International segment banners

i —

i 316.9

i —

i 316.9

i —

i 309.0

i —

i 309.0

Other (2)

i 52.0

i —

i 72.8

i 124.8

i 9.4

i —

i 47.8

i 57.2

Total sales

i 4,786.2

i 316.9

i 72.8

i 5,175.9

i 4,657.9

i 309.0

i 47.8

i 5,014.7

(1) Includes sales from the Company’s digitally native banners, James Allen and Blue Nile.

(2) Other primarily includes sales from Signet’s diamond sourcing initiative, loose diamonds and Rocksbox.

The following table provides the Company’s total sales, disaggregated by major product, for the 13 and 39 weeks ended October 29, 2022 and October 30, 2021:

13 weeks ended October 29, 2022

13 weeks ended October 30, 2021

(in millions)

North America

International

Other

Consolidated

North America

International

Other

Consolidated

Sales by product:

Bridal

i 729.2

i 39.9

i —

i 769.1

i 640.9

i 57.3

i —

i 698.2

Fashion

i 496.4

i 16.4

i —

i 512.8

i 524.6

i 23.3

i —

i 547.9

Watches

i 45.0

i 33.0

i —

i 78.0

i 48.7

i 44.0

i —

i 92.7

Services (1)

i 155.3

i 6.0

i —

i 161.3

i 143.8

( i 3.7)

i —

i 140.1

Other (2)

i 38.9

i —

i 22.6

i 61.5

i 36.2

i —

i 22.7

i 58.9

Total sales

i 1,464.8

i 95.3

i 22.6

i 1,582.7

i 1,394.2

i 120.9

i 22.7

i 1,537.8

39 weeks ended October 29, 2022

39 weeks ended October 30, 2021

(in millions)

North America

International

Other

Consolidated

North America

International

Other

Consolidated

Sales by product:

Bridal

i 2,247.1

i 139.2

i —

i 2,386.3

i 2,064.5

i 146.8

i —

i 2,211.3

Fashion

i 1,764.2

i 52.0

i —

i 1,816.2

i 1,866.7

i 53.7

i —

i 1,920.4

Watches

i 150.0

i 106.1

i —

i 256.1

i 154.2

i 102.2

i —

i 256.4

Services (1)

i 484.8

i 19.6

i —

i 504.4

i 440.8

i 6.3

i —

i 447.1

Other (2)

i 140.1

i —

i 72.8

i 212.9

i 131.7

i —

i 47.8

i 179.5

Total sales

i 4,786.2

i 316.9

i 72.8

i 5,175.9

i 4,657.9

i 309.0

i 47.8

i 5,014.7

(1) Services primarily includes sales from service plans, repairs and subscriptions.

(2) Other primarily includes sales from Signet’s diamond sourcing initiative and other miscellaneous non-jewelry sales.

The following table provides the Company’s total sales, disaggregated by channel, for the 13 and 39 weeks ended October 29, 2022 and October 30, 2021:

13 weeks ended October 29, 2022

13 weeks ended October 30, 2021

(in millions)

North America

International

Other

Consolidated

North America

International

Other

Consolidated

Sales by channel:

Store

i 1,140.6

i 79.8

i —

i 1,220.4

i 1,142.6

i 99.4

i —

i 1,242.0

E-commerce

i 315.6

i 15.5

i —

i 331.1

i 251.6

i 21.5

i —

i 273.1

Other (1)

i 8.6

i —

i 22.6

i 31.2

i —

i 22.7

Total sales

i 1,464.8

i 95.3

i 22.6

i 1,582.7

i 1,394.2

i 120.9

i 22.7

i 1,537.8

39 weeks ended October 29, 2022

39 weeks ended October 30, 2021

(in millions)

North America

International

Other

Consolidated

North America

International

Other

Consolidated

Sales by channel:

Store

i 3,851.7

i 261.6

i —

i 4,113.3

i 3,775.5

i 235.8

i —

i 4,011.3

E-commerce

i 894.1

i 55.3

i —

i 949.4

i 882.4

i 73.2

i —

i 955.6

Other (1)

i 40.4

i —

i 72.8

i 113.2

i —

i 47.8

Total sales

i 4,786.2

i 316.9

i 72.8

i 5,175.9

i 4,657.9

i 309.0

i 47.8

i 5,014.7

(1) Other primarily includes sales from Signet’s diamond sourcing initiative and loose diamonds.

Extended service plans (“ESP”)

The Company recognizes revenue related to ESP sales in proportion to when the expected costs will be incurred. The deferral periods for ESP sales are determined from patterns of claims costs, including estimates of future claims costs expected to be incurred. Management reviews the trends in claims to assess whether changes are required to the revenue and cost recognition rates utilized. A significant change in estimates related to the time period or pattern in which warranty-related costs are expected to be incurred could materially impact revenues. All direct costs associated with the sale of these plans are deferred and amortized in proportion to the

revenue recognized and disclosed as either other current assets or other assets in the condensed consolidated balance sheets. These direct costs primarily include sales commissions and credit card fees.

