Signet Jewelers Limited (NYSE:SIG) Analyst Day Conference Call October 4, 2011 9:45 AM ET
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.
Valerie Brown – Alliance Bernstein
[Call Starts Abruptly] Chief Executive and it’s a pleasure to have all of you here. Thanks for coming.
Before we start, let me ask you, if you don’t mind please ensure that your mobile phone (inaudible) iPhone accessories (inaudible) with our audio and video equipment. We appreciate you (inaudible). I would also like to welcome those of you joining us on webcast through the Signet’s webcast.
During today's presentation, we will in places discuss Signet's business outlook and 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 the Annual Report on Form 10-K that was filed with the SEC on March 30, 2011. And we also draw your attention to the slide on the screen.
Before we get going, I would like to make apologize for Ron Ristau, our Chief Financial Officer of Signet. He had an unfortunate family situation and he had to return today, and apologize and with best regards and happy to speak with you over the phone or in future meetings.
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.
In general, our sustainable competitive strength by identifying the timing and major long-term changes that consumer has as well as by the evolution of our merchandise such as the golden brand merchandise by many already.
Other ways that we have involved in each of these changes and the development of Jared in all small destination, non promotional policies that offer great service collection in diamond was designed to cater to an under served sector jewelry market is now one of the largest jewelry chains within the U.S. with 180 doors reported by national television advertising. And we feel we have the opportunity to close the change down 300 growing nations wide.
Kay, when Kay is capitalized and increasingly shopped all small and location by successfully large store format for these types, this greatly increases our potential for banks for Kay, while complementing the strong mall-based for incoming bases. In the U.K., we’re the continuing to share the shopping patterns, additional High Street locations major regional mall, in which H.Samuel and Ernest Jones, we have developed formats well suited to maximize business in these locations.
These are generally larger in size; they’re newer in designs, allowing for improved customer experience and standard merchandise collection. And as we discussed, we have a major list underway, take advantage of the technologies to provide customers with the best of both the traditional score and the digital environment. Corresponding to the consumer, we’re always be empowering for us, will continue to test in all of our business model going forward as we successfully don’t have and we continue to leaving the evolution in our industry.
Look at our three diamond principle over the last, I’ll talk about it little bit, that really constitute a lot of our management approach to the business. First is flexibility. Often times, sizably, the lack of ability on employed rate, the segment, our investment in people and systems means that we have identified experience and respond rapidly.
We execute the latest trend rather than to have budgeted plan and maybe you can see these, many, many months ago, we have to follow this trend on a current basis. That’s important in all times, put it even more important in the challenging environment that we face as we’re going forward.
Second, our ability to manage expenses and assets. Over the last four years, we’ve demonstrated an ability to react quickly and effectively to manage both these. In fiscal 2010, we reduced cost by $100 million., inventory by $225 million and capital by $70 million. In fiscal 2011, in addition, we’ve demonstrated the ability to - thoughtfully we invested, because of the fair value pricing, same store sales and shortly rebuilding operating margins.
And third, a little bit about the innovation. While we try to manage expenses and assets, we have not with the long-term (inaudible) Over the last three years, we have and innovate, we have taken major step in introducing the pre unit brand and put in place the foundation for further investment and sales enhancing technology. The success of our management approach has been reflecting our ability to outperform the competition and continue to gain profitable market share.
Now, I would like to take a little bit of time to discuss management priorities. I will start with building and maintaining a strong balance sheet. Let me take a couple of minutes to cover this topic.
Over the past three years, we focused on cash innovation. We believe, having the strong balance sheet and then fourth is competitive strength. This is especially solid in capital intensive retail business, (Inaudible). Next, we paid off our debt. In particular, the elimination of other (inaudible) you compare this in the fourth quarter of last year. Following that, and earlier this year, we put in place a new revolving credit in increasing capacity at lower rates and more favorable terms.
While we continue to invest in our business strategy even during downturn. (Inaudible) that in grades with so many companies did. So, next we catch up certain deferred investments, we approximately doubled our capital spending for the business in fiscal 2012. We ensured that we are maintaining a strong environment, appropriate industry leader that we are. We also increased the number of stores and Mark will go into that in more detail including our sales going into the next year.
In addition, most of the capital spend that is being invested in our infrastructure to be insured - we continue to have a solid foundation to build growth upon, the input of our overall execution and to allow us to take a stronger stand in effect of all the (inaudible).
Most recently, during our last earnings announcement, we’re pleased to announce that the Board approved and reinstated the payment of the ongoing dividend of $0.10 per share purchase. Even in this extremely volatile world in which we operate, this shows our measure of confidence and our strong business model and our ability to continue to delivering strong cash flows on a year-to-year basis.
Strong operating cash, paying off debt, restructuring for higher capacity at a better cost at our revolving credit facility, and most importantly, investing intelligently back into the business, our company is still up with a very strong balance sheet.
That kind of brings us up-to-date and to where we are today. Where do you go from here? We believe we must maintain the strong balance sheet that we worked so hard to fill. The cost heavy decline was “strong balance sheet”. Whether it is an appropriate amount of cash that has in order to be ensured, future strength and financial flexibilities for our company.
In today’s environment, we determine that a range of about 7% to 9% of net sales or at this time somewhere in the $300 million range for our key portfolio. We base this on (inaudible) studies and preferred companies and our internal view of future working capital on (inaudible). This position now gets us a guideline, available fund over and above in cash reserves for future investment. These investments that include continued reinvestment in our business, we will continue to increase subsequently within our existing (inaudible).
Continued investment, building new stores and as we see customers shopping patterns evolve (inaudible) available we will do so. Continued investments and new and innovative product ideas, brands and marketing. You are going to hear a lot more about this from our management team after our (inaudible).
Number two, we will invest and support in new initiatives, we will continue to be (inaudible) in the opportunities for growth, and new geographies through distribution channels, new concept or within our (inaudible) supply chain.
We will do this organically or through acquisition and/or joint ventures in a very measured fashion. Only from the rest of (inaudible) favorable and we can clearly (inaudible) and buy shareholder value. We think there maybe opportunities for (inaudible) obviously within a reasonable period of time in some of these areas now.
I can assure you though, whether our future investments are done organically or otherwise at this time, we are only interested in opportunities that fit well into our business model, that meet our strict criteria for financial returns, strengthen our company for the future and are part of a non-material size, so not to distract our management from anything of our current successful initiatives that this management entertains (inaudible) so well. We will then utilize any additional free cash flow to enhance shareholder value to appropriate means, which could include such vehicles as share repurchases and/or additional businesses.
Now I would like to turn it over to Rob Anderson, our CEO of our UK Division to give you an update on the UK businesses.
Good morning. It is a pleasure to be here. As most of you will not be as familiar as with Signet’s UK business as you are with Kay and Jared. I will begin with a brief business overview, unlike the similarities and differences in the U.S.
I’ll then outline the growth strategy for the UK business; particularly though I will give you more reasons for the consumer (inaudible) rather those of the competitors and differentiating H.Samuel and Ernest Jones with branded merchandize (inaudible) and the quality of the in-store experience.
I will also look at unlocking channel initiatives, but we are leaders in the UK in the jewelry the sector and adding further new initiatives this year. Plus doing a brief look at how we continue to improve execution for the financial performance of the business.
In the UK, Signet trades as two brands H.Samuel and Ernest Jones. H.Samuel is the number one (inaudible) 338 stores. It is located in almost every medium and large retail center with a typical net store size of 1100 square feet. This customer’s middle market with a typical annual income between 15% and 25%.
The healthy position in brands has a strong fashion watch selections, including Digital, Digital on-line (inaudible). Those are all traditional watches such as (inaudible). The only competitor that we found is (inaudible) has about 100 stores, the rest are independents. H. Samuel represents about 11% of Signet sales.
Ernest Jones is the number two to (inaudible) sales with 202 stores. It represents a less larger retail (inaudible) with an average net store of approximately 900 square feet. This customer is upper middle markets with a typical [outdoor] income 30 to £50000 or about 80,000 stores.
And also a strong (inaudible) watch represents (inaudible) with brands such as Armani, [UT] and Christian Dior. The vertical digital watches (inaudible). Selected locations, those that have descriptive watches such as (inaudible). Ernest Jones also has a strong [garment] business. There are big segments that compete with Ernest Jones, particularly in major regional models. The largest is Goldsmiths, followed by Beaverbrooks and Fraser Hart. There are also a significant number of independents. Ernest Jones accounts for about 9% of Signet sales.
