Group Strategy

Operating philosophies

The Group aims to build long term value by focusing on the customer and providing a superior merchandise selection in high quality real estate locations. Effective advertising draws consumers into our stores, where the objective is to provide outstanding service. The operating philosophies that help the Group achieve these aims are:

• excellence in execution;
• test before we invest;
• continuous improvement; and
• disciplined investment.

Group strategy

Over recent years the Group’s long term strategy for delivering shareholder value has been to:

maintain a strong balance sheet;continue the achievement of sector leading performance standards on both sides of the Atlantic; maximize store productivity in the US and the UK; and grow new store space in the US.

However, fiscal 2009, particularly the fourth quarter, was very challenging. As a result the Board reviewed its strategy and made significant adjustments to reflect the changed economic environment. The Group’s revised strategy is to enhance its position as the strongest operator in the middle market specialty retail jewelry sector and capitalize on the decrease in competition when consumer expenditure begins to recover. This involves maintaining a balance between the sustainable competitive advantages that the Group has established and the need to reduce risk, maximize profit and to strengthen the balance sheet through cash generation.

Sales will continue to be driven by leveraging the Group’s competitive strengths with the objective of maximizing gross merchandise margin dollars. In late fiscal 2009 and early fiscal 2010, a meaningful expense saving program was implemented and significant inventory reductions are planned to align both more closely with lower sales levels. Capital expenditure has also been substantially reduced, with decreased spending planned on both existing operations and space growth. New store openings have been largely eliminated. In the current marketplace it is preferable, and a much lower risk strategy, to grow profitable market share by focusing on sales productivity in existing stores.

While the level of expenditure on jewelry is discretionary, the expression of romance and appreciation, for example through bridal jewelry and gift giving, remain very important human needs, as is self reward. Central to the Group’s success is helping to satisfy those needs. Therefore the training of staff so that they can better understand the shopper’s requirements, communicate the value of the merchandise selected and ‘close the sale’ remains a high priority. The Group’s supply chain and merchandising expertise, combined with its size and balance sheet strength, enables it to increase differentiation in the marketplace through its exclusive merchandise, while also offering a compelling value proposition in more basic ranges. The Group’s marketing is effective and cost efficient, with its leading ‘share of voice’ leveraged through national television advertising and customer relationship marketing, both of which benefit from scale. At a time when the specialty jewelry sector is undergoing an accelerated rate of consolidation as weak competitors exit the market, these advantages become even more important.