Zales owner Signet buys online jewelry brand Blue Nile

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A pedestrian walks past a Zales store in New York.

Scott Eells | Bloomberg | Getty Images

Signet Jewelers announced on Tuesday that it will acquire online jewelry retailer Blue Nile for $360 million in an all-cash deal, in a bid to attract younger consumers and grow its bridal business. .

Separately, Signet cut its financial guidance for the second quarter and fiscal year 2023, given “increased pressure on consumer discretionary spending” and other macroeconomic headwinds.

Chief executive Virginia Drosos said the company began to see weaker sales in July as shoppers began to rein in spending amid 40-year high inflation.

The parent company of Zales, Jared and Kay Jewelers said it expects second-quarter revenue of about $1.75 billion and non-GAAP operating profit of about $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 dollars.

It pegs non-GAAP annual operating profit in the range of $787 million to $828 million, down from earlier guidance of between $921 million and $974 million.

Signet said the revised numbers do not take into account a further significant worsening in macroeconomic factors that could hurt consumer spending, or its pending acquisition of Blue Nile.

Signet said the deal, which will be funded with available cash, is expected to close in the third fiscal quarter. However, the transaction is unlikely to be accretive to the company 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 fund an acquisition of Blue Nile to increase market share.

Earlier this year, Blue Nile and special purpose acquisition firm Mudrick Capital Acquisition Corp. announced that they had agreed to partner in a deal that would allow the jewelry brand to go public through a SPAC. The merger had valued the combined company at the time at $873 million. And that would have marked Blue Nile’s return to the public markets.

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 talks between Mudrick and Blue Nile said their exclusive window was about to expire. Additionally, the person added, Bain was eager to get cash out of the company and Signet had already approached Blue Nile last year about an acquisition. The person requested anonymity because the interviews are private.

The performance of SPAC deals lagged the market as a whole as investors lost their appetite for riskier growth names.

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

Representatives for Blue Nile, Mudrick and Bain did not immediately respond to CNBC’s request for comment on why the deal fell through.

Signet shares closed Tuesday down 12% at $59.75. The stock has fallen more than 32% since the start of the year.

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