This retail market gives you an overall feel of the market, while also, both of our competitors are independents. They are estimated to account for about 80%. There are approximately 5,200 specialty jewelry stores, and the market is very fragmented as in the U.S.
Unlike the U.S., jewelry and watch sales in the U.K. are mostly made in the specialty sector. It accounts for about 75% of the total, gems about 43% of sales. (inaudible) non-specialty operators are (inaudible). These operators are first to enter the market, as is (inaudible). While the market position in the U.S. and U.K. divisions are very similar, there are major differences in merchandise mix, flatly cultural differences.
In the U.S., you can see that the dominant category is diamonds, while in the U.K. there is a more even category share lead by diamonds and watches, particularly fashion watches. They are followed fairly closely by the gold category. Thirdly, in the U.S., providing customer finance is important. This is not significant in the U.K. market space.
Returning to our strategy for growth, the challenging market space, we have a number of internal initiatives to drive the business (inaudible) For example, differentiating H. Samuel and Earnest Jones from competitors, you still design (inaudible) market front. (inaudible) to invest in multichannel opportunities (inaudible) continue to integrate these activities of Signet. We continue to focus on execution (inaudible).
The current economic environment will typically get stronger as they continue to invest in competitive strength although there is total finances [operationally]. I’ll now cover (inaudible) in more detail. First to differentiate is retail formats. We continue to obtain (inaudible).
These are our newly opened stores (inaudible) city development, largely certain malls in Europe. Also they’re much near in layout to a typical U.S. store than those operated by our competitors quite differentiated in the marketplace. These designs are most – better suited to attracting customers and providing superior customer service in a typical U.K. jewelry.
These new stores move outside of design – move on, on some of the design features, keep the focus on (inaudible) in stores, and particularly so in the Ernest Jones format, where we are increasingly making use of installed branded boutiques, such as the bridal (inaudible).
Second, with an increased emphasis on brands and designs both in H. Samuel and Ernest Jones, very important (Inaudible) appropriate opening price points. In H. Samuel, their focus is on partnering with third-party brands focused at the middle market, DKNY. H.Samuel sales has been a key partners of the brands. For Ernest Jones, there is more of a focus on differentiating brands, some of which are specific to the UK markets such as the Amanda Wakeley brand, while others such as the Leo Diamond (inaudible) store on our U.S. experience.
Moving on to marketing initiatives, we have carefully noted the effectiveness of our initiatives. TV, in-store accountable, (inaudible) advertising and CRA continue to refine the mix. Partnering the major brand is also increasingly important. For example with Chamilia on TV (inaudible) in-store events focused on particular revenues and successfully tested (inaudible).
Among the more significant (inaudible) both these channel we told you the key parts of our strategy. It’s about creating the synergy from an existing infrastructure such as store or website and developing a customer centric model allowing customers to reach the contract (inaudible) through any medium. We thought from a strong position for the number one and two sold brands two leading jewelry websites in the U.K.
It also have stages of (inaudible). We continually upgrade our capabilities some of the new development we have introduce this year or we shorted our check these fully transactional iPhone app brands. Same thing has been reviewed on our website for all products. Many of our customers have given written reviews (inaudible) allowing our customers to instantly communicate with us for the buying process. Having first in market jewelry option and we’re also impacted (inaudible) new H. Samuel are expected to start its business, now further important is funding for them.
Finally, (inaudible) we do the in-store customer experience therefore up shining and retention remains the priority. The addition they particularly quite interesting for making the best use of our great store key members I am sure optimal stocking at the peak period, investing in IT to minimize things (inaudible).
We are also investing in technology simplify our business processes to enable the essential function add more values to the business. A long-term initiative of being short and least period (inaudible) was to take advantage of the weak U.K. property market.
In fiscal 2011, the U.K. division reported operating income of $57 million, operating margin of 8.2%, 15% of Signets total operating income. Return on capital employed was almost 75%. The business was strongly cash flow positive.
So far this year at the end of July, same store sales have been slightly positive. This means having outperform the UK through the retail sectors as a whole. Good performance when the U.K. consumers experiencing a worst (inaudible).
You have to say the operating income has little changed from last year particularly at the historical gain $900,000 fiscal 2011. (inaudible) nearly all the operating income in U.K. and in the fourth quarter. Therefore apparently more focus on our final preparation for the holiday season. So before we finish on the U.K. business, I’ll hand back to Michael. Thank you.
Thanks for – very much. (inaudible) with a few reasons why the U.K. business is not equal to long-term competitive advantage for us. First, with a strategic partner for any international niche market watch and jewelry distributor, I know how important that is for (inaudible).
Second, our U.K. division is a clear market leader within the U.K. market. And final, U.K. division is not only the leader in the U.K. market, it is the largest mid market section almost within Europe. So it’s extremely important to our business model and something that we needed to invest for a lot of the initiatives that they lost focused (inaudible).
Now I’d like to turn it over to Mark Light, our U.S. Chief Executive Officer and (inaudible) Mark?
Hello, everybody. I am very pleased to be here and in fact we believe (inaudible) last 25 years and about in depth of this (inaudible) equipping our great team of people with training and the (inaudible) customer’s expectations, particular what it demonstrate what we believe they continue to profitably grow the business. Our growth strategy has (inaudible) activity and operating leverage. The industry is – developing our leadership of vital category, continue to develop branded merchandise and differentiated products in the market place. Second, (inaudible) is growth (inaudible) and you see the potential increase in selling space about 40%. Fiscal 2011, we opened six stores, this year, we are on track to open 23 stores. We are targeting (inaudible) 2013.
Third, by using technology to enhance sales and enhance (inaudible). Looking at each of these in terms, let’s (inaudible) it accounts about 50% of our sales. Due to (inaudible) major initiative and continue to focus on creating a value for sales (inaudible). Branded market places were dominated by (inaudible) high importance of the brand and (inaudible) based on the in-store experience. It is even more important that any other jewelry transaction.
Furthermore, (inaudible) for the most important (inaudible) purchase that any one will ever make. Our store team members think it is a very special (inaudible) train and provide our team members. It is our people that makes the difference. You will definitely get a change to meet some of them (inaudible) to help and succeed to provide our team members the (inaudible) in customer service, product knowledge and their selling skill. They also focus on the identification of best practices at the corporation of our day-by-day, store-by-store execution.
We have a computer based selling system for the bridal category in Jared (inaudible). A very good example of the technology, good customer service and execution. Another example, advancing our guest experience (inaudible). On a monthly basis, each store will be doing a report based on customer feedback across a range of business and key performance indictors.
The benchmark is that all our other stores help our field management identify best practice, positive change in the most appropriate manner. This is part of our computerized focus initiative of an integrated customer feedback, (inaudible) and choose the correct material to use monitoring that the change actually (inaudible).
You will actually love (inaudible) in the bridal category and other purchases of the business, so we can better understand bridal customers (inaudible) more accurate. We have also (inaudible) a major (inaudible) to understand us better, psychology of our bridal customers. Then we have (inaudible) based on what they do. A range of this has been incorporated into our marketing and (inaudible) training program for this fall.
This corrective action is due to the earned investitures, debt experience and debt forward and for giving this strength. As a team member of our 12 important products, these things to recruit and paying the best and price and to motivate and we have worked accordingly.
It is a strict policy of combined of our field management, all of our division managers and above we must encourage what part of our managers, even we recruited our Presidents, field operators from a competitive arm and have to start a (inaudible) our unique culture and to our low debt turnover per year for field managers, but we believe (inaudible).
As a result, we continue to build our many years of training that’s has been handled strategically in the foundation this makes our training much more productive. That believes us the reason that’s often given is that our expectations, our performance and (inaudible) turning to looking about is supply chain expertise. Given our scale we have invested especially in merchandising system and more importantly team members that use them by getting the right merchandise at the right time and in the right place. They are lead by average and proceed depending on that.
(inaudible) expertise said that fiscal 2010 has been sharper and more in sales, this is our inventory like $225 million increase in our margin. Average inventory has further decreased by over 11% in the second quarter of fiscal 2007, fiscal 2012, despite the discipline in the higher increase in commodity cost. Our sales for the same period has increased by more than 18%.
And booked development over the recent years for the increase in the virtual inventory, both in-store and online, they definitely are usually store retail partners or vendors. We also believe that we have the best supply chain in the middle market especially two of these sectors, for example last year 45% (inaudible) purchased cuts all together in the international diamond market. Upscale also in the most continue merchandising up respectively. The vision of strong balance sheet uses the five chain costs allowing us the greater flexibility, reduction and planned inventory better need the variations that customers buy these ads.
