Zales owner Signet buys online jewelry brand Blue Nile to bolster its portfolio
Signet Jewelers said Tuesday it will buy online jewelry retailer Blue Nile in a $360 million cash deal, seeking to attract younger customers and grow its bridal business.
Separately, Signet lowered its financial forecast for the second quarter and full-year fiscal 2023, noting “increased pressure on consumer discretionary spending” and other macroeconomic headwinds.
Chief Executive Officer Virginia Dross said the company began seeing softer sales in July as shoppers began to rein in their spending amid 40-year high inflation.
Zales, the parent company of Jared and Kay Jewelers, said it reported second-quarter revenue of about $1.75 billion and non-GAAP operating income totaling $192 million.
The company now expects fiscal 2023 sales to be between $7.60 billion and $7.70 billion, down from a previous range of $8.03 billion to $8.25 billion.
It estimates annual non-GAAP operating income of $787 million to $828 million, down from prior guidance of between $921 million and $974 million.
Signet said the revised figures do not factor in further macroeconomic factors that could hurt consumer spending, nor do they take into account the pending acquisition of Blue Nile.
Signet said the deal, which will be funded in cash, is expected to close in the fiscal third quarter. However, it said the transaction would not be operational until the fourth quarter of fiscal 2024.
Even in a down market, Dross said, the company’s strong balance sheet and “dry powder” helped fund the acquisition of Blue Nile to increase market share.
Earlier this year, Blue Nile and special purpose acquisition firm Mudrick Capital Acquisition Corp. had said they had agreed to enter into a deal that would allow the jewelry brand to go public through a SPAC. The merger valued the combined business at $873 million at the time. And it would have marked Blue Nile’s return to the public market.
In 2016, Blue Nile was taken private by Bain Capital Private Equity and Bow Street, a private investment firm, in a $500 million deal.
A person familiar with the talks between Mudrick and Blue Nile said their exclusive window is about to expire. Also, the person added, Bain was eager to cash out of the company and Signet had already approached Blue Nile last year. The person requested anonymity because the discussion is private.
The performance of SPAC deals has lagged the broader market as investors lose appetite for riskier growth names.
Blue Nile reported revenue of more than $500 million in calendar 2021.
Representatives for Blue Nile, Mudrick and Bain did not immediately respond to CNBC’s request for comment on why the deal was made.
Signet shares fell more than 11% in early trading. The stock has fallen about 22% year to date since Monday’s market close.