Revenue recognition

3 Months Ended

May 02, 2020

Revenue from Contract with Customer [Abstract]

The following tables provide the Company’s revenue, disaggregated by banner, major product and channel, for the 13 weeks ended May 2, 2020 and May 4, 2019:



	13 weeks ended May 2, 2020								13 weeks ended May 4, 2019
(in millions)	North America		International		Other		Consolidated		North America		International		Other		Consolidated
Sales by banner:
Kay	$	333.5	$	—	$	—	$	333.5	$	579.3	$	—	$	—	$	579.3
Zales	182.3		—		—		182.3		288.8		—		—		288.8
Jared	145.4		—		—		145.4		255.0		—		—		255.0
Piercing Pagoda	51.4		—		—		51.4		82.6		—		—		82.6
James Allen	43.8		—		—		43.8		52.0		—		—		52.0
Peoples	24.7		—		—		24.7		42.6		—		—		42.6
International segment	—		64.9		—		64.9		—		111.5		—		111.5
Other⁽¹⁾	—		—		6.1		6.1		—		—		19.9		19.9
Total sales	$	781.1	$	64.9	$	6.1	$	852.1	$	1,300.3	$	111.5	$	19.9	$	1,431.7


⁽¹⁾	Includes sales from Signet’s diamond sourcing initiative.



	13 weeks ended May 2, 2020								13 weeks ended May 4, 2019
(in millions)	North America		International		Other		Consolidated		North America		International		Other		Consolidated
Sales by product:
Bridal	$	314.1	$	28.1	$	—	$	342.2	$	594.7	$	48.6	$	—	$	643.3
Fashion	297.9		12.6		—		310.5		467.4		22.4		—		489.8
Watches	24.6		17.5		—		42.1		48.2		34.0		—		82.2
Other⁽¹⁾	144.5		6.7		6.1		157.3		190.0		6.5		19.9		216.4
Total sales	$	781.1	$	64.9	$	6.1	$	852.1	$	1,300.3	$	111.5	$	19.9	$	1,431.7


⁽¹⁾	Other revenue primarily includes gift, beads and other miscellaneous jewelry sales, repairs, service plan and other miscellaneous non-jewelry sales.



	13 weeks ended May 2, 2020								13 weeks ended May 4, 2019
(in millions)	North America		International		Other		Consolidated		North America		International		Other		Consolidated
Sales by channel:
Store	$	631.9	$	49.4	$	—	$	681.3	$	1,157.3	$	100.2	$	—	$	1,257.5
E-commerce	149.2		15.5		—		164.7		143.0		11.3		—		154.3
Other	—		—		6.1		6.1		—		—		19.9		19.9
Total sales	$	781.1	$	64.9	$	6.1	$	852.1	$	1,300.3	$	111.5	$	19.9	$	1,431.7

The Company recognizes revenues when control of the promised goods and services are transferred to customers, in an amount that reflects the consideration expected to be received in exchange for those goods. Transfer of control generally occurs at the time merchandise is taken from a store, or upon receipt of the merchandise by a customer for an e-commerce shipment. The Company excludes all taxes assessed by government authorities and collected from a customer from its reported sales. The Company’s revenue streams and their respective accounting treatments are further discussed below.

Merchandise sales and repairs

Store sales are recognized when the customer receives and pays for the merchandise at the store with cash, in-house customer finance, private label credit card programs, a third-party credit card or a lease purchase option. For online sales shipped to customers, sales are recognized at the estimated time the customer has received the merchandise. Amounts related to shipping and handling that are billed to customers are reflected in sales and the related costs are reflected in cost of sales. Revenues on the sale of merchandise are reported net of anticipated returns and sales tax collected. Returns are estimated based on previous return rates experienced. Any deposits received from a customer for merchandise are deferred and recognized as revenue when the customer receives the merchandise. Revenues derived from providing replacement merchandise on behalf of insurance organizations are recognized upon receipt of the merchandise by the customer. Revenues on repair of merchandise are recognized when the service is complete and the customer collects the merchandise at the store.