Our recruiting systems and balance sheet ultimately competitively shouldn’t impact the bottom low prices are hedging. Of the special track record remains the manufacturing and designers often doing their best time period of the first. If you can negotiate recruitment business has been our other competitive strength above differentiating recruitment and merchandise.
In the bio category, there are three established different brands. The (inaudible), it is widely recognized as most successful brand that Signet gold products and carefully developed after 11 years of this showroom paid or regional brand and Charmed in United Kingdom.
(inaudible) diamond is an ideal cut diamond exclusive to peers and Heart (inaudible) all ideal type diamonds. But this and (inaudible) first generation advantage study and would be available in all retailers at the end of our third quarter and our concrete diamond an ideal cut diamond, very strong (inaudible).
Some important factors in our accepted development of differentiated Bridal merchandise, our ability to use national television advertising respectively, this is very established track of our potential part. In spite of increased focus on bridal category we are testing different marketing strategy to better reach our target customers. Now I would like to show you one of our pay ads Low Diamonds, our top selling differentiated brand.
We call it universal language (inaudible). Given that the average selling price (inaudible) Bridal were significantly higher than the average those are often consumer finance and different models to able to manage in-house an important competitive threat. By carrying out this function in-house, we have our four part bridal customers that certain characteristics were making a bridal purchase when they made other credit transaction. We’d like to emphasize that our customer finance options is designed in the corporate Signet jewelry not to (inaudible). We also found that the life time value of the in-house credit card we didn’t not have time or than that of the non credit card customer.
Both branded business is key than the bridal category. We also have great success in the non-bridal category, as merchandise such as Charmed Memories LeVian, Love’s Embrace and Open Hearts by Jane Seymour are helping creating lead store destinations and are providing our sales forces a powerful (inaudible) these brands can help drive (inaudible) two ways. One by increasing the time of transaction and by helping to drive the average selling price, particularly sell the bridal category and (inaudible).
As a proof the exclusive and differentiated brands sold bridal and non-bridal categories, unusual theory at the moment. In addition to differentiated brands we are also building our local and third party such as Pandora and (inaudible), category the logo it has been the bottom of the day course, (inaudible) Pandora to our superior in-store brands, disciplined execution by our merchandising teams and national television advertising.
Again our scale and consistency of execution across all of our stores like us as an attractive partner Pandora targeting our sector of the market being will continue to focus on brands that meets our customers today.
Whole merchandising (inaudible) strong brand value that created at a long remained Kay and Jared advertising programs. We offer our customers a strong value proposition as they have material quality at great prices supported by additional customer service force such as our lifetime stand more key program and our training policies, trading the customers the full value of the real purchase that they trade up believe is more than 12%.
This strong value proposition which explains our customers our greater support teams, they have been our quality of execution all parts of our businesses and our sale. This merchandise has been essential to our consistence out performance of our competitors over many years since they help drive our often rolled market share gains.
Now let’s turn to page 12 and after 13. In fiscal 2012 we planned to open 20 Key stores, nine of it being in malls and 11 off-malls, three Jared stores. We also expected add 35 stores at the end of the year, hopefully all changes the phase in the years is expected to be neutral, but the quality of the products (inaudible).
Longer term, we think that for the 850 Kay off-mall locations and 300 Jared, Both Kay and Jared, definitely potential increased space by more than 20%. Adjustment or a key reduction of number of regional branded stores about 100, this gives the potential (inaudible) about 40%. As initiated earlier we have seen more real-estate opportunities that are now targeting to open 40 to 50 store in fiscal 2013.
Sudden drive of gold is the new and emerging technology. Business technology that enhances our consumer experiences are henceforth through a wide range of digital communications. Utilize our insights to our customers to the technology the better it requires. For example, being able to provide jewelry that needs to be desired and into the jewelry tailored prices or a wide collection of use of (inaudible) and is designing the wider customer interface doing appropriate and more so fast.
George Murray in his presentation will talk about e-commerce, we plan to more than double our sales in the next two years and the use of our digital communication. Seeing that you would have noticed the benefit of scale (inaudible) of life and technology ourselves to leverage our acceptance across a much larger sales days than our competitors that continues as our sector’s technology and system.
Just before I turn the show to the next slide, I wanted to remind you that the (inaudible) performance at the end of the day which by the way was a record period for the U.S. business.
There’ll now be a 15 minutes break and then we’ll be starting the presentation and we have 15 minutes. Thank you all.
Okay, welcome back. I hope you’re feeling refreshed and ready for the next two presentations, where George Murray and I will look at aspects of our growth strategy and a little bit more detail.
We’ll start with our initiatives in the bridal category, which represent approximately 50% of our overall business. Our goal is to have the most comprehensive assortment in the marketplace for the mid-market consumer; offering exclusive merchandise and differentiated brands as well as unbranded merchandise, which – while always providing a great value to the consumer.
In both our bridal and fashion categories, we are also looking to create branded collections that have lasting equity. Therefore, the merchandise not only has to be great at launch, but we also need to continue to innovate and keep the merchandise fresh and relevant overtime.
I’ll also speak to our world of virtual inventory and a personalization and customized jewelry program that is not only exclusively ours, but also light years ahead of the competition; a program where we can afford products to our customers, only limited by their imagination.
So what is a comprehensive offering for the bridal category in our sector of the market? Bridal as I stated is a major portion of our total sales, but a smaller percentage of our unit sales. Many times, this is the first significant jewelry purchase that these customers ever made and our merchandise offerings need to be the ones that come to their minds first, when they begin looking for this lifelong purchase.
When that customer does walk into our store or visits our websites to gain information, we have to make every presentation count, not only that we have to make a count, we have to be the best as surveys show a couple often visit in several retailers before making their final choice.
This is where the skill, judgment and discipline of our merchandising team supported by time tested processes such as our test before we invest approach, an industry leading systems are crucial. We utilize a customer pull merchandising model rather than a retailer push model. This means we will have the right inventory at the right place, at the right time to continue to meet the evolving needs of our customers. This model is heavily dependent on our scale and systems.
For example, we often test merchandise initially in 50 stores, then expand the test of 250 stores. So that we can get a specifically valid test and eliminating a store region, store or regional biases.
Over the last few years, we have been focused on expanding our existing bridal assortment as well as adding two new differentiated merchandise brands to reinforce our leadership in the bridal category. First, the Leo Diamond just celebrated its 10-year anniversary as a Signet exclusive brand.
We continue to grow the Leo brand with a constant flow of new product introductions and store count expansions in both the anniversary and bridal categories. This fall, we are also launching to our mall store locations, a brand new Leo display and new brand packaging to continue to invigorate the brand.
Last year we began to introduce Neil Lane Bridal to both our Kay and Jared stores. This spring, we expanded the brand to all Kay and Jared stores. In this fall, we have expanded Neil Lane Bridal to all of our regional brands. Neil Lane Bridal price points range from $2,500 to $7,000 in all stores with a top store assortment price points up to $15,000.
Last year, we also began to introduce Tolkowsky Diamond brand to our stores. Following our test and ran strategy, we have been expanding our Tolkowsky solitaire program to our mall stores, while at the same time testing, expanding our Tolkowsky bridal collection. This fall, we will have a Tolkowsky Diamond program in approximately 50% of our mall stores with price points in all stores ranging from $1,500 to $7,999 and top stores having price points up to $15,000.
And even as we expand these new brands, we are already testing new product and brand extensions within these brands as well as Hearts Desire merchandise in the Jared division.
Turning to value in the bridal category. Price is just one piece of the puzzle, and due to our experience, size, strong balance sheet, systems and longstanding vendor relationships, none of our competitors (inaudible) as effectively as we do. For example, in fiscal 2011 45% by value of all the diamonds that we sold, we selected and purchased the polished diamonds ourselves.
With our strong balance sheet, we are also able to take advantage of opportunistic purchases in the diamond markets when we see value opportunities. Our strong financial position and scale means that vendors are willing to work with us to build flexibility into the timing of merchandise deliveries, so we can pull forward or delay orders at short notice.
For example, we can change and get deliveries and merchandise within the holiday timeframe if we identify unexpectedly strong demand for particular items. In addition, our financial strength and success makes our suppliers want to work with us on exclusive programs along with bringing us new merchandise concepts and ideas first.
Another important aspect of value in the bridal category is quality, particularly at the lower price points where diamonds are not independently certified. Some of our cost advantages we passed on the consumers by offering superior quality. However, this requires very well trained members in our stores to demonstrate this to our customers. This makes consistency of quality very important, so that when a piece of merchandise is taken out of the showcase, the team member has a high degree of confidence in what they are selling.
