XML 34 R19.htm IDEA: XBRL DOCUMENT v3.22.4
Income taxes
 12 Months Ended
Jan. 28, 2023
Income Tax Disclosure [Abstract]  
Income taxes Income taxes
(in millions)Fiscal 2023Fiscal 2022Fiscal 2021
Income (loss) before income taxes:
– US
$281.2 $665.9 $(173.4)
– Foreign
170.0 218.5 83.7 
Total income (loss) before income taxes
$451.2 $884.4 $(89.7)
Current taxation:
– US
$157.1 $108.1 $(222.2)
– Foreign
16.7 7.6 0.7 
Deferred taxation:
– US
(70.4)8.4 158.4 
– Foreign
(28.9)(9.6)(11.4)
Total income tax expense (benefit)
$74.5 $114.5 $(74.5)
As the statutory rate of corporation tax in Bermuda is 0%, the differences between the US federal income tax rate and the effective tax rates for Signet have been presented below:
Fiscal 2023Fiscal 2022Fiscal 2021
US federal income tax rates
21.0 %21.0 %21.0 %
US state income taxes
2.9 %3.3 %4.1 %
Differences between US federal and foreign statutory income tax rates
0.8 %(0.1)%0.1 %
Expenditures permanently disallowable for tax purposes, net of permanent tax benefits
(1.4)%— %(4.7)%
Impact of global reinsurance arrangements
(8.7)%(2.2)%14.1 %
Impact of global financing arrangements
(2.2)%(0.6)%— %
Impairment of goodwill
— %— %(2.4)%
CARES Act— %(1.4)%111.9 %
Valuation allowance— %(6.5)%(55.5)%
Other items
4.1 %(0.6)%(5.5)%
Effective tax rate
16.5 %12.9 %83.1 %

In Fiscal 2023, the Company’s effective tax rate was lower than the US federal income tax rate primarily as a result of the favorable impacts from the Company’s global reinsurance and financing arrangements, partially offset by the unfavorable impact of an uncertain tax position related to a prior year of $20.5 million recorded in Fiscal 2023.

In Fiscal 2022, the Company’s effective tax rate was lower than the US federal income tax rate primarily due to the reversal of the valuation allowance recorded against certain state deferred tax assets, as well as additional benefits realized from the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and the benefits from global reinsurance arrangements. During Fiscal 2022, the Company evaluated evidence to consider the reversal of the valuation allowance on its state net deferred tax assets and determined that there was sufficient positive evidence to conclude that it is more likely than not its state deferred tax assets are realizable. In determining the likelihood of future realization of the state deferred tax assets, the Company considered both positive and negative evidence. As a result, the Company believed that the weight of the positive evidence, including the cumulative income position in the three most recent years and forecasts for a sustained level of future taxable income, was sufficient to overcome the weight of the negative evidence, and thus recorded a $49.8 million tax benefit to release the valuation allowance against the Company's state deferred tax assets during Fiscal 2022.
Deferred taxes
Deferred tax assets (liabilities) consisted of the following:
January 28, 2023January 29, 2022
(in millions)Assets(Liabilities)TotalAssets(Liabilities)Total
Intangible assets
$— $(100.6)$(100.6)$— $(77.0)$(77.0)
US property, plant and equipment
— (70.0)(70.0)— (60.2)(60.2)
Foreign property, plant and equipment
0.7 — 0.7 7.1 — 7.1 
Inventory valuation
— (208.1)(208.1)— (237.8)(237.8)
Revenue deferral
79.3 — 79.3 88.6 — 88.6 
Lease assets
— (230.3)(230.3)— (261.9)(261.9)
Lease liabilities
262.2 — 262.2 284.3 — 284.3 
Deferred compensation
8.0 — 8.0 7.7 — 7.7 
Retirement benefit obligations
— (0.2)(0.2)1.5 — 1.5 
Share-based compensation
8.6 — 8.6 8.4 — 8.4 
Other temporary differences
95.6 — 95.6 42.4 — 42.4 
163(j) interest carryforward13.8 — 13.8 — — — 
Net operating losses and foreign tax credits
65.9 — 65.9 84.3 — 84.3 
Value of capital losses
13.2 — 13.2 16.9 — 16.9 
Total gross deferred tax assets (liabilities)$547.3 $(609.2)$(61.9)$541.2 $(636.9)$(95.7)
Valuation allowance
(19.0)— (19.0)(27.9)— (27.9)
Deferred tax assets (liabilities)$528.3 $(609.2)$(80.9)$513.3 $(636.9)$(123.6)
Disclosed as:
Non-current assets
$36.7 $37.3 
Non-current liabilities
(117.6)(160.9)
Deferred tax assets (liabilities)$(80.9)$(123.6)
The following table is a rollforward of the Company’s deferred tax asset valuation allowance:
(in millions)Fiscal 2023Fiscal 2022Fiscal 2021
Beginning balance$27.9 $83.9 $38.4 
Charged (credited) to income tax expense— (43.8)45.1 
Increases from acquisitions1.9 — — 
Lapsed due to expiration of benefit(9.7)(11.9)— 
Foreign currency translation(1.1)(0.3)0.4 
Ending balance$19.0 $27.9 $83.9 
As of January 28, 2023, Signet had deferred tax assets associated with US Federal and state net operating loss carry forwards of $39.2 million, of which $30.9 million are subject to ownership change limitations rules under Section 382 of the Internal Revenue Code (“IRC”) and various US state regulations. Federal net operating losses can be carried forward indefinitely and state net operating losses expire between 2023 and 2040. Signet had deferred tax assets associated with foreign net operating loss carryforwards of $26.7 million as of January 28, 2023, most of which can be carried forward indefinitely. As of January 28, 2023, Signet had foreign capital loss carryforward deferred tax assets of $13.2 million (Fiscal 2022: $14.2 million), which can be carried forward over an indefinite period, which are only available to offset future capital gains.

