US Real Estate
| Number of stores | 2007/08 | 2006/07(1) | 2005/06 |
|---|---|---|---|
| Total opened during the year(2) | 108 | 104 | 81 |
| Kay | 68 | 58 | 43 |
| Jared | 19 | 25 | 18 |
| Regional chains | 21 | 21 | 20 |
| Total closed during the year | (17) | (17) | (16) |
| Kay | (6) | (7) | (4) |
| Jared | - | - | (1) |
| Regional chains | (11) | (10) | (11) |
| Total open at the end of the year | 1,399 | 1,308 | 1,221 |
| Kay | 894 | 832 | 781 |
| Jared | 154 | 135 | 110 |
| Regional chains | 351 | 341 | 330 |
| Average sales per store in thousands(3) | $1,996 | $2,089 | $1,930 |
| Kay | $1,710 | $1,815 | $1,665 |
| Jared | $5,341 | $5,676 | $5,453 |
| Regional chains | $1,344 | $1,517 | $1,514 |
| Increase in net new store space | 10% | 11% | 9% |
| Percentage increase in like for like sales | (1.7)% | 6.2% | 7.1% |
1. 53 week year.
2. Figures for stores opened during the year are adjusted for the impact of conversions of format between Kay and regional chains.
3. Based only upon stores operated for the full financial year.
Management believes that the US division’s prime real estate portfolio is a competitive advantage that helps build store traffic. The quality of the portfolio is based on the consistent application over time of strict real estate criteria and demanding required projected investment returns for both new space and the renewal of leases. The division has a target for new space growth of 8% to 10% per annum, but growth may be outside this range depending on the availability of sites that satisfy the investment criteria and the general economic environment. In 2008/09 and 2009/10 it is anticipated that net new store space will increase by about 5%. When a new store is opened the majority of the investment is in working capital, that is inventory and receivables, as nearly all stores are leased. Stores are normally refurbished on a ten year cycle, which for mall brands coincides with the typical length of a lease. Increased like for like sales growth is normally achieved for a number of years following a refurbishment due to factors such as improved lighting and better presentation of merchandise. Opportunities to relocate stores to better locations within malls, such as a centre court corner site are continually sought. Nearly all of Signet’s US stores are located in suburban areas, with about 58% of space being in traditional covered malls (2002/03: about 79%). In 2007/08 about 80% of net space growth was in off-mall locations.
The table below sets out the store numbers, net new openings and the potential number of stores by chain:
| Store numbers | 3 February 2007 | Net openings 2007/08 | 2 February 2008 | Expected net openings 2008/09 | Long term potential |
|---|---|---|---|---|---|
| Kay: | |||||
| Mall | 772 | 17 | 789 | 6 | 850+ |
| Off-mall | 52 | 40 | 92 | 19 | 500+ |
| Outlet | 5 | 5 | 10 | 8 | 50-100 |
| Metropolitan | 3 | nil | 3 | nil | c.30 |
| Kay Total | 832 | 62 | 894 | 33 | 1,430+ |
| Regionals | 342 | 10 | 351 | (14) | c.700 |
| Jared | 135 | 19 | 154 | 17 | c.300 |
| Total | 1,308 | 91 | 1,399 | 36 | 2,430+ |
Investment criteria
Both the operational and financial criteria for investment in real estate remain stringent and have been consistently applied for more than ten years. The financial criteria being a positive net present value over a five year period on a pre tax basis using a 20% discount rate and assuming working capital is released after five years.
| Planned 2008/09 $m | 2007/08 $m | 2006/07 $m | 2005/06 $m | |
| Total new stores | ||||
| Fixed capital investment | 45 | 60 | 57 | 45 |
| Working capital investment | 90 | 119 | 119 | 96 |
| Total investment | 135 | 179 | 176 | 141 |
| Other store fixed capital investment |
24 | 28 | 30 | 28 |
| Total store investment | 159 | 207 | 206 | 169 |
Investment criteria
Both the operational and financial criteria for investment in real estate remain stringent, the financial criteria being a positive net present value over a five year period on a pre tax basis using a 20% discount rate and assuming working capital is released after five years.
Signet may consider selective purchases of chains of mall stores that meet its acquisition criteria regarding location, quality of real estate, customer base and return on investment.