Accounts Receivable, Net

3 Months Ended

Apr. 30, 2022

Credit transactions

Credit card outsourcing programs

The Company has entered into various agreements with Comenity Bank (“Comenity”) and Genesis Financial Solutions (“Genesis”) through its subsidiaries Sterling Jewelers Inc. (“Sterling”) and Zale Delaware, Inc. (“Zale”), to outsource its private label credit card programs. Under the original agreements, Comenity provided credit services to all prime credit customers for the Sterling banners, and to all credit card customers for the Zale banners. In May 2021, both the Sterling and Zale agreements with Comenity and Genesis were amended and restated to provide credit services to prime and non-prime customers.

The non-prime portion of the Sterling credit card portfolio was previously outsourced to CarVal Investors (“CarVal”), Castlelake, L.P. (“Castlelake”) and Genesis (collectively with CarVal and Castlelake, the “Investors”). Under agreements with the Investors, Signet remained the issuer of non-prime credit with investment funds managed by the Investors purchasing forward receivables at a discount rate determined in accordance with their respective agreements. Prior to March 2022 as described below, Signet held the newly issued

non-prime credit receivables on its balance sheet for two business days prior to selling the receivables to the respective counterparty in accordance with the agreements.

In March 2021, the Company provided notice to the Investors of its intent not to extend the respective agreements with such Investors beyond the expiration date of June 30, 2021. Effective July 1, 2021, all new prime and non-prime account origination will occur in accordance with the Comenity and Genesis agreements described above.

Fiscal 2023 amended and restated agreements

In March 2022, the Company entered into amended and restated receivable purchase agreements with the Investors regarding the purchase of add-on receivables on such Investors’ existing accounts. Under the amended and restated agreements, The Bank of Missouri will be the issuer for the add-on receivables on these existing accounts and the Investors will purchase the receivables from The Bank of Missouri.

In conjunction with the above agreements in March 2022, the Company entered into agreements with the Investors to transfer all existing cardholder accounts previously originated by Signet to The Bank of Missouri. Therefore, the Company will no longer originate any credit receivables with customers.

Accounts receivable, net

The following table presents the components of Signet’s accounts receivable:


(in millions)	April 30, 2022		January 29, 2022		May 1, 2021
Customer in-house finance receivables, net	$	—	$	—	$	61.5
Accounts receivable, trade	17.1		18.3		9.5
Accounts receivable, held for sale	—		1.6		7.9
Accounts receivable, net	$	17.1	$	19.9	$	78.9

During Fiscal 2021, the various agreements with the Investors discussed in Note 11 pertaining to the purchase of non-prime forward flow receivables were terminated and new agreements were executed which were effective until June 30, 2021. Those new agreements provided that the Investors continued to purchase add-on non-prime receivables created on existing customer accounts but Signet retained all forward flow non-prime receivables created for new customers beginning in the second quarter of Fiscal 2021. Upon expiration of the amended agreements in June 2021, Signet sold all existing customer in-house finance receivables to CarVal and Castlelake during the second quarter of Fiscal 2022. As a result of the amended and restated agreements entered into with Comenity, Genesis, and the Investors during the second quarter of Fiscal 2022, Signet no longer retains any customer in-house finance receivables.

As described in Note 11, Signet is no longer the issuer of non-prime credit for add-on purchases on existing accounts. Therefore, the Company no longer holds these non-prime credit receivables. Prior to the March 2022 amendments, receivables originated by the Company but pending transfer to the Investors as of period end were classified as “held for sale” and included in accounts receivable in the condensed consolidated balance sheets. As of January 29, 2022 and May 1, 2021, the accounts receivable held for sale were recorded at fair value.

Accounts receivable, trade primarily includes amounts receivable relating to accounts receivable from the Company’s diamond sourcing initiative in the Other reportable segment.

Customer in-house finance receivables

As discussed above, the Company began retaining certain customer in-house finance receivables beginning in the second quarter of Fiscal 2021 through the date of the portfolio sale in June 2021. The allowance for credit losses related to these receivables was an estimate of expected credit losses, measured over the estimated life of its credit card receivables that considers forecasts of future economic conditions in addition to information about past events and current conditions.

To estimate its allowance for credit losses, the Company segregated its credit card receivables into credit quality categories using the customers’ FICO scores. The following three industry standard FICO score categories were used:

•620 to 659 (“Near Prime”)

•580 to 619 (“Subprime”)

•Less than 580 (“Deep Subprime”)

The vintage year was Fiscal 2021 for all customer in-house finance receivables presented below. The following table disaggregates the Company’s customer in-house finance receivables by credit quality:


(in millions)	May 1, 2021
Near Prime	$	46.0
Subprime	26.2
Deep Subprime	10.7
Total at amortized cost	$	82.9

The following table is a rollforward of the Company’s allowance for credit losses on customer in-house finance receivables:


	13 weeks ended
(in millions)	May 1, 2021
Beginning balance	$	25.5
Provision for credit losses	(1.2)
Write-offs	(2.9)


Ending balance	$	21.4

Additions to the allowance for credit losses were made by recording charges to bad debt expense (credit losses) within selling, general and administrative expenses within the condensed consolidated statements of operations.

The following table disaggregates the Company’s customer in-house finance receivables by past due status:


(in millions)	May 1, 2021
Current	$	69.2
1 - 30 days past due	5.4
31 - 60 days past due	1.9
61 - 90 days past due	1.9
Greater than 90 days past due	4.5
Total at amortized cost	$	82.9

Interest income related to the Company’s customer in-house finance receivables is included within other operating income (expense) in the condensed consolidated statements of operations. Accrued interest was included within the same line item as the respective principal amount of the customer in-house finance receivables in the condensed consolidated balance sheets. The accrual of interest was discontinued at the time the receivable is determined to be uncollectible and written-off. The Company recognized $4.0 million of interest income on its customer in-house finance receivables during the 13 weeks ended May 1, 2021. Interest income recognition ceased at the date of the sale of the portfolio as noted above.