The decrease in the total valuation allowance in Fiscal 2023 was $8.9 million. The valuation allowance as of January 28, 2023 primarily relates to certain state deferred tax assets and foreign capital loss carry forwards that, in the judgment of management, are not more likely than not to be realized.
Signet believes that it is more likely than not that deferred tax assets not subject to a valuation allowance as of January 28, 2023 will be offset where permissible by deferred tax liabilities or realized on future tax returns, primarily from the generation of future taxable income.
Uncertain tax positions
The following table summarizes the activity related to the Company’s unrecognized tax benefits for US federal, US state and non-US tax jurisdictions:
(in millions)Fiscal 2023Fiscal 2022Fiscal 2021
Unrecognized tax benefits, beginning of period
$24.9 $25.4 $23.5 
Increases related to current year tax positions1.6 2.0 1.0 
Increases from acquisitions2.3 — — 
Increases related to prior year tax positions59.6 0.4 3.4 
Lapse of statute of limitations(2.4)(2.9)(2.6)
Foreign currency translation(0.1)— 0.1 
Unrecognized tax benefits, end of period
$85.9 $24.9 $25.4 
As of January 28, 2023, Signet had approximately $85.9 million of unrecognized tax benefits in respect to uncertain tax positions. The unrecognized tax benefits relate primarily to accounting methods used for income tax purposes and intercompany deductions, including financing arrangements and intra-group charges which are subject to different and changing interpretations of tax law. Signet recognizes accrued interest and, where appropriate, penalties related to unrecognized tax benefits within income tax expense (benefit) in the consolidated statements of operations. As of January 28, 2023, Signet had accrued interest of $9.8 million and $0.5 million of accrued penalties. If all of these unrecognized tax benefits were settled in Signet’s favor, the effective income tax rate would be favorably impacted by $51.5 million.
Over the next twelve months management believes that it is reasonably possible that there could be a reduction of some or all of the unrecognized tax benefits as of January 28, 2023 due to settlement of the uncertain tax positions with the tax authorities.
Signet has business activity in all states within the US and files income tax returns for the US federal jurisdiction and all applicable states. Signet also files income tax returns in the UK, Canada and certain other foreign jurisdictions. Signet is subject to examinations by the US federal and state and Canadian tax authorities for tax years ending after November 1, 2011 and is subject to examination by the UK tax authority for tax years ending after February 1, 2014.