Deferred selling costs

Unamortized deferred selling costs as of October 29, 2022, January 29, 2022 and October 30, 2021 were as follows:

(in millions)

Other current assets

i 27.7

i 28.4

i 25.2

Other assets

i 85.5

i 87.8

i 87.2

Total deferred selling costs

i 113.2

i 116.2

i 112.4

Amortization of deferred ESP selling costs is included within selling, general and administrative expenses in the condensed consolidated statements of operations. Amortization of deferred ESP selling costs was $ i 9.9 million and $ i 31.0 million during the 13 and 39 weeks ended October 29, 2022, respectively, and $ i 12.4 million and $ i 29.4 million during the 13 and 39 weeks ended October 30, 2021.

Deferred revenue as of October 29, 2022, January 29, 2022 and October 30, 2021 was as follows:

(in millions)

ESP deferred revenue

i 1,124.9

i 1,116.5

i 1,066.3

Other deferred revenue (1)

i 88.5

i 82.4

i 53.9

Total deferred revenue

i 1,213.4

i 1,198.9

i 1,120.2

Disclosed as:

Current liabilities

i 335.3

i 341.3

i 307.0

Non-current liabilities

i 878.1

i 857.6

i 813.2

Total deferred revenue

i 1,213.4

i 1,198.9

i 1,120.2

(1) Other deferred revenue primarily includes revenue collected from customers for custom orders and eCommerce orders, for which control has not yet transferred to the customer.

13 weeks ended

39 weeks ended

(in millions)

ESP deferred revenue, beginning of period

i 1,131.5

i 1,063.8

i 1,116.5

i 1,028.9

Plans sold (1)

i 101.1

i 103.2

i 345.2

i 345.9

Revenue recognized (2)

( i 107.7)

( i 100.7)

( i 336.8)

( i 308.5)

ESP deferred revenue, end of period

i 1,124.9

i 1,066.3

i 1,124.9

i 1,066.3

(1) Includes impact of foreign exchange translation.

(2) The Company recognized sales of $ i 60.7 million and $ i 208.5 million during the 13 and 39 weeks ended October 29, 2022, respectively, and $ i 56.4 million and $ i 192.8 million during the 13 and 39 weeks ended October 30, 2021, respectively, related to deferred revenue that existed at the beginning of the period in respect to ESP.

On March 29, 2021, the Company acquired all of the outstanding shares of Rocksbox Inc. (“Rocksbox”), a jewelry rental subscription business, for cash consideration of $ i 14.6 million, net of cash acquired. The acquisition was driven by Signet's Inspiring Brilliance strategy and its initiatives to accelerate growth in its services offerings. Net assets acquired primarily consist of goodwill and intangible assets (see Note 15 for details). The results of Rocksbox subsequent to the acquisition date are reported as a component of the North America reportable segment.

On November 17, 2021, the Company acquired all of the outstanding shares of Diamonds Direct USA Inc. (“Diamonds Direct”) for cash consideration of $ i 503.1 million, net of cash acquired of $ i 14.2 million and including the final additional payment of $ i 1.9 million made in the first quarter of Fiscal 2023. Diamonds Direct is an off-mall, destination jeweler in the US, with a highly productive, efficient operating model with demonstrated growth and profitability which immediately contributed to Signet’s Inspiring Brilliance strategy to accelerate growth and expand the Company’s market in accessible luxury and bridal. Diamonds Direct’s strong value proposition, extensive bridal offering and customer-centric, high-touch shopping experience is a destination for younger, luxury-oriented bridal shoppers.

The following table presents the estimated fair value of the assets acquired and liabilities assumed from Diamonds Direct at the date of acquisition:


(in millions)
Inventories	$	i 229.1
Property, plant and equipment	i 32.3
Operating lease right-of-use assets	i 56.9
Intangible assets	i 126.0
Other assets	i 6.8
Identifiable assets acquired	i 451.1

Accounts payable	i 46.8
Deferred revenue	i 36.0
Operating lease liabilities	i 57.6
Deferred taxes	i 31.2
Other liabilities	i 27.6
Liabilities assumed	i 199.2
Identifiable net assets acquired	i 251.9
Goodwill	i 251.2
Net assets acquired	$	i 503.1

The Company recorded acquired intangible assets of $ i 126.0 million, consisting entirely of an indefinite-lived trade name.

Goodwill is calculated as the excess of the purchase price over the estimated fair values of the assets acquired and the liabilities assumed in the acquisition and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The amount allocated to goodwill associated with the Diamonds Direct acquisition is primarily the result of expected synergies resulting from combining the activities such as marketing and digital effectiveness, expansion of connected commerce capabilities, and sourcing savings. The Company allocated goodwill to its North America reportable segment. i None of the goodwill associated with this transaction is deductible for income tax purposes.

The results of Diamonds Direct subsequent to the acquisition date are reported as a component of the North America reportable segment. Pro forma results of operations have not been presented, as the impact on the Company’s consolidated financial results was not material.

