Signet Jewelers is reducing its earnings outlook for the year, citing economic “headwinds” and reduced consumer spending, and also announced it will pay $360 million to buy online jewelry retailer Blue Nile Inc.
The company said on Tuesday its lower outlook for the year is because of decreased consumer spending caused by high inflation. The company in March reported a strong fourth quarter and full-year 2022 financials.
Shares plunged in early trading on Tuesday. Shares were down $9.26, or 13.7%, to $58.41 at 10:10 a.m. Over the past 52 weeks, shares have ranged from a low of $48.31 to a high of $111.92.
In its other announcement, Signet said it will pay cash for Blue Nile, an online retailer of engagement rings and fine jewelry. Blue Nile had $500 million in revenue last year, Signet said in a news release. The deal is expected to close in Signet’s fiscal 2023 third quarter.
Adding Blue Nile expands Signet’s bridal offerings, its Accessible Luxury portfolio, and adds to its ecommerce sales, the company said.
Blue Nile customers have a young, affluent, and ethnically diverse demographic, the company said. Blue Nile will be at the top tier of Signet’s Accessible Luxury banners that includes Jared, James Allen and Diamonds Direct, Signet said. Other Signet Jewelers brands include Kay Jewelers, Zales, Piercing Pagoda, RocksBox and others.
“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 Chief Executive Officer Virginia C. Drosos said in a news release.
Signet also said it has lowered its guidance for operating income and revenue for the full 2023 fiscal year. Revenue is expected to range from $7.6 billion to $7.7 billion, compared to previous guidance of $8.03 billion to $8.25 billion. Adjusted operating income is expected to range from $787 million to $828 million, compared to previous guidance of $921 million to $974 million.
“We saw sales soften in July as our customers have been increasingly impacted by rapid inflation, so we’re revising guidance to align with these trends,” Drosos said. “That said, I’m pleased that revised guidance positions us up−25% in revenue versus the [fiscal 2020] pre-pandemic period. In addition, our transformed operating model and strong balance sheet give us dry powder, even in a down market, to invest in market share expansion as we are doing organically in our banners and with the acquisition of Blue Nile. We believe this acquisition brings additional value, capabilities, and further growth potential to our company.”
Signet in July saw a further deterioration in consumer spending, including at higher price points, Joan Hilson, chief financial and strategy officer, said in the news release.
“Assuming this trend will persist in the back half of the year, we are modestly reducing our [fiscal 2023] guidance,” Hilson said. “Importantly, our outlook continues to reflect a double digit annual operating margin based on the strength of our transformed business model.”