In an effort to reach out to younger customers and expand its bridal business, Signet Jewelers announced Tuesday that it will purchase online jewellery store Blue Nile for $360 million in an all-cash deal.
Separately, due to “heightened pressure on consumers’ discretionary spending” and other macroeconomic headwinds, Signet lowered its financial projection for the second quarter and the entire fiscal year 2023.
Virginia Drosos, the chief executive officer, claimed that the company started to see weaker sales in July as consumers started to rein down their spending in the face of inflation that was at a 40-year high.
The parent company of Zales, Jared, and Kay Jewelers predicted that the second quarter would bring in around $1.75 billion in revenue and about $192 million in non-GAAP operating profitability.
Sales for the upcoming fiscal year are now anticipated to be between $7.60 billion and $7.70 billion, down from an earlier estimate of $8.03 billion to $8.25 billion, according to the firm.
It estimates non-GAAP operating income for the year to be between $787 million and $828 million, which is less than the earlier forecast of between $921 million and $974 million.
A further material deterioration of macroeconomic conditions that could have a negative impact on consumer purchasing, as well as Signet’s impending acquisition of Blue Nile, are not included in the updated data, the company claimed.
The transaction, which will be funded with cash on hand, is anticipated to finalise in the third quarter, according to Signet. However, it stated that it is anticipated that the acquisition won’t be profitable for the company until the fourth quarter of fiscal 2024.
According to Drosos, the business was able to finance the purchase of Blue Nile in order to increase market share despite a downturn in the market thanks to its strong balance sheet and “dry powder.”
The jewellery retailer Blue Nile and special-purpose acquisition firm Mudrick Capital Acquisition Corp. announced earlier this year that they had reached an agreement to merge in a deal that would enable the SPAC IPO of the brand. The combined company was valued at $873 million at the time of the transaction. Additionally, it would have signalled Blue Nile’s return to open markets.
In a $500 million acquisition, private investment company Bow Street and Bain Capital Private Equity took Blue Nile private in 2016.
A source with knowledge of the negotiations between Murdock and Blue Nile claimed that their window of exclusivity was about to close. This insider also mentioned that Bain was keen to exit the business that Signet had previously approached Blue Nile about an acquisition the previous year.
Because investors are less interested in risky growth companies, SPAC acquisitions have performed worse than the overall market.
In the 2021 calendar year, Blue Nile reported earnings of more than $500 million.
When CNBC asked representatives of Blue Nile, Mudrick, and Bain for comment on why the deal fell through, they didn’t react right away.
Shares of Signet dropped by more than 12% in early trade. By the close of the market on Monday, the stock had lost about 22% of its value so far this year.