On August 19, 2022, the Company acquired all of the outstanding shares of Blue Nile, Inc. (“Blue Nile”), subject to the terms of a stock purchase agreement (“Agreement”) entered into on August 5, 2022. The total cash consideration was $ i 395.9 million, net of cash acquired of $ i 16.6 million, including purchase price adjustments for working capital, and is subject to customary post-closing adjustments per the Agreement. In connection with the acquisition, the Company incurred $ i 1.5 million and $ i 4.1 million of acquisition-related costs during the 13 and 39 weeks ended October 29, 2022, respectively, which were recorded as selling, general and administrative expenses in the condensed consolidated statements of operations.

Blue Nile is a leading online retailer of engagement rings and fine jewelry. The strategic acquisition of Blue Nile accelerates Signet's initiatives to expand its bridal offerings and grow its accessible luxury portfolio while enhancing its connected commerce capabilities as well as extending its digital leadership across the jewelry category – all to further achieve meaningful operating synergies to enhance shopping experiences for consumers and create value for shareholders.

The information included herein has been prepared based on the allocation of the purchase price using estimates of the fair value and useful lives of assets acquired and liabilities assumed which were determined by management using a combination of income and cost approaches, including the relief from royalty method and comparable market prices. The purchase price allocation is subject to further adjustment until all pertinent information regarding the assets and liabilities acquired are fully evaluated by the Company.

The following table presents the preliminary estimated fair value of the assets acquired and liabilities assumed from Blue Nile at the date of acquisition:


(in millions)
Inventories	$	i 90.2
Property, plant and equipment	i 39.5
Operating lease right-of-use assets	i 39.1
Intangible assets	i 102.0
Other assets	i 10.1
Identifiable assets acquired	i 280.9

Accounts payable	i 73.2
Deferred revenue	i 14.2
Operating lease liabilities	i 39.1

Other liabilities	i 17.0
Liabilities assumed	i 143.5
Identifiable net assets acquired	i 137.4
Goodwill	i 258.5
Net assets acquired	$	i 395.9

The Company recorded acquired intangible assets of $ i 102.0 million, consisting entirely of an indefinite-lived trade name. In addition, the Company acquired federal net operating loss and other carryforwards of approximately $ i 85 million and $ i 71 million, respectively. Such amounts are subject to certain limitations under Section 382 of the Internal Revenue Code, and generally do not expire.

Goodwill is calculated as the excess of the purchase price over the estimated fair values of the assets acquired and the liabilities assumed in the acquisition and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The amount allocated to goodwill associated with the Blue Nile acquisition is primarily the result of expected synergies resulting from combining the merchandising and sourcing activities of the Company’s digitally native banners, as well as efficiencies in marketing and other aspects of the combined operations. The Company allocated goodwill to its North America reportable segment. i None of the goodwill associated with this transaction is deductible for income tax purposes.

The results of Blue Nile subsequent to the acquisition date are reported as a component of the North America reportable segment. Pro forma results of operations have not been presented, as the impact on the Company’s consolidated financial results was not material.

5. i Segment information

Financial information for each of Signet’s reportable segments is presented in the tables below. Signet’s chief operating decision maker utilizes segment sales and operating income, after the elimination of any inter-segment transactions, to determine resource allocations and performance assessment measures. Signet aggregates operating segments with similar economic and operating characteristics. Signet manages its business as i three reportable segments: North America, International, and Other. Signet’s sales are derived from the retailing of jewelry, watches, other products and services as generated through the management of its reportable segments. The Company allocates certain support center costs between operating segments, and the remainder of the unallocated costs are included with the corporate and unallocated expenses presented.

The North America reportable segment operates across the US and Canada. Its US stores operate nationally in malls and off-mall locations, as well as online, principally as Kay (Kay Jewelers and Kay Outlet), Zales (Zales Jewelers and Zales Outlet), Jared (Jared The Galleria Of Jewelry and Jared Vault), Diamonds Direct, Blue Nile, James Allen, Banter by Piercing Pagoda, and Rocksbox. Its Canadian stores operate as Peoples Jewellers.

The International reportable segment operates stores in the UK, Republic of Ireland and Channel Islands, as well as online. Its stores operate in shopping malls and off-mall locations (i.e. high street) principally under the H. Samuel and Ernest Jones banners.

The Other reportable segment primarily consists of subsidiaries involved in the purchasing and conversion of rough diamonds to polished stones.