This confidence is then communicated to the consumer. This consistency of quality has to be maintained across all of our stores and over time. This requires very experienced diamond buyers and stringent quality control. Our loose diamond buyers have over 120 years of combined buying experience in the key diamond markets across the world, and our buyers within the bridal category each average over 20 years of industry experience.
Now really Mark identified increasing our average selling price point as one we have driving store productivity. Let me give you an example of how this might work. The opening price point for a 1-carat uncertified solitaire set in a very simple setting would be $3,199, a diamond of the same size but one quality grade higher and certified we sell for $4,599. A Leo Diamond a 1-carat again certified but also one step higher in color and clarity combine with the GemEx Certification demonstrating the Leo’s superior fire sparkle and brilliance would be $6,499. Now historically, this was the highest price line within the mall-divisions.
Now with the launch of the Tolkowsky Diamond, we have a diamond of similar quality as the Leo however having the added benefit of being cut to ideal standards with a price point of $7,999 we can offer 1-carat diamond that will fit any customers desire and budget. To take advantage of this opportunity, again you need very well trained team members in-store, to now only point out the settle quality differences, but to assist the customers in ascertaining the factors that are most important to them. In many instances, it may be a combination of attributes that they are seeking.
Here having associates in every store that are graduate diamontologist is extremely important. Next as we are facing a tough economy having credit options that will enable our customers to purchase the bridal ring of their dreams is of equal importance. Another way the average selling price is being increases by the introduction of Neil Lane Bridal.
Currently the most popular price points for this collection range on average over $6000 which is well above our typical price point to Kay.
In similar fashion to our exclusive bridal measures our fashion brands have been strategically deployed to compliment not overlap with each other. For example, Charmed Memories offers our customers the ability to make a significant jewelry purchase whereas little as $29, over designers’ line such as Le Vian garners an average sale of well over $1,000.
Jane Seymour Open Heart collection can certainly speak to a romantic situation but it can also touch customers in other ways. Our analysis has shown it can be expressing the emotions of a mother to daughter or vice versa friend to friend, an expression of sympathy or hope, or any situation we’re keeping your heart open is sage advice.
On the other hand, Love’s Embrace was designed for the romantic gift giving occasion. Our ability to drive brand awareness and purchase intent for these exclusive product ranges has achieved to our capacity to advertise in a national level group of Kay and Jared utilizing both television and radio. These branded differentiated exclusive programs have enjoyed rapid sales growth over the last three years. In fiscal 2011, they accounted for about 22% of U.S. merchandised sales against 9% in fiscal 2008 and we would expect to further increase this year.
The growth of differentiated branch is not just about launching a new product with the name. It involves a careful nurturing of each brand and keeping the merchandised range fresh and relevant to the target customer. Let me demonstrate what this means from a merchandising perspective for you.
When we launched Open Hearts by Jane Seymour in 2008, the collection was centered around Jane’s original iconic design. In 2009, the angel design which was proven to be very successful was added along with the introduction of a watch collection. In 2010, we introduced a Nature same collection, a Key collection and a collection of open heart charms as part of our Charmed Memories Program.
This year we introduced Colored stones to the collection. Following our test [women] strategy this was initially tested in [selected] group storage really this year, and will be expanding to all stores for holiday.
We have also been introducing new designs that enable us to continue to offer merchandize at opening and other key price points, which is helping to offset the impact of higher commodity cost. Therefore, we can grow our differentiated brands each year through these types of refinements and a logical product extensions without a major new launch. This is all part of creating long-term brand equity and therefore reinforcing our competitive strength.
Turning now to Virtual Inventory and Personalized Jewelry. We first began using this concept with the virtual diamond of Jared. We have also translated this concept into LeVian selling system that was demonstrated during last year store visit. Both of these involve a structured selling system for our sales associates to offer our customers unique merchandize selections outside of the typical store assortments.
We have also utilize virtual inventory on our websites, for example with our designer and capability on the Jared website, we are able to offer our guest a selection over 15000 exclusive loose diamonds offering a brand a broad range of attributes across many different price points.
This year we are expanding these features to Kay with the launch of designer and capability on the Kay website and the introduction of the customer assisted selling system to 275 Kay stores as well. The customer assisted selling system strains are currently mounted on the showcases, however we are also testing a tablet based system.
A new extension of this concept that we have been testing this year is personalized jewelry, which I’ll demonstrate for you in a minute. This exclusive program of personalized and customized jewelry goes far beyond what the initial perceptions or what personalized jewelry might be and really meets the evolving needs of our customers. Because we offer our customers a real time view of their customized jewelry, they can actually see the completed piece online before they place their order. None of our competitors have this capability. In addition, none of our competitors offer the wide range of personalization options of gemstone, metal types engraving and sizing that we are able to offer.
With millions of different combinations to choose from, it is much more than just the opportunity to add a name or a birth stone to jewelry. This program gives our customers the opportunity to clearly take almost any design and make it their own. Our customers can from the comfort of their own home, lay out thousands of design option, order their selection, have it custom made for them and then delivered to their home or local store within two weeks. Let me demonstrate how this works.
Before I really get into the presentation, I just want to say that previously these types of orders were either non-existent because the manufacturers didn’t want to deal with them or even the sales associates didn’t want to. They wanted to sell what they had right now, get credit for it at that point in time.
Why the manufacturers didn’t want to do, it’s again most of the manufacturers are set up to be assembly. They want to produce hundreds of an item to thousands of an item at one particular run. The one-off ring or pendant or necklace or bracelet totally not efficient for them, so what we have done is we partner with a supplier. Its exclusive arrangement where they have set up a factory for us that is geared towards the one-off. And that’s how they are able to do it.
First of all, they take all of the orders; secondly, they can do it and deliver it in two weeks. So again on our website here, what you’ll see here all of the different personalized category options. You got diamond jewelry, (inaudible) men’s Jewelry, initial jewelry, personalized rings so on so forth. So just about every category you are able to personalize. So let’s try for our example here personalized bracelets.
So Paul let’s try this bracelet here to gemstone bracelet. So what you’ll see now is this bracelet set up without any sounds in it, it’s basically set up and to falls to the lowest quality of metal stone type et cetera. So right now you are seeing that it’s basically a blank money it’s priced at $187 its price sterling silver.
So let’s say there is three different bracelet lengths six, seven and eight inch let’s go with the average we’ll see at the 7inch bracelet, so if you click that and you see the cost just moving up to $199 – $193. So again just by having one additional inch increase cost and the customer sees that so they are able to order back and make their choice. So let’s move from the length of bracelet.
Let’s go now to colored stones. Let’s try the bracelet in the birthstone for February which is Amethyst. So again the bracelet is now populated with a gemstone, you see now also that the price point has moved up to $380. You know what actually my wife that she wanted both birthstones and so let’s do February and let’s do Aquamarine for March. So again you see that now the bracelet is postulated with both gemstones and the price has moved up to $424. Our next choice is the metal content. So again it is defaulted to $424 in sterling silver, let’s go to 10-carat weight gold, $400 dollars now to go from sterling silver to white gold in 10-carat it’s now $2,600 still not expensive enough.
Let’s go to 14-carat. So now you see the price has gone up to 39, 72, and if you are a little bit more traditional let’s see what it looks like in yellow gold. So the price stay the same because obviously 14-carat yellow, white same price, but you can – now the customer can see white gold, yellow gold et cetera and knows the price point. The key of this is they see what it looks like, they see the pricing of real time it’s what they’ve developed, it’s what they’ve customized, personalized and if there is the two weeks once they click.
Okay, turning now to managing our mechanize margin. This is a complex mixture of art and science delivered by experienced management and sophisticated system support and analysis. Significant input costs inflation is something that the jewelry sector has been experiencing for many years. Higher commodity costs are nothing new. We have therefore developed the detailed understanding of how the consumer shops and reacts to price changes as well as our associates.
As jewelry is an infrequent purchase of a complex product. The consumer usually has very limited price visibility over time. Typically the consumer has a dollar budget and not a product specific constraint. Therefore the wide range of price points for example from $8,999 to $1,799 for an iconic item in the Love's Embrace collection means that a suitable item is normally within the customers price range.
Due to our use of average costing of the inventory and of hedging of gold, it takes time for commodity costs to impact gross margin, merchandized margin. As a result we have time to very carefully plan pricing action and product selection when creating a merchandize assortment. And last but certainly not least, when considering pricing, we have the additional advantage of having the lowest cost supply chain in the mid-market specialty sector.
