Signet Jewelers Ltd. has agreed to acquire Diamonds Direct USA Inc. for $490 million, and has raised its guidance for the third quarter and full year.
Diamonds Direct, based in Charlotte, N.C., operates 22 stores in 15 states, as well as its website. Its revenues, which were not disclosed, are generated mostly through its stores. The all-cash deal is expected to close in the fourth quarter.
“It’s a distinct new banner for Signet, and a great strategic and cultural fit,” Signet’s chief executive officer Virginia C. Drosos, told WWD. “We think there are operating synergies that come from combining the two companies,” including greater scale in purchasing, marketing and services, she added.
“We’ve done a lot of consumer research in advance of this acquisition. It’s a very distinct and incremental offering for us. Immediately upon the closing, it will be an accretive acquisition.”
She said Diamonds Direct has a bridal-focused shopping experience and provides “a new entry point for Signet as we build lifetime customer relationships and strive to reach our $9 billion revenue goal over time.”
For 2021, Signet revenues are seen at $7.04 billion to $7.19 billion, compared to earlier guidance of $6.8 billion to $6.95 billion. Third-quarter revenues are seen reaching $1.42 billion to $1.45 billion, up from previous guidance of $1.26 billion to $1.31 billion.
Operating income for the year is seen at $680 million to $735 million, versus the $618 million to $673 million previously forecast. For the third quarter, operating incomes is expected to reach $53 million to $63 million, versus the previous forecast of $10 million to $25 million.
“As results to-date have exceeded expectations, we’re raising our guidance on continued strong business momentum. Customers are showing positive response to our new product launches, and the reduction in government stimulus and customer shift to spending on entertainment and travel are having less impact than we previously anticipated,” Joan Hilson, chief financial and strategy officer, explained in a statement.
“While there remain factors beyond our control, our strengthened supply chain and vendor partnerships gave us the ability to plan earlier receipt of holiday product, and we currently do not expect any material supply chain disruptions. Signet uses air freight for the transit of the vast majority of our merchandise, thus avoiding current ocean freight congestion.”
Executives also pointed out that while the company continues to expect some shift of consumer discretionary spending away from the jewelry category toward experience-oriented categories in the fourth quarter, such a shift is expected to have less of an impact than originally anticipated.
In other guidance, Signet expects gross cost savings in the range of $85 million to $105 million for fiscal 2022, benefitting both SG&A and gross margin. Capital expenditures are seen ranging from $190 million to $200 million.
The company expects to close more than 100 stores in fiscal 2022 and open up to 100, primarily in “highly efficient” Banter by Piercing Pagoda formats.
Diamonds Direct’s leadership team will remain intact, Drosos said, and she pointed out that some of those executives have become stakeholders in Signet by purchasing shares. Blackstone was the principal owner of Diamonds Direct, while management also had stakes in the company. Diamond Direct has about 500 employees.
“We are planning to run this business like we do all of our businesses — as a separate banner entity,” said Drosos.
Regarding plans to grow Diamonds Direct, Drosos replied: “Number one is continuing to grow their store business. With an acquisition, I always think of playing to its strengths first.”
Signet’s last acquisition was in April 2021, when it purchased Rocksbox, a jewelry rental and subscription service. Four years ago, Signet purchased JamesAllen.com, which added technology prowess to the company.
Signet, considered the world’s largest retailer of diamond jewelry, operates approximately 2,800 stores primarily under the brand names Kay Jewelers, Zales, Jared, H. Samuel, Ernest Jones, Peoples, Piercing Pagoda and JamesAllen.com.
“I am excited about Diamonds Direct joining the Signet family as we share a passion for company culture that prioritizes our team members, our customers and our community,” said Itay Berger, president of Diamonds Direct, which offers loose and mounted diamonds, including rare and unique stones, as well as engagement ring mountings and wedding bands, diamond and gemstone fashion jewelry, pearls and other products.
“We are thrilled to continue to grow our business, leveraging Signet’s strengths and strategic capabilities to bring even more innovation and value to our signature shopping experience,” said Berger.