13 weeks ended

39 weeks ended

(in millions)

Sales:

North America segment

i 1,464.8

i 1,394.2

i 4,786.2

i 4,657.9

International segment

i 95.3

i 120.9

i 316.9

i 309.0

Other segment

i 22.6

i 22.7

i 72.8

i 47.8

Total sales

i 1,582.7

i 1,537.8

i 5,175.9

i 5,014.7

Operating income (loss):

North America segment (1)

i 65.4

i 123.8

i 300.3

i 573.1

International segment

( i 6.5)

i 0.2

( i 14.9)

( i 4.0)

Other segment

( i 0.3)

( i 0.4)

i 4.5

( i 1.4)

Corporate and unallocated expenses (2)

( i 10.2)

( i 16.7)

( i 54.5)

( i 66.7)

Total operating income

i 48.4

i 106.9

i 235.4

i 501.0

Interest expense, net

( i 3.6)

( i 4.1)

( i 11.4)

( i 12.4)

Other non-operating expense, net

( i 2.7)

( i 1.1)

( i 139.6)

( i 0.9)

Income before income taxes

i 42.1

i 101.7

i 84.4

i 487.7

(1) Operating income during the 13 and 39 weeks ended October 29, 2022 includes $ i 5.0 million and $ i 15.2 million, respectively, of cost of sales associated with the fair value step-up of inventory acquired in the Diamonds Direct and Blue Nile acquisitions; and $ i 4.7 million and $ i 7.3 million, respectively of acquisition and integration-related expenses in connection with the Blue Nile acquisition. Operating income during the 39 weeks ended October 29, 2022 includes $ i 190.0 million related to pre-tax litigation charges. See Note 4 and Note 21 for additional information.

Operating income during the 13 and 39 weeks ended October 30, 2021 includes $ i i 2.6 / million of acquisition-related expenses in connection with the Diamonds Direct acquisition; and $ i 0.7 million and $ i 2.0 million, respectively, of net asset impairments. Operating income during the 39 weeks ended October 30, 2021 includes $ i 1.1 million of transaction-related expenses in connection with the Rocksbox acquisition; $ i 1.4 million of gains associated with the sale of customer in-house finance receivables; and credits of $ i 1.0 million to restructuring expense, primarily related to adjustments to previously recognized restructuring liabilities.

(2) Operating income during the 13 and 39 weeks ended October 30, 2021 includes credits of $ i 1.7 million and $ i 2.3 million, respectively, to restructuring expense, primarily related to adjustments to previously recognized restructuring liabilities.

6. i Redeemable preferred shares

On October 5, 2016, the Company issued i 625,000 shares of Series A Redeemable Convertible Preference Shares (“Preferred Shares”) to certain affiliates of Leonard Green & Partners, L.P., for an aggregate purchase price of $ i 625.0 million, or $ i 1,000 per share (the “Stated Value”) pursuant to the investment agreement dated August 24, 2016. Preferred shareholders are entitled to a cumulative dividend at the rate of i 5% per annum, payable quarterly in arrears either in cash or by increasing the stated value of the Preferred Shares. The Company has declared all Preferred Share dividends in Fiscal 2022 and Fiscal 2023 payable in cash. Refer to Note 7 for additional discussion of the Company’s dividends on Preferred Shares.

(in millions, except conversion rate and conversion price)

Conversion rate

i 12.3939

i 12.2297

Conversion price

i 80.6849

i 81.7682

Potential impact of preferred shares if-converted to common shares

i 8.1

i 8.0

Liquidation preference (1)

i 665.1

i 665.0

(1) Includes the Stated Value of the Preferred Shares plus any declared but unpaid dividends

In connection with the issuance of the Preferred Shares, the Company incurred direct and incremental expenses of $ i 13.7 million. These direct and incremental expenses originally reduced the Preferred Shares carrying value and will be accreted through retained earnings as a deemed dividend from the date of issuance through the first possible known redemption date in November 2024. Accumulated accretion recorded in the condensed consolidated balance sheets was $ i 10.2 million as of October 29, 2022 (January 29, 2022 and October 30, 2021: $ i 9.0 million and $ i 8.5 million, respectively).

Accretion of $ i 0.4 million and $ i 1.2 million was recorded to Preferred Shares in the condensed consolidated balance sheets during the 13 and 39 weeks ended October 29, 2022 ($ i 0.4 million and $ i 1.2 million for the 13 and 39 weeks ended October 30, 2021).

7. i Shareholders’ equity

Dividends on Common Shares

As a result of COVID-19, Signet’s Board of Directors (the “Board”) elected to temporarily suspend the dividend program on common shares, effective in the first quarter of Fiscal 2021. The Board elected to reinstate the dividend program on common shares beginning in second quarter of Fiscal 2022. i Dividends declared on the common shares during the 39 weeks ended October 29, 2022 and October 30, 2021 were as follows:

(1) Signet’s dividend policy results in the common share dividend payment date being a quarter in arrears from the declaration date. As a result, as of October 29, 2022 and October 30, 2021, $ i 9.2 million and $ i 9.5 million, respectively, has been recorded in accrued expenses and other current liabilities in the condensed consolidated balance sheets reflecting the cash dividends on common shares declared for the third quarter of Fiscal 2023 and Fiscal 2022, respectively.