Having implemented price changes we can then carefully monitor their impacts on gross margin dollars earned adding further to our understanding and insight to a better influencing future decisions. As a result, we have successfully managed our merchandize margin for many years.
In conclusion, I believe I’ve demonstrated why our experienced systems and scale enable to execute in a superior manner and rather than relying and gut instincts we make well informed decisions. Therefore given our test before we invest philosophy we are more likely to succeed in others in presenting to our guest differentiated and start off to merchandize that also provides them with a great value.
I’d now like to turn it over to George Murray.
Thanks, Ed. And good morning, and pleasure speaking with all of you. Signet starts with a deep understanding of our customer wants and needs through a primary research, data mining and on trend insights. We have a test before we invest culture and we drive sustainable consumer centric competitive advantages across our entire company.
Our emotional and benefit based advertising campaigns utilize romance and appreciation. They build brand awareness and equity for Kay with our Every Kiss beings with Kay and Jared’s with our He went to Jared campaigns. We utilize national television, which is particularly effective for jewelry as it is a visual product with an emotional message.
There is also very limited competition from other jewelry companies on national television. National television has a number of advantages including communicating brand positioning and building brand equity. Greater marketing leverage because every store benefits from each additional impression. We’re able to develop brand name recognition more quickly for our merchandize launches and penetrating new markets. It provides us the ability for product placements and programs such as Kay’s integration in NBCs Christmas at Rockefeller Center and Jared’s integration on ABCs Marry Me Monday on the Bachelor.
We also make extensive use of multiple touch points with consumers in store, online, credit, repair, extended service plans, warranties, gift cards. We proactively market to our customer via phone, mail and e-mail in a fully integrated manner. This integrated approach is becoming increasingly important as today’s consumer expects us to be able to contact us whatever way is most convenient for them. We’re therefore making a significant investment in digital media. We aim to be best-in-class in our industry. And during this year we’ve been making the first of many significant improvements to our websites.
In the U.S. we typically spend in the range of 6.5% of our sales on marketing. This is 50% greater than the sector as a whole based on data produced by jewelers of America. Over the years, we have been investing and building our stores brands effectively creating a brand equity barrier to our competitive set.
We’ve also created a proprietary database of 27 million names build up over more than 15 years, and have very strong customer profiles to do integrated marketing campaigns and drive incremental customer lifetime value our skill allows us to build behavioral models for marketing based on our customers responses to our offers and events. And we continually test alternative strategies with a champion challenger approach.
Our Jared TV campaign talks to Jared superior product selection and uses humor and referential power to drive traffic to our stores. Last year, the commercial introduced called GPS featured to male – female voice GPS taking control of a car. This year we have the (Sequel) in which today the car’s owner is literally driven back to Jared by the women who lives in his GPS. We are going to show you a sneak peak of GPS, which will launch this holiday.
We carry out extensive consumer researched to better understand our guests and potential guests, so that we can communicate with them more effectively. The Jared Guest is typically a college educated, married male with household incomes in the range of 75,000 to 125,000 plus.
This year we carried out a series of major research initiatives in the Bridal category, including a major study to determine the size of the U.S. Bridal markets. It has provided us with a good estimate of the size of the category, which is over $11 billion. As you would expect, this is predominantly rings in particular diamond engagement rings.
We conducted qualitative research into the psychology of the emotional needs in the barriers of our Bridal customer followed by quantitative studies. Testing the various hypotheses to understand the difference of shopping and purchasing patterns of different demographic cohorts such as the Gen-Y Group.
The needs and views of our credit offering was also studied. These research initiatives serve as the basis for advertising creative development and very importantly training of our store team associates.
Our strategy of providing exclusive branded and differentiated merchandise is key to our market leadership and is particularly important in our Bridal merchandize, with our new Neil Lane Bridal collection, we have partnered with a man who first and foremost is a jewelry designer. Over the last 30 years, Neil Lane has become the go-to bridal ring designer for Hollywood’s biggest stars. By the way, Neil Lane is the designer of the engagement rings on The Bachelor, a TV show.
Earlier today, Mark showed you a Kay ad for the Leo Diamond Bridal collection, and I would like to show now a new Neil Lane bridal ad. This ad will launch at holidays and incorporates our research findings and introduces Neil as a jewelry designer to the stars. With handcrafted rings that are original Neil Lane designs for the star in your life.
Okay. Now we turn to the digital environment. This is a priority area of investment for us, and our goals is to leveraged online what we do in-store. That is to provide a superior experience with great customer service and interaction. As part of this process, we are also looking to achieve a more seamless interface between our in-store and online experience.
We have been steadily adding features to both sites. For example, the ability to personalize jewelry that ad just demonstrated. We are developing a strong brand presence and emotional connection with user generated content on our jewelry, which allows customers to give ratings and reviews. And with our merchandise getting an excellent average score of 4.5 out of 5.
This slide depicts the new Kay homepage with the site updates that include a simplified site design and simplified checkout process. Automatic recommendations for cross-sell and up-sell, the ability to compare the attributes for multiple products. The consumer provides the product reviews and ratings and in-house credit information for new credit customers is available as well as payment and open-to-buy information for existing credit customers. This feature is a major advantage of having an in-house credit system function.
Our research indicates that store credit is a useful and attractive option to many customers and is effective at enabling fine jewelry purchases particularly in the engagement and bridal categories. Well the – case site this week. This will have the same functionality as the jared.com capability, but will have its own unique questions of thousands of diamonds that are specifically targeted to our Kay consumer demographic.
With Kay, our customers are more likely to be male college graduates, married with household incomes in the 50 to 75 plus range. This is the new redesigned Jared homepage. Beyond the functionality upgrades that I mentioned a few moments ago for Kay’s site, which have also been applied to the Jared site. We’ve also center justified our sites, updated our store locator functionality, developed an email preference center, worked aggressively to improve our SEO, search engine optimization, and as a result, our traffic counts on both sites are up significantly as is our conversion rates.
We’ve also refocused and reprioritized our SEM search engine marketing or paid search. This fall, we will also be launching mobile friendly sites for both Kay and Jared. These sites will include features that customers find valuable, like a GPS-driven store locator, product browsing as well as product reviews, so that they know what to ask for, when they walk into our stores. We will be making these sites transactional in later releases.
We have also been developing an understanding of a social media through initiatives such as Facebook page for Open Hearts by Jane Seymour, as well as an Open Hearts by Jane Seymour YouTube channel and the KeepAnOpenHeart.com micro site. Since the introduction, the micro site has had nearly 100,000 visitors.
The site communicates the velocity of keeping an Open Heart with consumers through e-mail, e-cards and text messaging and offers the consumer the opportunity to submit their own Open Heart story. We’ll be launching a Kay’s Facebook page in the next three months followed by one for Jared. These improvements in our electronic communications capabilities are just the first year of a multi-year initiative.
Our market leadership, financial resources, ability and commitment to invest in and develop people means that we can invest far more in our capabilities than our competitors. Then leverage our investment across both Kay and Jared and increasingly H. Samuel’s and Ernest Jones in the UK.
In penetrating our messages deeper into the digital environment, we leverage our television media buyers and production expenditures by testing online video advertising, utilizing our TV spots and use premium video content sites. These are particularly useful for targeting Gen-Y our primary audience for Bridal who is also a key user of digital media.
Shown here are a couple of examples of online co-branding with network TV sites. I hope I have demonstrated to you our market leadership and the traditional forms of advertising and the competitive advantages that it brings us.
In addition, I believe you will also have seen our increased commitment to the digital environment and how we are integrating our in-store and online capabilities with a consumer-centric approach.
I will now hand it back to Mike for a few closing remarks, before we begin the Q&A session.
Thanks George. That was great. I would like to say thank you to the other presenters that we had here today, I really appreciate you guys taking the time and effort to come here and speak with our investment community. I think it’s very beneficial to all of us quite frankly.
I would also like to say, thanks to all of the team members behind the scenes that logistically made this meeting happen, because it’s not an easy endeavor, but we certainly are glad to be here and we are certainly glad that you could join us today.
In conclusion, our outstanding performance, it’s not chance. This is based on sustainable, competitive strengths that we have many of which you heard about today. Our business model is built on truly understanding the consumer and continually evolving to better respond to their ever changing needs in the marketplace. It’s about recruiting, training and retaining great people providing them with compelling product initiatives supported by outstanding advertising and in delivering a superior in-store experience.
