Subsequent events

12 Months Ended

Feb. 01, 2020

Subsequent Events [Abstract]

Subsequent events

Subsequent events

Risks and Uncertainties

In December 2019, COVID-19 was identified in Wuhan, China. In March 2020, the World Health Organization declared COVID-19 a global pandemic as a result of the further spread of the virus into all regions of the world, including those regions where the Company’s primary operations occur in North America and the UK. COVID-19 has already begun to significantly impact consumer traffic and the Company’s retail sales, based on the perceived public health risk and government-imposed quarantines and restrictions of public gatherings and commercial activity to contain spread of the virus. Effective March 23, 2020, the Company has temporarily closed all of its stores in North America, its diamond operations in New York and its support centers in the United States, and effective March 24, 2020, has temporarily closed all of its stores in the UK. The COVID-19 pandemic has also begun to disrupt the Company’s global supply chain, and may cause additional disruptions to operations if employees of the Company become sick, are quarantined, or are otherwise limited in their ability to work at Company locations or travel for business. While the Company’s eCommerce business has not yet been significantly impacted, additional federal or state mandates ordering the shut-down of additional non-essential businesses could impact the Company’s ability to take or fulfill customer orders placed online.

In addition, as a result of the uncertainty surrounding the impacts of COVID-19, beginning in February 2020, there was a significant decline in all major domestic and global financial market indicators. The Company’s share price and market capitalization has significantly declined and been reduced below its book value as of the date of this report.

The full extent and duration of the impact of COVID-19 on the Company’s operations and financial performance is currently unknown, and depends on future developments that are uncertain and unpredictable, including the duration and spread of the pandemic, its impact on capital and financial markets on a macro-scale and any new information that may emerge concerning the severity of the virus, its spread to other regions and the actions to contain the virus or treat its impact, among others.

The Company is currently evaluating the potential short-term and long-term implications of COVID-19 on its consolidated financial statements. The potential impacts to the Company’s consolidated financial statements could occur as early as the first quarter of Fiscal 2021, and include, but are not limited to: impairment of goodwill and indefinite-lived intangible assets; impairment of long lived assets, including property and equipment and operating lease right-of-use assets related to the Company’s stores; fair value and collectibility of receivables and other financial assets (including the deferred purchase price described in Note 21); valuation of inventory; and the hedge de-designation of certain foreign currency and commodity derivative financial instruments should those instruments become ineffective.

Any of these outcomes could have a material adverse impact on Signet’s business, financial condition, results of operations and cash flows. Management currently believes that it has adequate liquidity and business plans to continue to operate the business and mitigate the risks associated with COVID-19 for the next 12 months from the date of this report.

ABL Revolving Facility draw down

As a result of the aforementioned risks and uncertainties associated with the potential impacts of COVID-19 on the Company’s business, as a prudent measure to increase the Company’s financial flexibility and bolster its cash position, on March 19, 2020, the Company elected to access an additional $900 million on the ABL Revolving Facility. At the time of draw down, the Company had more than $1.2 billion in cash and approximately $292 million available on the ABL Revolving Facility.

As described in Note 23, the ABL Revolving Facility is subject to a fixed charge coverage ratio if excess availability under the facility falls below 10% of the borrowing base or $100 million, whichever is higher. The Company's most recently reported borrowing base under the ABL Revolving Facility as of the date of the draw down was approximately $1.4 billion. The Company’s Senior Notes due in 2024 are not subject to financial covenants.

CarVal’s termination of forward-flow receivable purchases; Memorandum of Understanding with Castlelake

As further described in Note 4, beginning in June 2018, CarVal and Castlelake began purchasing the majority of forward flow receivables of Signet’s non-prime credit from Signet for a five-year term. On March 23, 2020, CarVal provided notice to the Company that it was terminating the agreement effective the same day.  In the notice of termination, CarVal stated that it is willing to provide a 30-day purchase facility at substantially the same terms as the terminated agreement, but for a fixed term of 30 days from March 23, 2020. Signet is in discussions with CarVal regarding such transition agreement. Castlelake has informed Signet that, subject to their reservation of rights, they do not currently intend to terminate their agreement.  On March 25, 2020, Castlelake and Signet entered into a non-binding memorandum of understanding (“MOU”) regarding the parties’ shared interest in a potential definitive agreement whereby Castlelake would purchase 100% of the funding obligations on the forward flow and add on purchases on a go-forward basis.