Dividends on Preferred Shares

Dividends declared on the Preferred Shares during the 39 weeks ended October 29, 2022 and October 30, 2021 were as follows:

(1) Signet’s dividend policy results in the preferred share dividend payment date being a quarter in arrears from the declaration date. As a result, as of October 29, 2022 and October 30, 2021, $ i 8.2 million and $ i 8.2 million, respectively, has been recorded in accrued expenses and other current liabilities in the condensed consolidated balance sheets reflecting the dividends on the Preferred Shares declared for the third quarter of Fiscal 2023 and Fiscal 2022, respectively.

There were i i i i no / / / cumulative undeclared dividends on the Preferred Shares that reduced net income attributable to common shareholders during the 13 and 39 weeks ended October 29, 2022 or October 30, 2021. See Note 6 for additional discussion of the Company’s Preferred Shares.

On August 23, 2021, the Board authorized a reinstatement of repurchases under the 2017 Share Repurchase Program (the “2017 Program”). During Fiscal 2022, the Board also authorized an increase in the remaining amount of shares authorized for repurchase under the 2017 Program by $ i 559.4 million, bringing the total authorization to $ i 1.2 billion as of January 29, 2022. In June 2022, the Board authorized an additional increase of the 2017 Program by $ i 500 million, bringing the total authorization to $ i 1.7 billion. Since inception of the 2017 Program, the Company has repurchased approximately $ i 1.1 billion of shares, with an additional $ i 602.2 million of shares authorized for repurchase remaining as of October 29, 2022.

On January 21, 2022, the Company entered into an accelerated share repurchase agreement (“ASR”) with a large financial institution to repurchase the Company’s common shares for an aggregate amount of $ i 250 million. On January 24, 2022, the Company made a prepayment of $ i 250 million and took delivery of i 2.5 million shares based on a price of $ i 80 per share, which is i 80% of the total prepayment amount. On March 14, 2022, the Company received an additional i 0.8 million shares, representing the remaining i 20% of the total prepayment and final settlement of the ASR. The number of shares received at final settlement was based on the average of the daily volume-weighted average prices of the Company’s common stock during the term of the ASR. The ASR was accounted for as a purchase of common shares and a forward purchase contract.

The share repurchase activity during the 39 weeks ended October 29, 2022 and October 30, 2021 was as follows:

39 weeks ended October 29, 2022

39 weeks ended October 30, 2021

(in millions, except per share amounts

Shares repurchased

Amount repurchased (1)(2)

Average repurchase price per share (2)

Shares repurchased

Amount repurchased(2)

Average repurchase price per share(2)

2017 Program

i 5.1

i 361.2

i 70.98

i 0.5

i 41.1

i 88.04

(1) The amount repurchased in Fiscal 2023 includes $ i 50 million related to the forward purchase contract in the ASR.

(2) Includes amounts paid for commissions.

8. i Earnings per common share (“EPS”)

Basic EPS is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding for the period. i The computation of basic EPS is outlined in the table below:

13 weeks ended

39 weeks ended

(in millions, except per share amounts)

Numerator:

Net income attributable to common shareholders

i 28.8

i 83.9

i 73.5

i 429.7

Denominator:

Weighted average common shares outstanding

i 46.1

i 52.9

i 47.1

i 52.6

EPS – basic

i 0.62

i 1.59

i 1.56

i 8.17

The dilutive effect of share awards represents the potential impact of outstanding awards issued under the Company’s share-based compensation plans, including restricted shares, restricted stock units, performance-based restricted stock units and stock options issued under the Omnibus Plan and stock options issued under the Share Saving Plans. The dilutive effect of performance-based restricted stock units represents the number of contingently issuable shares that would be issuable if the end of the period was the end of the contingency period and is based on the actual achievement of performance metrics through the end of the current interim periods. The dilutive effect of Preferred Shares represents the potential impact for common shares that would be issued upon conversion. Potential common share dilution related to share awards and Preferred Shares is determined using the treasury stock and if-converted methods, respectively. Under the if-converted method, the Preferred Shares are assumed to be converted at the beginning of the period, and the resulting common shares are included in the denominator of the diluted EPS calculation for the entire period being presented, only in the periods in which such effect is dilutive. Additionally, in periods in which Preferred Shares are dilutive, cumulative dividends and accretion for issuance costs associated with the Preferred Shares are added back to net income attributable to common shareholders. See Note 6 for additional discussion of the Company’s Preferred Shares.

The computation of diluted EPS is outlined in the table below:

13 weeks ended

39 weeks ended

(in millions, except per share amounts)

Numerator:

Net income attributable to common shareholders

i 28.8

i 83.9

i 73.5

i 429.7

Add: Dividends on Preferred Shares

i —

i 8.7

i —

i 25.9

Numerator for diluted EPS

i 28.8

i 92.6

i 73.5

i 455.6

Denominator:

Basic weighted average common shares outstanding

i 46.1

i 52.9

i 47.1

i 52.6

Plus: Dilutive effect of share awards

i 2.0

i 2.8

i 2.1

Plus: Dilutive effect of Preferred Shares

i —

i 8.0

i —

i 8.0

Diluted weighted average common shares outstanding

i 48.1

i 63.7

i 49.2

i 62.7

EPS – diluted

i 0.60

i 1.45

i 1.49

i 7.27

i The calculation of diluted EPS excludes the following items for each respective period on the basis that their effect would be antidilutive:

13 weeks ended

39 weeks ended

(in millions)

Potential impact of Preferred Shares

i 8.1

i —

i 8.1

i —

Total antidilutive shares

i 8.1

i —

i 8.1

i —

9. i Accumulated other comprehensive income (loss)

The following tables present the changes in AOCI by component and the reclassifications out of AOCI, net of tax:

Pension plan

(in millions)

Foreign
currency
translation

Gains (losses) on available-for-sale securities, net

Gains (losses)
on cash flow
hedges

Actuarial
(losses) gains

Prior
service
costs

Accumulated
other
comprehensive income (loss)

Balance at January 29, 2022

( i 244.3)

i 0.2

i 0.4

( i 103.3)

( i 3.9)

( i 350.9)

Other comprehensive income (loss) (“OCI”) before reclassifications

( i 42.5)

( i 0.6)

i 2.2

( i 0.4)

i —

( i 41.3)

Amounts reclassified from AOCI to earnings

i —

( i 0.5)

i 106.6

i 3.9

i 110.0

Net current period OCI

( i 42.5)

( i 0.6)

i 1.7

i 106.2

i 3.9

i 68.7

Balance at October 29, 2022

( i 286.8)

( i 0.4)

i 2.1

i 2.9

i —

( i 282.2)

The amounts reclassified from AOCI to earnings were as follows:

Amounts reclassified from AOCI

13 weeks ended

39 weeks ended

(in millions)

Statement of operations caption

(Gains) losses on cash flow hedges:

Foreign currency contracts

( i 0.4)

i 0.1

( i 0.7)

i 0.4

Cost of sales (see Note 16)

Commodity contracts

i —

i 0.2

Cost of sales (see Note 16)

Total before income tax

( i 0.4)

i 0.1

( i 0.7)

i 0.6

Income taxes

i 0.2

i —

i 0.2

( i 0.1)

Net of tax

( i 0.2)

i 0.1

( i 0.5)

i 0.5

Defined benefit pension plan items:

Amortization of unrecognized actuarial losses

i 1.0

i 3.0

i 1.4

Other non-operating expense, net (see Note 22)

Amortization of unrecognized net prior service costs

i 0.1

i —

i 0.3

i 0.1

Other non-operating expense, net (see Note 22)

Pension settlement loss

i —

i 132.8

i —

Other non-operating expense, net (see Note 22)

Total before income tax

i 1.1

i 1.0

i 136.1

i 1.5

Income taxes

( i 0.2)

( i 25.6)

( i 0.3)

Net of tax

i 0.9

i 0.8

i 110.5

i 1.2

Total reclassifications, net of tax

i 0.7

i 0.9

i 110.0

i 1.7

10. i Income taxes i


	39 weeks ended
	October 29, 2022		October 30, 2021
Estimated annual effective tax rate before discrete items	i 19.7	%	i 22.1	%
Discrete items recognized	( i 37.5)	%	( i 15.5)	%
Effective tax rate recognized in statements of operations	( i 17.8)	%	i 6.6	%

During the 39 weeks ended October 29, 2022, the Company’s effective tax rate was lower than the US federal income tax rate, primarily as a result of the discrete tax benefits related to litigation charges of $ i 47.7 million, the reclassification of the pension settlement loss out of AOCI of $ i 25.2 million and the excess tax benefit for share-based compensation which vested during the year of $ i 14.7 million.

The Company’s effective tax rate for the same period during the prior year was lower than the US federal income tax rate primarily due to the reversal of the valuation allowance recorded against certain state deferred tax assets.

As of October 29, 2022, there has been no material change in the amounts of unrecognized tax benefits, or the related accrued interest and penalties (where appropriate), in respect of uncertain tax positions identified and recorded as of January 29, 2022.

11. i Credit transactions

Credit card outsourcing programs

The Company has entered into various agreements with Comenity Bank (“Comenity”) and Genesis Financial Solutions (“Genesis”) through its subsidiaries Sterling Jewelers Inc. (“Sterling”) and Zale Delaware, Inc. (“Zale”), to outsource its private label credit card programs. Under the original agreements, Comenity provided credit services to all prime credit customers for the Sterling banners and to all credit card customers for the Zale banners. In May 2021, both the Sterling and Zale agreements with Comenity and Genesis were amended and restated to provide credit services to prime and non-prime customers.

The non-prime portion of the Sterling credit card portfolio was previously outsourced to CarVal Investors (“CarVal”), Castlelake, L.P. (“Castlelake”) and Genesis (collectively with CarVal and Castlelake, the “Investors”). Under agreements with the Investors, Signet remained the issuer of non-prime credit with investment funds managed by the Investors purchasing forward receivables at a discount

rate determined in accordance with their respective agreements. Prior to March 2022 as described below, Signet held the newly issued non-prime credit receivables on its balance sheet for two business days prior to selling the receivables to the respective counterparty in accordance with the agreements. In March 2021, the Company provided notice to the Investors of its intent not to extend the respective agreements with such Investors beyond the expiration date of June 30, 2021.