We will now be happy to take questions; I would ask you please wait for a microphone to be passed before you begin your question as we are being webcast this morning. Thank you.
Valerie Brown – Alliance Bernstein
Hi. It’s Valerie Brown with Alliance Bernstein. I have a question about your virtual inventory strategy. Does the virtual inventory support your e-Commerce site as well as the stores, and can a sales associate in either Jared or Kay fulfill a customer's request from that centralized inventory?
That's a great question, thank you very much. Actually, yes the virtual inventory is very flexible. Ed, would you like to come up and talk about how it can be utilized in-store and online, etcetera?
To answer your question quickly, yes. I mean, it can be accessed by the consumer at home on the designer ring – for the diamonds, the designer ring functionality. Personalization is at home or in-store. Again, those screens that we'll have up, we have 275 Kay stores with it. You'll see that. Jared has it all, so as they start getting counsel and training, they'll be able to (inaudible) find something in the store. They'll be able to take more, screen and help them find something and build something for them. Yes, so either way.
Valerie Brown – Alliance Bernstein
On the store opening plan that you gave earlier, the 40 to 50 stores, I guess first of all, are those net of growth and which brands do you expect to be opening more stores in over the next few years?
Well, first-off, we're very excited that we're able to at least ramp up our store openings a little bit over this year and certainly over the previous year – well, I believe it was only six, but Mike, why don't you give a little bit more detail on what kind of stores we're planning to open and how that's going to net out.
Sure. First of all – where did that question come from? The number was a gross number. The 40 to 50 was gross prior to closing stock closings. Historically, prior to the recession we were to close anywhere from 15 to 20 stores a year and as you – once at the recession, we ramped up and we are projecting 35 this year, so next year it will be in the 20 to 30 store closing zone.
I want to start off by saying that we actually are very excited and we have a team ramped up and ready to open stores. And they are ready to open stores relative to our criteria. It's got to hit our strict hurdles as it relates to the pro forma and real estate criteria, center court corners or food court corner and mall for Jared at the minimum traffic count, accessibility, visibility and co-tendency. But ones those opportunities arise; our team is ready to go for it.
The one challenge that we are having quite frankly is our development community is not ready to ramp up as rapidly as we are, our developers are obviously have some challenges during the recession, and they have some market that they are probably have too much inventory. So we will ramp up. We have the capabilities, but we cannot ramp up as fast as our developers will ramp up. To answer your question, it’s going to be primarily - it will be Kay, Kay-off mall and then we will have a good amount of Jared stores opening. So I don’t know how to give a numbers there.
Why you said 40 to 50 stores?
40 to 50 stores for the breakdown Kay to Jared?
Yeah, go ahead.
All right. So on the Jared zone, hey we got a green light – in the Jared zone, you’re probably anywhere from 6 to 10, and then the balance will be Kay mall and off mall.
Those are the gross numbers again, yes.
Those are the gross numbers and I think that, as Mark spoke earlier today about the overall real estate growth strategies that we have, and the opportunity that we are excited about that we could add up to 40% really on a growth fashion to our real estate space out there. That’s over a period of time obviously, that’s over a fairly long period of time. Just to reiterate, last year, we opened about six stores in the U.S. this year it’s going to be about 23, now we are looking at 40 to 50 for next year. So we are ramping up, but it’s going to take time still.
Question on the comp results that you guys are generating, can you peel it back a little bit by nameplate in terms of - maybe just traffic versus average selling price, what are the major drivers in the buckets that that we should think about and given these results?
Well, it’s pretty broad-based out there, I mean we’re seeing both great comp results in the U.S. in both the Kay nameplate as well as in Jared, double-digit comp results, Mark, I believe in both of those for the past quarter. So that’s pretty exciting for us. What’s driving now, a lot of things are driving it, we get the question a lot about, our price increases driving it, partially so, that’s part of it, but there is also that the opportunities that we have with the merchandise that we’re driving especially in this branded area, the exclusive merchandise that we have in the differentiated ranges were able to up-sell our customers.
We’re giving them offerings that they haven’t seen before, and they are willing to pay more for it, you heard I believe Ed made the comment about Neil Lane, which is something that we’re really rolling out and ramping up this year, it was in test mode last year, the average price point is over $6000 in a mall based jewelry store. One of the best selling price points, is that correct? So there is a lot of opportunity for us to bring our customers up in price, not just price increases, but it is also providing innovative fashionable product they haven’t seen before and they are willing to pay more for it. Yes.
Hey, Mike. Hi I know you want a question about capital, so let me go for it, have you saw about or what are your thoughts regarding your rough diamond initiatives that you guys started I think in 2007 sound successful and then kind of cut back on due to your balance sheet and the environment, since their balance sheet is much stronger now, what are your thoughts on that? Thanks.
Well. Number one, thank you. Our supply chain is very important to us and especially when you are the leader in an industry it’s got to be very important to you, because obviously we’re buying more diamonds than anybody else out there.
And it is something that we need to stay focused on, smaller guys can always find a little bit of product here, a little bit of product there, but we have to focus on what is going to be sustainable, long-term supply chain for us in the future and make sure that we secure that is best we can.
So that’s number one, that’s really important that we secure that for the long-term future and sustainability of this company. We’re always looking at ways to build partnerships with our suppliers out there, some of these are just buy-sell relationships, they sell we buy that’s great, some of them are very strategic in nature, a lot exclusive partnerships that we have out there.
I can say that Ed and his team are working diligently, working with all of our vendor community and out there internationally within the supply chain community at large to find ways to give us better supply chain competitive advantage is going forward. I would not count out that there may be opportunities for us to go more vertical there and please don’t read into that, that we are going to go out to mall and buy a big diamond mine somewhere, that’s not going to happen.
The partnerships that we talk about are very strategic in nature, and there could be as I said acquisitions or could be joint ventures even within the supply chain side. But if we do something, it’s definitely - we are going to use the same philosophy we use throughout our business model that is we are going to test before we invest.
And it’s the same thing with supply chain as it is for the rest of our business model, we will take it slow, we will do it in a measured way and we will make sure that it benefits the future success of our company.
Unidentified Company Representative
When we look at operating margins, it looks like you could be approaching the company’s all-time high at the end of this year potentially, but looking back several years when you guys were around that 13.5% margin the business is very different, [Arms of] ASPs and branded jewelry penetration. Can you talk about your view over the next several years of our operating margin drivers and profitability in general?
Sure. Absolutely, yeah, we think we still have a lot of headroom available to us in the operating margin. What’s important to us is we want to drive strong double-digit, sustainable operating margins. And I use that word sustainable, for reason. We will continue to invest in our businesses; we have to do that for the future of our company, and for growth in the future.
So we’re going to investing in our systems; we’re going to invest in technologies, we’re going to continue to develop the most innovative best product in the industry; we’re going to develop brands and marketing initiatives et cetera.
So I do believe there is more headroom there that we can go further. We’ve done a great job and kudos to the team for really managing our gross merchandise margins in an extremely effective way. And making sure that we were able to at least maintain our gross merchandise margin and actually I think we squeak them up a little bit even in these trying times with the price of commodities going through the roof and somebody in different way.
So I think we will continue to work to at least maintain our gross merchandise margins and that as we see more productivity driven through these stores that we’re going to be able to continue to see an increase in the operating margin overall.
Could you provide us with some recent color in consumer financing trends and given the macro outlook, what sort of your outlook generally in terms of current consumer financing, it’s such a big part of your business?
It is a big part of our business and I think that the team did a good job at pointing out the fact that and this is an important distinction to make. We don’t sell credit, we use credit to help us facilitate the sale of our jewelry. And that’s why it’s so important that this is an in-house function we have in the United States.
That’s under our control, and that we have a team of people that over many, many years have developed systems that accurately score the credit risk of our customers, appropriately grant credit to them and help us to utilize that in such a fashion that actually drives our sales I believe Mark or somebody made the point to - that our credit – in-house credit customers worth about three and a half times over the lag time that in non in-house credit customer.
And what we do that’s different from just somebody that’s out there selling credit is, we have credit on a credit card, they want you to spend as much money as you can max it out make the minimum payment every month and take 47 years to pay it off and pay about 20 times, which you originally bought for – because of all the interest charges.
Our goal is to have our consumers come in and put down at reasonable amount for a down payment and then pay it off, the average pay off is about 12% to 14% per month. So we actually have less than a year for the consumer to pay off their purchase that they made with their in-house credit card.
What that does is, is it opens up their personal open to buy come back into the store and spend some more money on jewelry. So that’s an important distinction to make and how we run our credit facilities versus a lot of other people run theirs.
