Zales owner Signet buys online jewelry brand Blue Nile

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

Separately, Signet cut its financial forecast for the second quarter and full-year fiscal 2023, given “heightened pressure on consumers’ discretionary spending” and other macroeconomic headwinds.

Chief Executive Officer Virginia Drosos said the company started to see softer sales in July as shoppers began to rein in their spending amid 40-year-high inflation.

The parent company of Zales, Jared and Kay Jewelers said it sees second-quarter revenue of about $1.75 billion and non-GAAP operating income totaling roughly $192 million.

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

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

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

Signet said the deal, which will be funded with cash on hand, is expected to close in the fiscal third quarter. It said the transaction will likely not be accretive to the business, however, until the fourth quarter of fiscal 2024.

Even in a down market, Drosos said, the company’s strong balance sheet and “dry powder” allowed it to fund an acquisition of Blue Nile to grow market share.

Earlier this year, Blue Nile and special purpose acquisition company Mudrick Capital Acquisition Corp. had said they agreed to combine in a deal that would allow the jewelry brand to go public via a SPAC. The merger had valued the combined business at the time at $873 million. And it 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 the talks between Mudrick and Blue Nile said their exclusive window was about to expire. Also, this person added, Bain was eager to cash out of the company and Signet had approached Blue Nile already last year about an acquisition. The person requested anonymity because the talks are private.

SPAC deals’ performance has lagged the broader market as investors lose appetite for riskier growth names.

Blue Nile recorded revenue of more than $500 million in calendar 2021.

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

Signet shares fell more than 11% in early trading. The stock has dropped about 22% year to date, as of Monday’s market close.