On June 30, 2021, the Company entered into amended and restated receivable purchase agreements with CarVal and Castlelake regarding the purchase of add-on receivables on such Investors’ existing accounts, as well as the purchase of the Company-owned credit card receivables portfolio for accounts that had been originated through Fiscal 2021 (see Note 12). During the second quarter of Fiscal 2022, Signet received cash proceeds of $ i 57.8 million for the sale of these customer in-house finance receivables to the Investors. These receivables had a net book value of $ i 56.4 million as of the sale date, and thus the Company recognized a gain on sale of $ i 1.4 million in the North America reportable segment within other operating income in the condensed consolidated statements of operations during the second quarter of Fiscal 2022. Additionally, during the second quarter of Fiscal 2022, the Company received $ i 23.5 million from the Investors for the payment obligation of the remaining i 5% of the receivables previously purchased in June 2018. Beginning July 1, 2021, all new prime and non-prime account origination have occurred in accordance with the Comenity and Genesis agreements described above.

Fiscal 2023 amended and restated agreements

In March 2022, the Company entered into amended and restated receivable purchase agreements with the Investors regarding the purchase of add-on receivables on such Investors’ existing accounts. Under the amended and restated agreements, The Bank of Missouri will be the issuer for the add-on receivables on these existing accounts and the Investors will purchase the receivables from The Bank of Missouri.

In conjunction with the above agreements in March 2022, the Company entered into agreements with the Investors to transfer all existing cardholder accounts previously originated by Signet to The Bank of Missouri. Therefore, the Company will no longer originate any credit receivables with customers.

12. Accounts receivable

The following table presents the components of Signet’s accounts receivable:

(in millions)

Accounts receivable, trade

i 29.8

i 18.3

i 17.0

Accounts receivable, held for sale

i —

i 1.6

i 2.3

Accounts receivable

i 29.8

i 19.9

i 19.3

As described in Note 11, Signet is no longer the issuer of non-prime credit for add-on purchases on existing accounts. Therefore, the Company no longer holds these non-prime credit receivables. Prior to the March 2022 amendments, receivables originated by the Company but pending transfer to the Investors as of period end were classified as “held for sale” and included in accounts receivable in the condensed consolidated balance sheets. As of January 29, 2022 and October 30, 2021, the accounts receivable held for sale were recorded at fair value.

Accounts receivable, trade primarily includes amounts receivable relating to accounts receivable from the Company’s diamond sales in the North America reportable segment and from the Company’s diamond sourcing initiative in the Other reportable segment.

Customer in-house finance receivables

As discussed above, the Company began retaining certain customer in-house finance receivables beginning in the second quarter of Fiscal 2021 through the date of the portfolio sale in June 2021. The allowance for credit losses related to these receivables was an estimate of expected credit losses, measured over the estimated life of its credit card receivables that considered forecasts of future economic conditions in addition to information about past events and current conditions.

To estimate its allowance for credit losses, the Company segregated its credit card receivables into credit quality categories using the customers’ FICO scores. The following three industry standard FICO score categories were used:

•620 to 659 (Near Prime)

•580 to 619 (Subprime)

•Less than 580 (Deep Subprime)

The following table is a rollforward of the Company’s allowance for credit losses on customer in-house finance receivables:

13 weeks ended

39 weeks ended

(in millions)

Beginning balance

i —

i 25.5

Provision for credit losses

( i 0.6)

( i 1.0)

Write-offs

i —

( i 5.5)

Recoveries

i 0.6

Reversal of allowance on receivables sold

i —

( i 19.6)

Ending balance

i —

Additions to the allowance for credit losses were made by recording charges to bad debt expense (credit losses) within selling, general and administrative expenses within the condensed consolidated statements of operations.

Interest income related to the Company’s customer in-house finance receivables was included within other operating income (expense) in the condensed consolidated statements of operations. Accrued interest was included within the same line item as the respective principal amount of the customer in-house finance receivables in the condensed consolidated balance sheets. The accrual of interest was discontinued at the time the receivable is determined to be uncollectible and written-off. The Company recognized $ i 6.5 million of interest income on its customer in-house finance receivables during the 39 weeks ended October 30, 2021. Interest income recognition ceased at the date of the sale of the portfolio as noted above.