Maybe you can give us a little sense of where you are as an industry in non bridal, it’s always hard when you look at the industry leader that determine kind of how much of a dip there was, because looking your numbers there was a one kind of down ten comp and then it kind of quickly started calling it back, but my guess is that a lot of that is just taking market share.
Whereas, if you look at the mass bankruptcies that went on, and the near bankruptcies, okay, so we would suggest that there was a much more prolonged dip than you experienced. So I guess my question is, if you look at maybe '06 or one of the peak years versus where we are now, how much did the industry stand to gain back in the concept of past peak or pent up demand that should accrue to you as much as anyone else as the market share leader?
Thank you for the question. It is clear that if you look at the statistics over the last 10 years, we have very good numbers on the U.S. market fortunately. We have gained market share. We moved in the past 10 years from being the number two player in the market to being the number one player in market share and almost twice the size of the next competitor in market share.
And this has been done from over the past 10 years in a very regimented organized way. We've taken market share year-in and year-out, even during the downtimes. In fact, I think that during the tough times, it's a better time to take the market share than any other time, especially when you are a strong company and you're willing to invest in your future, which is what we have been willing to do.
Even in the toughest areas of business, we've continued to make those investments. We have taken market share, it's very well documented. I believe last year we had about a 10.3% market share in the United States within the specialty, retail jewelry sector part of the market. And that's double-digit market share, the year before we asked the question, dare we say we're going to get to double-digit market share, well, we did, and we think that there's a lot further that we can go in that area too with all the competitive advantages that we have.
There are a lot of people, as you mentioned, there were several major bankruptcies of companies during the downturn and thousands and thousands of independent jewelers went out of business. I think that what we'll continue to see is a consolidation in the industry. This is still one of the more fragmented industries within the retail sector of the business.
There's still a lot of Mom & Pop jewelry stores out there. But over time, I think we'll continue to see a consolidation of that, slower, albeit slower because the economy is better than it was back in the worst days and hopefully it’ll continue to improve from here, but with the strategic competitive advantages that we have with our ability to advertise on national television which of course independents cant do at all. With the strategic exclusive and differentiated brand ranges that we have that nobody else can get, I think we’ll continue to see that continue for the future.
Give us the breakdown for Bridle for that say, and kind of where you are hoping those in terms of a breakdown of the Bridal businesses?
Well, I think the Bridal business is about half of our business right now. And we have continued to grow that business over a long period of time. We think there is a lot of opportunity for further growth in the Bridal category, you want to talk about some of the key initiatives on why we’ll think that’s great opportunity for us long-term?
Again, we’ve done the programs we have, I think George’s team has done a lot of the research there and show the size, we really wanted to understand because there is a lot of numbers thrown out there what really was the size of the bridal market and what was the long-term outlook for the bridal market, is it sustainable?
And it looks like it is a very sizable market, so we are continuing to look at products that provide, discernible features and benefits, to the consumer, be it Tolkowsky with an idea, Neil Lane with a fashion element, other programs that really are filling what the customer is asking us for, with their purchase amounts whether it’s a work, a specific quality and it’s again, what we do we test before we invest, we do a lot of research and find out what that customer is looking for.
So bridal continues to be a very strong category for us, we are testing a lot of different products there already within Neil Lane, we are expanding into bands, anniversary bands, jewelry aspects of that. So again to continue as I said in the presentation too, build upon those successful brands and expand them with logical line extensions and other category extension.
That’s great. Ed, thank you so much. The other thing about bridal is that, was it becoming more of a branded business and less generic in so many ways. We have had the Leo Diamond for quite some time. Now, it’s about 10 years that we’ve anniversary with it and it is to the best for our knowledge, the largest branded diamond that’s sold in the marketplace and it’s been extreme, it’s still our largest differentiator brand exclusive and it’s still very important to us for the long-term.
But now we are seeing some of these new brands develop. This Neil Lane Bridal which is very exciting, the Tolkowsky Diamond, I don’t know if we mentioned it, but Tolkowsky is the name of the gentleman that actually invented the ideal cut diamond.
What a great branding strategy we can put behind that. As our experienced teams within the stores talk to the customers about what their diamond means to them. It’s a very emotional purchase. It also helps us drive the branding on two levels. We have our proprietary brands with the Kay Jewelers and Jared, the Galleria of Jewelry, these are our proprietary brands that we are out there on national television able to drive.
And at the same time we can drive our merchandise brands that we have, the Leo Diamonds, the Tolkowsky, the Neil Lane, et cetera. So it’s a great opportunity for us in the bridal category. And by the way, we have done the research and during the good times, during the bad times, it’s pretty consistent the same number of people are getting married every years is not falling off. And it is something that is more of a continuity business. It doesn’t depend upon a certain time of the year like the holiday season, during Christmas or Valentines Day or Mother’s Day which were all very large times for us in our business, but bridal is important, it’s something that happens 12 months a year and we’re focused on it and we think that we can still garner a larger market share in that part of the business.
Yes, I had two questions for you, if I may. The first one was just, I was curious how you approached coming into the company as the leader just you coming into a strong company that has a culture and a history of promoting from within and I imagine one of the things that I would be afraid of it is, I have been in years with Signet, and I don’t want to screw this up, but I want to add value too. So I’m curious how you went and approached that task?
Yeah, well, that’s a good point. Number one, I came from a great company. And you know I was there for over 25 years, I built an extensive career and really I thought I’d never leave there. But as I began looking at this opportunity, as I spoke to a lot of our board members and realize just what a fantastic opportunity this was and how much further we could go with it, I was very excited about it.
How did I feel about coming in? Number one, they have a great strategy, we have a great team of very experienced executives, some of which are here today, they’ve done a fantastic job driving this business very strongly for many years. Let’s keep doing that, let’s not stop. We’re taking market share year-in, year-out, our business is getting stronger. I’d tell you what excited me is I felt like, wow, this business has already started that evolution that needed to take place and that we’re driving very fiercely right now towards things like branded merchandise.
It’s no longer your grandmother’s jewelry story anymore, it’s not just generically based where you walk in, there is just diamond sections and gold sections and chains over here in this and that and the other. This is something that speaks to the consumer and what they are looking for and we’re driving product innovation and we’re driving brands and that is my history, that’s what I come from. I come from a company that was totally branded in every way and now I feel like I’ve joined a new industry that is still very related.
In fact we sell a lot of watches especially in UK Division, it’s a very large market part of our business, and now we’re moving in an evolutionary way towards more branding more excitement, more innovation, and that’s exactly what I wanted to see happen, I think it’s fantastic.
Great and then my second question has to do with, five years from now, on your Analyst Day what do you think the penetration will be or could be as a differentiated merchandize exclusive versus the 22% today?
More. We haven’t set a target on that, honestly we’re going to led these brands find their own levels. I think that we made it clear throughout our presentations that we run a pull model of doing business, we don’t run a push model. We’re not going to go out there and say, we think that this should be a big part of the business and we made that decision like all, we were going to go buy a lot of it. We’re going to put it in all of stores, we’re not going to test it and go from 50 to 250 tweak it get it right and then roll it out, we are just going to put it in every store and we’re going just try to drive it, because we think it’s the right thing to do, it’s not the way we operate.
Where on a pull model, we go out there and we test and react and we test and react and we keep doing this till we get it right and then we roll it out and that to me is most effective way of doing business, again historically it fits exactly the way I did business for over 25 years before I joined this company, and it’s exactly the right way to do business in my opinion and that’s something we’re going to continue doing. So we’ll let them find their own level, I think that we will continue to see.
As I mentioned last year, the exclusive and differentiated brands increased by 300 basis points over the prior year and we will see that number grow again this year pretty substantially. So I think that five years from now there is a good chance that they’re a sizable part of our business.
I guess Mike, I didn’t hear you talk about the U.K. business, when you gave your, I guess quarter-to-date update. There's obviously a lot of fear in the market. Can you maybe talk about what’s happening in the U.K. business so far this quarter? And then on the commodity cost increases, obviously you people are worried about that as we head into next year. You know, has the company ever seen such an increase in a short term period like they’ve seen and does the private label or branded penetration help you offset the rise in commodity costs?
Yeah there are – thank you very much for those two questions. I’m going to take the second one first and talk about commodity costs. Commodity costs are something that this industry sees year in, year out, has seen over many years. Gold has been going up, in particular for many, many years. Just to kind of level set where diamonds were at, and Ed, jump in here if you can help with this. You know diamonds were increasing and they kind of peaked out in 2007 or 2008 areas – that about right? 2008 was the high, and then as we went into an economic downturn we saw prices of diamonds kind of taper down, level off, even go down a little bit.
