Zales parent Signet Jewelers has agreed to buy online engagement ring and fine jewelry retailer Blue Nile for $360 million in cash as the world's largest retailer of diamond jewelry looks to expand its bridal offerings and attract younger consumers.
The transaction will be funded with cash on hand and is currently expected to close in the third quarter of fiscal year 2023. Signet had $927.6 million of cash and cash equivalents as of 30 April. According to the company, the deal will likely not be accretive until the fourth quarter of fiscal 2023.
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Regulatory filings were made in July and the applicable waiting period has passed. However, the transaction is still subject to other customary closing conditions.
The deal will strategically position Blue Nile at the "top tier" of Signet's Accessible Luxury banners alongside Jared, James Allen and Diamonds Direct.
"Blue Nile is a pioneer and innovator in online engagement rings and fine jewelry, providing a unique and highly desirable shopping experience for customers," Signet CEO Virginia Drosos said in a statement. "Adding Blue Nile to our strong and diversified portfolio of banners will further drive our Inspiring Brilliance growth strategy — expanding customer choice, building new capabilities, and achieving meaningful operating synergies that will increase value for both our consumers and shareholders."
In 2021, Blue Nile delivered revenue of more than $500 million.
The move comes as Signet has revised its guidance for the second quarter and full year 2023 after seeing sales soften in July due to soaring inflation.
"While our initial guidance for FY23 anticipated the impact of stimulus in the base period and the level of inflation that we were seeing at that time, we have seen a further deterioration in consumer spending, including at higher price points, in July," Signet chief financial and strategy officer Joan Hilson explained in a statement. "Assuming this trend will persist in the back half of the year, we are modestly reducing our FY23 guidance."
Signet is forecasting preliminary second quarter revenue of approximately $1.75 billion and non-GAAP operating income of approximately $192 million. The Wall Street estimate is $1.78 billion, according to Refinitiv data.
Meanwhile, total revenue for fiscal 2023 is currently expected to fall within the range of $8.03 billion and $8.25 billion and non-GAAP operating income between $921 million and $974 million.
The guidance does not include the pending acquisition of Blue Nile or a further material worsening of macroeconomic factors that could impact consumer spending.
Shares of Signet have tumbled more than 27% year to date.