Good morning, everyone, and welcome to the Signet Jewelers Fourth Quarter Fiscal 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please also note today’s event is being recorded. Today’s speakers are Signet's CEO, Gina Drosos; and CFO, Joan Hilson. During today's presentation, Signet will make certain forward-looking statements. Any statements that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. We urge you to read the risk factors, cautionary language and other disclosures in Signet’s annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K as filed with the Securities and Exchange Commission. Except as required by law, Signet undertakes no obligation to revise or publicly update forward-looking statements in light of new information or future events. During the call, Signet will discuss certain financial measures not presented in accordance with Generally Accepted Accounting Principles, otherwise known as non-GAAP measures. These non-GAAP measures include operating income, effective tax rate and earnings per share. For future discussion of the non-GAAP financial measures as well as reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures. Investors should review the news release posted on Signet’s website at www.signetjewelers.com/investors. At this time, I'll turn the conference call over to Ms. Drosos.

Thank you, Jamie. Good morning, everyone and thank you for joining today's call. Before I discuss our fourth quarter and fiscal 2020 performance, I would like to address the COVID-19 outbreak. On behalf of the Signet Board of Directors, executive team and all of our Signet team members, our hearts and prayers go out to all who have been impacted by the COVID-19 global pandemic. We greatly appreciate all who are caring for those in need, especially the many healthcare professionals on the frontlines. I'm also thankful to our team members who are demonstrating remarkable compassion, commitment, and courage during this crisis. In this rapidly evolving environment, we've been making decisions in real time, prioritizing the health and safety of our team members and customers and taking bold actions to ensure the long-term sustainability of our business. With that, in the forefront of our minds, it's difficult to transition to a discussion of fourth quarter business results. However, we believe it's important to share how the business performed prior to seeing impact from the COVID-19 pandemic, the actions we have taken since, and how we're positioning our Company for when the nation begins to emerge from this crisis. The environment we are operating in today underscores the importance of Signet's transformation into a more agile and efficient organization. As you've seen from our announcement earlier this week, we have moved quickly and aggressively to strengthen Signet's financial flexibility. We are focused on substantially reducing discretionary spend in areas that our customers do not see or care about, as well as driving marketing efficiencies through enhanced digital presence and targeting using advanced data and analytics. Additionally, given the temporary closure of our stores, we are implementing reduced work hours, furloughs and reduced compensation across store and support center teams. As part…

Thanks, Gina. And good morning, everyone. In my remarks, I'll first cover the highlights of our fourth quarter and fiscal 2020 financial results, move on to the actions we are taking to conserve cash while our stores are closed due to COVID-19, and then conclude with a discussion of our credit facilities. The cumulative progress we have made is evident in our strong holiday quarter and full-year fiscal 2020 financial results. Fourth quarter same-store sales grew 2.3% with double-digit growth in ecommerce as well as brick-and-mortar same-store sales growth. Non-GAAP operating profit grew 12% in the quarter, driven by higher gross margin as well as lower SG&A expense on a dollar and percentage of sales basis. Fourth quarter gross margin and SG&A each benefited from strong transformation cost savings. SG&A in the quarter also benefited from lower advertising spend that delivered higher impressions and lower staff costs inclusive of a smaller store base. These SG&A benefits were somewhat offset by higher incentive compensation year-over-year as a result of positive sales and profit performance. GAAP operating profit includes a charge of $33 million related to the Company cash contribution portion of the settlement of a previously disclosed shareholder litigation, which will be described in our Form 10-K filing. This settlement is $240 million with approximately $205 million expected to be paid with proceeds from insurance policies the Company has in place. The settlement is subject to court approval. Interest expense declined 29% year-over-year in the quarter as a result of lower debt balances as well as the benefit of lower interest rates, post our September 2019 refinancing. Fourth quarter non-GAAP EPS was $3.67, compared to prior year non-GAAP EPS of $3.96, as the benefit of higher operating profit and lower interest expense was more than offset by a higher tax rate.…

[Operator Instructions] And our first question today comes from Lorraine Hutchinson from Bank of America. Please go ahead with your question.

Thank you. Good morning. Thanks for the update on the credit business. So non-prime is 7% of your sales. Can you talk about the breakout of the rest of the sales between prime and then also the other financing, the rent to own financing that you've offered?

Thanks for the question, Lorraine. We haven't disclosed the breakout of those. But what I can tell you is that the leasing aspect of our business is something that's been growing over the past year and our customer has responded to that. One of the things that we are looking forward to doing is moving to offering that online at some point in the coming year.

Okay. And then, any help on how the terms will change, now that CarVal's stepping out and Castlelake is taking over the rest of the portfolio? How we should be thinking about the discount that they're paying for the receivables on a go-forward basis?

Lorraine, as I mentioned that we are in process of negotiating that MOU with -- we have a memorandum of understanding with Castlelake at this time. But, we haven't disclosed the MDR rate. The arrangement with CarVal for the next 30 days is substantially under the same terms of the existing agreement.

Okay. And then, if we look at the prime offering, have you heard at all from your partners there on any changes to their appetite to finance jewelry purchases?

Lorraine, not at this time. Our relationship and partnership with our other providers are very strong, and we look forward to working with them throughout this crisis and into the -- once we emerge.