Well, clearly this year as we came out of the economic downturn last year and certainly into this year, we started seeing diamond prices rising again pretty spectacularly. You can again see that, just like you can see the effects of the average inventory costing, you can see the effects of what your cost is doing in well in advance and you can prepare for that. You could see it in diamonds as well, because you can watch two different kinds of prices; rough prices, which is going to eventually dictate where the polished prices are going with diamonds.
So, we have the data available to us to make the appropriate plans and offset the commodity cost. Have we ever seen it like this before to this level, I don’t know, I do know that if you take gold and you look at the tremendous spike that it has had over the last number of years, there was a time back in the 1980s that if you inflation-adjust it, you could almost overlay those, and you had that same similar type of a spike and then of course, it abated and went back down. Will it go down? I don’t know.
Unfortunately, I’m not prognosticator, I can’t predict that. What I can predict is that we will continue to make the appropriate, right decisions for our company, as we see the commodities change. The one thing about commodity pricing that we auditors put up with and we are all on a level playing field, everybody has got to deal with it. Whoever deals with it more effectively wins.
And we feel like that we’ve got the experience and the team to do that. As far as the UK business; number one I would say, based upon that the type of economy and the environment that that UK in general is going through, I am very pleased with the results of our business in that market.
Rob pointed out some factors such as, we are outperforming other non-food retail companies within the UK and more importantly, we continue to investment in that market, because of the strength of our company, we are not hunkering down on the UK just trying to survive; we are making some very key investments. Rob, you want to just talk about couple of those a little bit for one, as to what you are doing to really invest in the future of driving that business.
I think before I say that, I think one of the differences that I noticed coming over to the States between the two countries is the way austerity measures have been applied in the UK, which have been quite profound and those impacted a lot of people very hard. What that looks like is, to a lot of people increased taxation, to a lot of people a few hours of work.
So, although unemployment is moving up marginally, underemployment is increasing a lot in the UK at the moment. So, people who work by the hour have got less hours. So, everybody is feeling the pinch to a greater or a lesser extent and that’s really impacting the whole economy. And that’s reflected in the retail sales figures, because one of the things that Mark and I have talked about over the last few months is, why is it that the UK marketplace, general retail marketplace isn’t performing as the American one is.
And again, I’m probably going to get lynched on my way out here, I’m outnumbered with Americans, but I think we’ve had it a lot tougher in terms of the austerity measures that have been applied to our economy and people are very mindful of that. I think in terms of, so what are we focused on? I think we are focused on similar things to the American business.
First and most importantly are our people, and we stay focused on the training program that we’ve got. We stay very focused on engagements; engagement is a word that bantered about a lot. We spend a lot of time investing in engagement in our business. We seek opinions from our employees on a two-yearly basis in terms of questionnaires and what have you and we respond to those.
And in our business over the last 10 years, we’ve come from being one of the worst people in terms of labor turnover to one of the best. And if our benchmark John Lewis in the UK is the best in class, our turnover figures are similar to theirs now, which just illustrates the commitment and the engagement we’ve got from our people.
From a product point of view, the next thing, we’re very focused on that. We’ve got very strong relationships with the U.S. business and that’s not just me and Mark having a conversation once a month, around the way through our organization these guys will testify, we’ve got relationships. So, we know what’s going on over here, they know what’s going on in the UK.
And if you look around the realm or around the anti-realm, a lot of the brands that we’ve got. All of those brands, we have either got them in the UK or if we have them, there is a bloody good reason why we have them. Jane Seymour is one of the brands we haven’t got, we tested it in the UK, it didn’t hit the spot in the sort of engagement point of view with the UK consumer as it did with the U.S. consumer. So, we tested it, it didn’t work, we don’t want to flog a dead horse, so we moved away from it.
The other thing is real estate. When you look at the quality of our real estate in the UK, we have strict principles as they have in the States. If you went to the new Westfield Stratford development in London or the Stratford West London site, which has been there for a couple of years now. You will see, we’ve got the best locations, we’ve got corner sites, we have got the best jewelry stores in both of those markets.
So, what they are doing in a time of difficulty here is trying to strike that balance between investing in the important things in the business, but at the same time, we got to be prudent about our cost where we can. And it is an interesting process that we’re engaged in on a day-to-day basis.
Thank you very much, Rob. I appreciate that. You know what’s the other big mall there, the Westfield White City, is that the name? If you have the chance to get to the UK and you have the opportunity to visit either White City Westfield mall or the new Stratford Center, Rob is exactly right, we have some outstanding stores in these locations. And as was spoken to earlier, the consumer is changing their shopping patterns and I think it’s important for us to note again the fact that we are following that evolution, we are not staying in a traditional methodology of you need to have kind of a mom-and-pop jewelry store, each one of these cities, the consumer is changing their pattern of how they shop and where they shop, and we are following that.
That was the reason that we went after an underserved part of the market here in the U.S. with Jared, which is a freestanding store that does very well, especially when it sits at the front of a very strong power center with a very strong destination anchor attached to it. And we have the right traffic patterns that we scientifically check the traffic, the visibility all of these different methodologies and it has worked very well for us.
And this move that the Rob and our team in the UK are making into some of these really big regional malls, I believe that the Stratford that you just mentioned you said, it is the largest enclosed mall in Europe now. These malls are spectacular and they drive a lot of traffic and these stores that we are building in there are beautiful.
So, we are following the consumer where they are evolving to and we are making sure that we continue to do that, but on top of that, we are making investments in the business to give those well trained staff an opportunity to really drive business as best they can in the environment that is dealt to them right now.
We are making these product investments, we are continuously working on new product ranges and we are leveraging some of the brands that are so successful for us in the United States and then again, as Rob pointed out, there are some brands that are more exclusive like Amanda Wakeley to the UK market that’s been very successful for us as well.
So, it is the same strategy and basically the way we look at it is; we are putting together a global strategy, but we are making sure that we execute it locally to fit the needs of the market. Last question thank you.
Then I will make it two. Okay, so the first question is same sex marriage a business opportunity for you? And I am curious to find out, in your consumer research, you figured out a strategy for addressing that market, maybe you sell two rings I don’t know it depends. And then secondly, I am curious about your factory outlet strategies for both Kay and Jared, do you view that as a significant opportunity to grow your doors?
Thank you. We consider all consumers to be a huge opportunity for us to have our business. The bridal business as we said and whatever form it takes, is an extremely important business to us. And we are going to everything we can do maximize that business and to speak to all consumers as well as we can wherever they are at and whatever their needs might be.
So to answer that, it’s just part of our bridal strategy, we will do everything we can to increase our market share within that part of our business. Outlet strategies, we do have some outlet doors, do you want to talk about that a little bit Mark and where you are at on the numbers that you have approximately and what you are looking do in that area.
On the Kay outlet strategy, I just want to start up, we don’t we don’t go out and buy close out merchandize. We populate our Kay outlet stores with more of the inventory mix than it is clearance type of aged inventory. So, if a typical store has 4% or 5% of the inventory and aged inventory, our Kay outlet store will have up to 25% of the inventory, but they will have the same offering as every other Kay in the country.
All the same services, same warranty, same policies, that is first off. Currently, we are roughly about 15 Kay outlet stores, we see the potential up to 100 Kay outlet stores and in that number that I shared with you earlier that we believe that Kay could be -- we could have up to 500 of mall Kay stores. Within that number is an incremental 90 outlet strategy.
All right. Jared, it is not in our plans that Jared – the Jared concept is a single price strategy and we don’t have any plans of having Jared being an outlet strategy. Right now, we can use our Kay outlets and our existing stores to deal with the Jared aged inventory issues, so it is not in our current plans right now.
Thanks Mark. And I am sure that Ed has apologized for the unbelievable management of the merchandizing and the buying groups and the fact that they are having a tough time giving your outlets enough – spoke about merchandize, but sorry about that right.
So, anyway we want to thank you all again for attending our Investor Relations Day. It’s been a pleasure to spend this time with you and I look forward to doing it again next time. We do have lunch available, please join us for lunch, and if you move towards these, at the back of the side rooms, we have tables setup to make a nice lunch for you. And then, at 12:30, we are going to gather in head downstairs to get on the buses for the store tours which will start about 12:30, right?
Okay. Thank you all very much, enjoy lunch. Thanks for coming again, we appreciate it.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: firstname.lastname@example.org. Thank you!