HAMILTON, Bermuda--(BUSINESS WIRE)--
Signet Jewelers Limited (“Signet”) (NYSE: SIG), the world’s largest
retailer of diamond jewelry, announced today the completion of the first
phase of the strategic outsourcing of its in-house credit program,
including:
-
The sale of its prime-only credit quality accounts receivable to the
Columbus, Ohio-based card services business of Alliance Data Systems
Corporation (“Alliance Data”) (NYSE: ADS) for par value of $960
million at the time of closing;
-
Outsourcing of the credit servicing function of its existing and
future non-prime accounts receivable to Genesis Financial Solutions
(“Genesis”); and
-
Implementation of its lease-purchase program in partnership with
Progressive Leasing.
Virginia C. Drosos, Chief Executive Officer of Signet, said: “The
successful completion of the first phase of strategic outsourcing of our
credit portfolio has allowed us to reduce our outstanding debt and
return capital to our shareholders. In addition, the transaction enables
us to optimize our business model with greater organizational focus on
driving the growth of our OmniChannel retail platforms and delivering a
true Customer First experience.”
Ms. Drosos added: “A key priority of our credit transaction has been to
minimize impact on our credit customers and substantially maintain our
net sales. This has been achieved through our partnership with Alliance
Data and Genesis to continue to provide the full suite of our credit
offerings for our customers, and adding an incremental lease-purchase
financing option with Progressive Leasing. I want to thank our partners
and Signet team for their hard work in executing this complex
transaction on time.”
As previously announced, Signet and Alliance Data have entered into a
seven-year program agreement under which Alliance Data will become the
primary provider of credit, including funding, underwriting, servicing
and associated program functions, to Signet’s U.S. stores. Signet will
receive future payments from Alliance Data under an economic-sharing
agreement.
Signet and Genesis have entered into a five-year servicing agreement,
under which Genesis will provide credit servicing functions for Signet’s
existing non-prime accounts receivable, as well as future non-prime
account originations. Signet will retain the existing non-prime accounts
receivable on its balance sheet and continue to originate the majority
of new accounts until the expected completion of the second phase of
credit outsourcing.
Finally, Signet implemented a lease-purchase program in partnership with
Progressive Leasing across its U.S. stores. Lease-purchase is an
incremental payment option available for customers who do not qualify
for Signet’s credit programs, or do not wish to pursue a credit option
to finance the purchase of our merchandise. Signet believes the program
represents an incremental growth opportunity.
As part of the transaction, nearly all existing Signet team members
supporting credit operations have been transferred to Alliance Data or
Genesis, or retained by Signet to facilitate a smooth transition for
Signet’s team members and customers.
In the first phase of strategic outsourcing of credit, Signet completed
the sale of approximately 55% of its credit portfolio to Alliance Data
and outsourced servicing of its full credit programs. Signet is in
ongoing discussions with several interested funding partners related to
the second phase, which is expected to be completed in the first half of
calendar year 2018. In the second phase, Signet expects to sell
remaining accounts receivable on its balance sheet at the time of the
transaction and fully outsource new account originations to a third
party.
Use of Proceeds, Accounting Considerations and Financial Impact
Signet received $960 million of proceeds from the sale of its prime-only
accounts receivable to Alliance Data. As previously indicated, Signet
directed the sale proceeds to fully repay its $600 million
securitization facility and repurchase shares earlier in the year based
on opportunistic market conditions. In the second quarter of Fiscal
2018, the Company repurchased 12% of its outstanding shares using cash
on hand and revolver borrowings. Therefore, the remaining $360 million
of sale proceeds will be used to repay the $350 million short-term loan
used to finance the R2Net acquisition, which would otherwise be financed
through revolver borrowings.
As previously disclosed, Signet will report a $10 million pre-tax,
non-cash gain at closing reflecting the future profit sharing agreement
with Alliance Data. Total transaction costs related to legal, advisory,
implementation and retention expense were $36 million for the full year
Fiscal 2018, of which $30 million was recognized in the third quarter
and $6 million was recognized in the second quarter.