The following table summarizes the details of the Company’s inventory:

(in millions)

Raw materials

i 130.9

i 75.8

i 72.6

Merchandise inventories

i 2,298.1

i 1,984.6

i 2,075.7

Total inventories

i 2,429.0

i 2,060.4

i 2,148.3

Total lease costs consist of the following:

13 weeks ended

39 weeks ended

(in millions)

Operating lease cost

i 100.7

i 107.0

i 297.3

i 322.0

Short-term lease cost

i 11.1

i 1.8

i 35.1

i 8.2

Variable lease cost

i 25.9

i 26.0

i 84.3

i 87.5

Sublease income

( i 0.3)

( i 0.5)

( i 1.3)

( i 1.7)

Total lease costs

i 137.4

i 134.3

i 415.4

i 416.0

15. i Goodwill and intangibles

Goodwill and other indefinite-lived intangible assets, such as indefinite-lived trade names, are evaluated for impairment annually. Additionally, if events or conditions indicate the carrying value of a reporting unit or an indefinite-lived intangible asset may be greater than its fair value, the Company would evaluate the asset for impairment at that time. Impairment testing compares the carrying amount of the reporting unit or other intangible assets with its fair value. When the carrying amount of the reporting unit or other intangible assets exceeds its fair value, an impairment charge is recorded.

During the 13 weeks ended May 1, 2021, the Company completed its quarterly triggering event assessment and did not identify any events or conditions that would indicate that it was more likely than not that the carrying values of the reporting units and indefinite-lived trade names exceed their fair values.

In connection with the acquisition of Rocksbox on March 29, 2021, the Company recognized $ i 11.6 million of definite-lived intangible assets and $ i 4.6 million of goodwill, which are reported in the North America reportable segment. The weighted-average amortization period of the definite-lived intangibles assets acquired is i eight years.

During the 13 weeks ended July 31, 2021, the Company completed its annual evaluation of its indefinite-lived intangible assets, including goodwill and trade names, and through the qualitative assessment the Company did not identify any events or conditions that would indicate that it was more likely than not that the carrying values of the reporting units and indefinite-lived trade names exceeded their fair values. Additionally, the Company completed its quarterly triggering event assessment and determined that no triggering events had occurred in the second quarter of Fiscal 2022 requiring interim impairment assessments for all reporting units with goodwill and indefinite-lived intangible assets.

In connection with the acquisition of Diamonds Direct on November 17, 2021, the Company recognized $ i 126.0 million of indefinite-lived intangible assets related to the Diamonds Direct trade name and $ i 251.2 million of goodwill, which are reported in the North America reportable segment. Refer to Note 4 for additional information.

During the 13 weeks ended October 30, 2021, the Company completed its quarterly triggering event assessment and determined that no triggering events had occurred in the third quarter of Fiscal 2022 requiring interim impairment assessment for all reporting units with goodwill and indefinite-lived intangible assets.

During the 13 weeks ended April 30, 2022, the Company completed its quarterly triggering event assessment and did not identify any events or conditions that would indicate that it was more likely than not that the carrying values of the reporting units and indefinite-lived trade names exceed their fair values.

During the 13 weeks ended July 30, 2022, the Company completed its annual evaluation of its indefinite-lived intangible assets, including goodwill and trade names, and through the qualitative assessment the Company did not identify any events or conditions that would indicate that it was more likely than not that the carrying values of the reporting units and indefinite-lived trade names exceeded their fair values. Additionally, the Company completed its quarterly triggering event assessment and determined that no triggering events had occurred in the second quarter of Fiscal 2023 requiring interim impairment assessments for all reporting units with goodwill and indefinite-lived intangible assets.

In connection with the acquisition of Blue Nile on August 19, 2022, the Company recognized $ i 102.0 million of indefinite-lived intangible assets and $ i 258.5 million of goodwill, which are reported in the North America reportable segment. Refer to Note 4 for additional information.

During the 13 weeks ended October 29, 2022, the Company completed its quarterly triggering event assessment and determined that no triggering events had occurred in the third quarter of Fiscal 2023 requiring interim impairment assessment for all reporting units with goodwill and indefinite-lived intangible assets.

The uncertainty related to the current macroeconomic environment, such as rising interest rates and the heightened inflationary pressure on consumers’ discretionary spending, could negatively affect the share price of the Company’s stock, as well as key assumptions used to estimate fair value, such as sales trends, margin trends, long-term growth rates and discount rates. Thus, an adverse change in any of these factors could result in a risk of impairment in the Company’s goodwill or indefinite-lived trade names in future periods, including those from recent acquisitions.

The following table summarizes the Company’s goodwill by reportable segment:

Balance at January 29, 2022 (1)

Balance at October 29, 2022 (1)

(1) The carrying amount of goodwill is presented net of accumulated impairment losses of $ i i 576.0 / million as of October 29, 2022 and January 29, 2022.

(2) The change in goodwill during the period represents the acquisition of Blue Nile and the finalization of the purchase price allocation of Diamonds Direct. Refer to Note 4 for additional information.

Definite-lived intangible assets include trade names, technology and customer relationship assets. Indefinite-lived intangible assets consist of trade names. Both definite and indefinite-lived assets are recorded within intangible assets, net, on the condensed consolidated balance sheets. Intangible liabilities, net, consists of unfavorable contracts and is recorded within accrued expenses and other current liabilities and other liabilities on the condensed consolidated balance sheets.

The following table provides additional detail regarding the composition of intangible assets and liabilities: