September 26, 2022

Signet, owner of Zales, buys online jewelry brand Blue Nile

Signet, owner of Zales, buys online jewelry brand Blue Nile

A pedestrian passes a Zales store in New York.

Scott Ailes | Bloomberg | Getty Images

ring jewelry On Tuesday, it said it would acquire online jewelry retailer Blue Nile for $360 million in an all-cash deal, in an effort to attract younger consumers and grow its bridal business.

Separately, Signet cut its financial forecast for the second quarter and the entire fiscal year 2023, in light of “increasing pressure on consumer discretionary spending” and other macroeconomic headwinds.

Virginia Drosos, the company’s CEO, said the company began seeing a drop in sales in July, as shoppers began to control their spending amid rising inflation for 40 years.

Parent company Zales, Jared and Kay Jewelers said it expects second-quarter revenue of about $1.75 billion and non-GAAP operating income of about $192 million.

The company now expects fiscal year 2023 sales to be between $7.60 billion and $7.70 billion, down from the previous range of $8.03 billion to $8.25 billion.

It pegs non-GAAP annual operating income in the $787 million to $828 million range, down from previous guidance of $921 million to $974 million.

Signet said the revised figures do not take into account further material deterioration of macroeconomic factors that could harm consumer spending, nor the pending acquisition of Blue Nile.

Signet said the deal, which will be funded with cash on hand, is expected to close in the third quarter. She said the deal likely won’t overlap with the business until the fourth quarter of fiscal 2024.

Even in a bear market, Drosos said, the company’s strong balance sheet and “dry powder” allowed it to finance the acquisition of Blue Nile to increase its market share.

Earlier this year, Blue Nile and special purpose acquisition firm Mudrick Capital Acquisition Corp. said. They agreed to combine in a deal that would allow the jewelry brand to be visible to the public via SPAC. The merger valued the combined company at the time at $873 million. It would have represented the return of the Blue Nile to public markets.

In 2016, Bain Capital Private Equity and Bow Street, a private investment firm, acquired Blue Nile in a $500 million deal.

A person familiar with the talks between Murdock and Blue Nile said their exclusive window is about to expire. Also, this person added, Bain was eager to cash in on the company, and Signet had already contacted Blue Nile last year about the acquisition.

SPAC deals have lagged behind in the broader market as investors Lose appetite for more dangerous growth names.

Blue Nile Company recorded revenues of over $500 million in calendar year 2021.

Representatives for Blue Nile, Modric and Payne did not immediately respond to CNBC’s request for comment on why the deal failed.

Signet shares are down about 7% in pre-market trading. The stock is down 22% year-to-date, as of the market close on Monday.