Signet Jewelers Limited (SIG) Analyst Day Conference Call October 4, 2011 9:45 am ET Executives Michael Barnes – Chief Executive Officer Robert Anderson – Chief Executive UK Division Mark Light – President & Chief Executive Officer U.S. Division Ed Hrabak – Senior Vice President, General Merchandising Manager U.S. George Murray – Senior Vice President, Marketing U.S. Analysts Valerie Brown – Alliance Bernstein Presentation Michael Barnes [Call Starts Abruptly] Chief Executive and it’s a pleasure to have all of you here. Thanks for coming.
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But before begin our presentation by divisional management; I am going to speak a little bit to our strategy, take advantage of the evolving specialty retail marketplace.Signet’s tracking record, our sale and market share gains, (inaudible) well place to do so. Rob Anderson, our Chief Executive of the UK Division will then update us on the UK jewelry market and our growth strategy for the UK Division. Bob has been with Signet since 2000 and has been in the UK Chief Executive Officer since the beginning of 2002. Mark Light, our President and Chief Executive Officer of US division of Signet. Mark [has a bright career] in the U.S. division of Signet and he became the U.S. Chief Executive Officer in January of 2006. I’d also like to note that this year; Mark was recognized and inducted into the National Jeweler's Retailer Hall of Fame that’s awarded third year of the industry, congratulations Mark. Ed Hrabak and George Murray, our Senior Vice President of Merchandising and Marketing respectively will then follow on. [So be kind] at the end of the morning (inaudible). Then, we’ll have a short lunch break after which we will all travel to (inaudible), which will be (inaudible) I assure you to join (inaudible) this afternoon, and for those of you interested making purchases (inaudible) we encourage it. So we offer you a 25% courtesy discount on each merchandise purchases excluding (inaudible). One of the things, just before we start the presentation, I’d like to update you on current trades. Normally, if we would not do this in the middle of the quarter, so given that we do have our Investor Relations Day today and considering you know lot of the market volatility that we’re all thinking about out there over the past couple of months and to make an exception. And therefore pleased to announce that our same-store sales in the first eight weeks of the third quarter will broadly in line both reported for our second quarter. As you all recall, we had a very strong 9.9% same-store sales reported in the second quarter. So that’s a great winning start that they have.
But why invest in Signet? Talking about the factors that have driven strong sales performance that I’ve just mentioned are the same ones that are behind our record of gaining profitable market share over a number of years. We believe this is a result of much sustainable competitive strength. Importantly, we are adding to these competitive strengths through the initiatives that we’ll talk about today. We believe the excellence and execution by our experience and well trained team of professionals have also changed further profitable market shares and drive operational leverage within our business.Now, we’ll look at the competitive strength in a little more detail. Our greatest competitive strength is to improve in-store experience. We have a consistent goal that outperforms all of our competitors and customer service, which is still extremely important and essential in the jewelry transactions unlike to many other form of retail in today’s world. We also focus our in-house repair and design capabilities as we have 1,000 plus jewelry markets are designed within our stores, particularly in design and repair. And finally, our after-sales services such as our warranty program and our extended service plans are very critical to the customer’s experiences within our stores. Absolutely crucial throughout providing superior store experience, our outstanding -- this shouldn’t be taken for granted, this is not something that we created overnight, but rather have taken many, many years to develop. We strive to work (inaudible) to the best. And let me focus on continual training and development, so they have all the support that they need to succeed providing that wow factor that our guests are looking for and in driving sales. You could see some of our extensive training material, you may have seen something within the room next door where we had breakfast and welcome to (inaudible) lunch time as well.
The development of our team required incredible support from our (inaudible) central function (inaudible) tremendous business dedications. We need to be able to identify to understand and effectively implement best practices. Much of this – sorry (inaudible) monitoring individual performance across key performance indicators by receiving customer feedback on a store-by-store basis and through sophisticated market research. This is key not only to store operations, but it also applies to all other parts of our business.We have an experienced and long senior management team in most areas that we compliment by recruitment of new expertise as necessary. Our scale also means we’re better able to invest in innovative systems to effectively maximize our efficiency. A good example is the performance metrics that you will see demonstrated in the stores this afternoon. And this is just one example of the innovative systems that we have within our business. Another is the customer assisted solving system, which will be demonstrated later this morning and will (inaudible) through the Jared store business. This system is in all Jared stores and is expected to be rolled into Kay over the next 12 months. As in many other aspects of our business, our investment in training and systems is based on a test performing best philosophy. We serve in test and decline to fully aggressively roll out any given issue. So while we do consider the in-store experience to lead our list of competitive strength (inaudible). Other competitive strengths include our supply chain leadership; the development and the growth of differentiated branded merchandise. High customer awareness driven by ability to do advertise on national television and due to rising quality advertising campaigns. Quality and the superior locations of our stores. And finally, within the U.S. our in-house customer financing capabilities. You will hear a lot more about these from our team later on.
But let’s talk about brands for a minute. Earlier, I highlighted the growth in merchandised brand within the specialty jewelry sector and our leadership and the successful developments. If we were to take a look at (inaudible) what we’d consider a traditional jewelry store, might have a diamond counter, a stone counter (inaudible) and a watch counter. Majority of the brands you will see is primarily being watches in a traditional store, but this has changed. Brands are becoming increasingly important for consumers all around the world and while the jewelry industry maybe a little late for the (inaudible).Consumers are wanting to (inaudible); they want innovation, newness, something that makes them special, brands do just that. So, the strength of our differentiated and exclusive brands along with strong partnerships with other third party brands has become a powerful driver of our performance. Let's take the U.S. business for example. About ten years ago, brands made up less than 10% of our merchandize sales, and most of this was in the watch category. Five years ago, brands made up around 15% of our U.S. merchandize sales (inaudible) our first differentiated brand and accounting for (inaudible). Last year, brands accounted for approximately one-third of our U.S. sales. The differentiated and exclusive merchandise accounting for about 22% of all U.S. merchandise and sales. And that was up by 300 basis points over the prior year. (Inaudible) much further significant decreases in areas as well. We will continue to (inaudible) customer demand for brand. Our merchandize strategy is similar to (inaudible) rather than retail. This is based on our test before we invest strategies significantly increasing our ability. Now turning to some of our current initiatives to create new (inaudible) and strengths. Our store designs both U.S. and UK are increasingly reflecting the growing importance of all brands. For example, if you look further here, (inaudible) store within UK and in the U.S. market we're also testing (inaudible) boutiques within Jared.
Another major initiative is digital marketing. The important upgrades for our website is being undertaken in the both the U.S. and in the UK. Social media and mobile applications have been in the UK for a while and U.S. capabilities are being most important. We are also slightly increasing the use of customer-assisted selling systems, in-store, which both improve the in-store customer experience and enable us to make substantial use virtual inventory (inaudible).We started using these systems together about five years ago in [bangles] category and last year we successfully tested Jared, the Le Vian collection as well. And now have multiple interfaces in every Jared store and we only have 275 Kay locations to the system this fall and ultimate testing. Read the rest of this transcript for free on seekingalpha.com