Extended service plans and lifetime warranty agreements (“ESP”)

The Company recognizes revenue related to ESP sales in proportion to when the expected costs will be incurred. The deferral period for ESP sales is determined from patterns of claims costs, including estimates of future claims costs expected to be incurred. Management reviews the trends in claims to assess whether changes are required to the revenue and cost recognition rates utilized. A significant change in estimates related to the time period or pattern in which warranty-related costs are expected to be incurred could materially impact revenues. All direct costs associated with the sale of these plans are deferred and amortized in proportion to the revenue recognized and disclosed as either other current assets or other assets in the condensed consolidated balance sheets. These direct costs primarily include sales commissions and credit card fees. Amortization of deferred ESP selling costs is included within selling, general and administrative expenses in the consolidated statements of operations. Amortization of deferred ESP selling costs were $4.3 million and $7.5 million during the first quarter of Fiscal 2021 and Fiscal 2020, respectively.

Unamortized deferred selling costs as of May 2, 2020, February 1, 2020 and May 4, 2019 were as follows:



(in millions)	May 2, 2020		February 1, 2020		May 4, 2019
Deferred ESP selling costs
Other current assets	$	23.6	$	23.6	$	23.8
Other assets	79.5		80.0		76.4
Total deferred ESP selling costs	$	103.1	$	103.6	$	100.2

The North America segment sells ESP, subject to certain conditions, to perform repair work over the life of the product. Customers generally pay for ESP at the store at the time of merchandise sale. Revenue from the sale of the lifetime ESP is recognized consistent with the estimated pattern of claim costs expected to be incurred by the Company in connection with performing under the ESP obligations. Lifetime ESP revenue is deferred and recognized over a maximum of 17 years after the sale of the warranty contract. Although claims experience varies between the Company’s national banners, thereby resulting in different recognition rates, approximately 55% of revenue is recognized within the first two years on a weighted average basis.

The North America segment also sells a Jewelry Replacement Plan (“JRP”). The JRP is designed to protect customers from damage or defects of purchased merchandise for a period of three years. If the purchased merchandise is defective or becomes damaged under normal use in that time period, the item will be replaced. JRP revenue is deferred and recognized on a straight-line basis over the period of expected claims costs.

Signet also sells warranty agreements in the capacity of an agent on behalf of a third-party. The commission that Signet receives from the third-party is recognized at the time of sale less an estimate of cancellations based on historical experience.

Sale vouchers

Certain promotional offers award sale vouchers to customers who make purchases above a certain value, which grant a fixed discount on a future purchase within a stated time frame. The Company accounts for such vouchers by allocating the fair value of the voucher between the initial purchase and the future purchase using the relative-selling-price method. Sale vouchers are not sold on a stand-alone basis. The fair value of the voucher is determined based on the average sales transactions in which the vouchers were issued, when the vouchers are expected to be redeemed and the estimated voucher redemption rate. The fair value allocated to the future purchase is recorded as deferred revenue.

Consignment inventory sales

Sales of consignment inventory are accounted for on a gross sales basis as the Company maintains control of the merchandise through the point of sale as well as provides independent advice, guidance and after-sales service to customers. The products sold from consignment inventory are indistinguishable from other products that are sold to customers and are sold on the same terms. Supplier products are selected at the discretion of the Company. The Company is responsible for determining the selling price and physical security of the products.

Deferred revenue

Deferred revenue is comprised primarily of ESP and voucher promotions as follows:



(in millions)	May 2, 2020		February 1, 2020		May 4, 2019
ESP deferred revenue	$	961.0	$	960.0	$	931.3
Voucher promotions and other	30.0		37.7		45.3
Total deferred revenue	$	991.0	$	997.7	$	976.6

Disclosed as:
Current liabilities	$	271.2	$	266.2	$	277.0
Non-current liabilities	719.8		731.5		699.6
Total deferred revenue	$	991.0	$	997.7	$	976.6



	13 weeks ended
(in millions)	May 2, 2020			May 4, 2019
ESP deferred revenue, beginning of period	$	960.0		$	927.6
Plans sold⁽¹⁾	55.0			96.0
Revenue recognized⁽²⁾	(54.0		)	(92.3		)
ESP deferred revenue, end of period	$	961.0		$	931.3


⁽¹⁾	Includes impact of foreign exchange translation.

⁽²⁾

During the first quarter of Fiscal 2021, the Company recognized sales of $44.5 related to deferred revenue that existed at February 1, 2020 in respect to ESP. Additionally, no ESP revenue was recognized beginning on March 23, 2020 and through the end of the quarter due to the temporary closure of the Company’s stores and service centers as a result of COVID-19.