[Operator Instructions] Our next question comes from Paul Lejuez from Citigroup. Please go ahead with your question.

Thanks. It's Tracy Kogan filling in for Paul. I have two questions. The first is on the mall versus non-mall stores. I was wondering what the performance was this past quarter between those different groups of stores. And then, if you could just remind us, at year-end where you stood with -- after your closings, where you stood with mall versus non-mall. And then just on the Castlelake agreement, do you expect the customer -- will this all be seamless to the customer? I know you had some issues before rolling out the new -- when you had new deals. I just wanted to just understand if the customer would feel any different.

Yes. Thanks for the questions, Tracy. With respect to the service provider, as I mentioned, Genesis is continuing and we have a very strong relationship with them. We expected this transition to be with little to no disruption and our customers should not experience any real noticeable change.

And then -- hi, Tracy. It's Gina. Just to address your first question on mall versus non-mall. So, as we've discussed in previous calls, we continue to see stronger performance in our off-mall location versus malls. We did see in the fourth quarter that our Signet banners continue to perform and drive traffic ahead of other retailers, based on ShopperTrak data. So we believe our always-on marketing approach is working to drive a higher level of traffic, but still a traffic decline in malls and less traffic there than on-malls. The good news in the holiday season was that, thanks to our terrific team and also having great merchandise on hand, we had much stronger closure. And so, therefore we saw transactions up in both, mall and off-mall locations.

Now, what was the split between mall and off-mall at year-end?

Well, if you think about Kay as an example, Kay has roughly 290 off-mall. There is a different breakout of off-mall, Tracy. But when you think about it, there is like 500 off-mall between outlet hometown out of 1,200 stores, which is the largest -- Kay has the largest composition of off-mall in the fleet.

Other than Jared, of course, which is fully an off-mall location.

And our next question comes from Ike Boruchow from Wells Fargo. Please go ahead with your question.

Hey. Good morning, everyone. My first question is -- I know there is no guidance. So, maybe just at a high level, Gina or Joan, could you talk about the eCommerce performance that you're seeing? I'm just kind of curious how eCommerce holding up during a time when we know that stores are generally closed across the country. Just directionally, how we should think about that channel? Is there growth? Is it slowing down? Is it accelerating? Just, again, any color would be kind of helpful.

Sure. Hi, Ike. Thanks for calling in today. We've seen continued growth in our eComm business. If I just kind of go back to the fourth quarter for a minute, we were up 15% and we've been steadily growing our share of sales in eComm, so now up to almost 14% of sales. And you’ll remember, just even a few years ago, it was only around 5%. So, we've been continuing to add to that customer experience. What we're doing now is really trying to bring the best of our stores to that eCommerce environment. So, I mentioned in my script, some of the new tools that we're putting for virtual selling. And just as a great example, as Jared ramped that up this week in the first couple of hours, we had 37 customers served by five jewelry consultants in different parts of the country working from home, and the report was really good. So, we think we'll have new tools coming online that will be helpful. We're also making sure we have great value online right now. So, we are seeing some strength in our eComm business at this time. But, I think the jury is out, of course, on where all this will head. But we’re prepared based on everything we've been doing over the last couple of years and introducing new capabilities, as we go.

Got it. For Joan, I'm just curious, on the balance sheet. When I'm looking at the ending balance sheet for Q4, your accrued expenses jumped up by about $200 million. Can you just talk to us about what's going on there? It just seems a little odd relative to the prior years of how that line item would move. Just in that accrued expense line, what exactly is kind of going on right now?

Well, Ike, I can work through the detail of that. But, generally speaking, as we look at the timing and just the close of the year end, it's really about timing of specific payments at the end of the year and where the year cut off.

Okay. And then, my last one, again for you, Joan. Correct me if I'm wrong, but I think that you guys have a 2.5 times levered debt covenant, debt to EBITDA. If retail is going to remain under heavy pressure for a prolonged period of time -- I know you guys don't know, we don't know, nobody knows, but if that's going to take place, it looks like you guys might end up tripping that. And I guess I'm just trying to understand how are you thinking about that possibility? What does that exactly mean? Just how does -- how do we think about -- how to think about potential trip to the debt covenant, on the balance sheet?

Yes. As I mentioned in my remarks, our credit facility is subject to a fixed coverage ratio if availability under the facility falls below the 10% of the borrowing base or the $100 million, whichever is higher. And the unsecured notes are not subject to financial covenants. So, at this point, we're not in that position. So, the fixed coverage ratio only applies if the facility falls below 10%.

And ladies and gentlemen, at this time, I'm showing no additional questions. I'd like to turn the conference call back over to Ms. Drosos for any closing remarks.

Well, thank you, Jamie. And thank you again to everyone for joining our call this morning. Again, on behalf of our whole team here at Signet, our hearts and prayers are with all those who are impacted by this COVID-19 pandemic and especially our investor base, many of you in New York, which you know, it's a tough time right now. So, we appreciate you calling in today and being part of this with us. Take care everyone and stay safe.

Ladies and gentlemen, this does conclude today's conference call. We do thank you for joining today's presentation. You may now disconnect your lines.