The table below provides information on the Fiscal 2018 Operating Profit
and EPS impact of outsourcing on Signet’s financial statements as
disclosed on August 24, 2017.
|
|
|
FY18 Net impact from outsourcing credit portfolio¹
|
|
|
Operating
|
|
Diluted
|
|
|
Profit
|
|
EPS
|
|
Elimination of bad debt, net of late fee income
|
$10
|
|
$0.10
|
|
Elimination of finance charge income
|
($38)
|
|
($0.36)
|
|
SGA savings (net of servicing costs, Alliance Data net economic
|
|
|
|
|
profit sharing and elimination of in-house credit operations)
|
$6
|
|
$0.06
|
|
Interest expense savings from repayment of $600 million ABS facility
|
-
|
|
$0.04
|
|
Net impact
|
($22)
|
|
($0.16)
|
|
|
|
|
|
|
FY18 Net transaction costs including gain on sale of prime A/R
|
|
|
Operating
|
|
Diluted
|
|
|
Profit
|
|
EPS
|
|
Q2 gain recognized in reclassification of portfolio as assets held
for sale
|
$21
|
|
$0.19
|
|
Q2 transaction costs recognized²
|
($6)
|
|
($0.06)
|
|
Q3 transaction costs to be recognized²
|
($30)
|
|
($0.28)
|
|
Q3 beneficial interest gain recognized upon closing
|
$10
|
|
$0.09
|
|
Net impact
|
($5)
|
|
($0.05)
|
|
|
|
|
|
|
Share repurchase acceleration
|
|
|
Operating
|
|
Diluted
|
|
|
Profit
|
|
EPS
|
|
Q2 share repurchases associated with A/R sale proceeds
|
$ -
|
|
$0.50
|
|
Net impact
|
$ -
|
|
$0.50
|
|
(1)
|
|
Impact is almost entirely in Q4 of FY2018.
|
|
(2)
|
|
Credit transaction costs related to legal, advisory, implementation
and retention expense.
|
|
|
|
|
About Signet Jewelers and Safe Harbor Statement:
Signet Jewelers Limited is the world's largest retailer of diamond
jewelry. Signet operates approximately 3,600 stores primarily under the
name brands of Kay Jewelers, Zales, Jared The Galleria Of Jewelry,
H.Samuel, Ernest Jones, Peoples, Piercing Pagoda and JamesAllen.com.
Further information on Signet is available at www.signetjewelers.com.
See also www.kay.com,
www.zales.com,
www.jared.com, www.hsamuel.co.uk, www.ernestjones.co.uk,www.peoplesjewellers.com,
www.pagoda.com
and www.jamesallen.com.
This release contains statements which are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of
1995. These statements, based upon management’s beliefs and expectations
as well as on assumptions made by and data currently available to
management, appear in a number of places throughout this document and
include statements regarding, among other things, Signet’s results of
operation, financial condition, liquidity, prospects, growth, strategies
and the industry in which Signet operates. The use of the words
“expects,” “intends,” “anticipates,” “estimates,” “predicts,”
“believes,” “should,” “potential,” “may,” “forecast,” “objective,”
“plan,” or “target,” and other similar expressions are intended to
identify forward-looking statements. These forward-looking statements
are not guarantees of future performance and are subject to a number of
risks and uncertainties, including but not limited to, the benefits of
the credit portfolio sale including future financial and operating
results, the timing and expected completion of the second phase of the
credit outsourcing, general economic conditions, the impact of
hurricanes on Signet’s business, regulatory changes following the United
Kingdom’s announcement to exit from the European Union, a decline in
consumer spending, the merchandising, pricing and inventory policies
followed by Signet, the reputation of Signet and its brands, the level
of competition in the jewelry sector, the cost and availability of
diamonds, gold and other precious metals, regulations relating to
customer credit, seasonality of Signet’s business, financial market
risks, deterioration in customers’ financial condition, exchange rate
fluctuations, changes in Signet’s credit rating, changes in consumer
attitudes regarding jewelry, management of social, ethical and
environmental risks, security breaches and other disruptions to Signet’s
information technology infrastructure and databases, inadequacy in and
disruptions to internal controls and systems, changes in assumptions
used in making accounting estimates relating to items such as extended
service plans and pensions, risks related to Signet being a Bermuda
corporation, the impact of the acquisition of Zale Corporation on
relationships, including with employees, suppliers, customers and
competitors, and our ability to successfully integrate Zale
Corporation’s operations and to realize synergies from the transaction.
For a discussion of these and other risks and uncertainties which could
cause actual results to differ materially from those expressed in any
forward-looking statement, see the “Risk Factors” section of Signet's
Fiscal 2017 Annual Report on Form 10-K filed with the SEC on March 16,
2017 and quarterly reports on Form 10-Q filed with the SEC. Signet
undertakes no obligation to update or revise any forward-looking
statements to reflect subsequent events or circumstances, except as
required by law.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171023006333/en/
Source: Signet Jewelers Limited