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Signet Jewelers (SIG) Acquires Blue Nile for $360M Cash, Updates FY23 Guidance

August 9, 2022 6:49 AM EDT

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Signet Jewelers Limited ("Signet" or the "Company") (NYSE: SIG), the world's leading retailer of diamond jewelry, today announced it has signed a definitive agreement to acquire Blue Nile, Inc. ("Blue Nile"), a leading online retailer of engagement rings and fine jewelry, for $360 million in an all cash transaction. Blue Nile delivered revenue of more than $500 million in calendar year 2021.

The strategic acquisition of Blue Nile accelerates Signet's efforts to expand its bridal offerings and grow its Accessible Luxury portfolio while extending its digital leadership in the jewelry category – all to further enhance shopping experiences for consumers and create value for shareholders. Blue Nile brings an attractive customer demographic that is younger, more affluent, and ethnically diverse which will broaden our customer acquisition funnel. Upon closing, Blue Nile will be strategically positioned at the top tier of Signet's Accessible Luxury banners along with Jared, James Allen and Diamonds Direct.

"Blue Nile is a pioneer and innovator in online engagement rings and fine jewelry, providing a unique and highly desirable shopping experience for customers," said Signet Chief Executive Officer Virginia C. Drosos. "Adding Blue Nile to our strong and diversified portfolio of banners will further drive our Inspiring Brilliance growth strategy - expanding customer choice, building new capabilities, and achieving meaningful operating synergies that will increase value for both our consumers and shareholders."

"By joining Signet, we will extend our premium brand and fine jewelry offering to millions of new customers while bringing new capabilities to our leading e-commerce business that will drive additional growth opportunities for Blue Nile," said Sean Kell, CEO of Blue Nile. "We're equally thrilled to join a purpose-inspired and sustainability-focused company that shares our core values and has been recognized as a certified Great Place to Work®."

The transaction will be funded with cash on hand and is currently expected to close in the third quarter of Fiscal Year 2023. Regulatory filings were made in July and the applicable waiting period has passed however the transaction is still subject to other customary closing conditions. While synergies are likely to start materializing as early as the fourth quarter of Fiscal 2023, the acquisition, will likely not be accretive until Q4 of Fiscal 2024, exclusive of transaction and integration-related charges, as well as anticipated impacts of purchase accounting adjustments related to the transaction.

Separately, the Company is updating its guidance for the second quarter and full year Fiscal 2023 given heightened pressure on consumers' discretionary spending and increased macroeconomic headwinds. Preliminary second quarter total revenue is expected to be approximately $1.75 billion and non-GAAP operating income is expected to be approximately $192 million. The Company now expects Fiscal 2023 total revenues of $7.60 – 7.70 billion and non-GAAP operating income to be in the range of $787-828 million. This compares with prior Fiscal 2023 guidance for total revenue of $8.03-8.25 billion and non-GAAP operating income of $921-974 million. This revised Fiscal Year 2023 outlook does not include 1) further material worsening of macroeconomic factors which could impact consumer spending patterns and have an associated impact on the Company's business performance, or 2) the pending acquisition of Blue Nile.

Drosos continued, "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. That said, I'm pleased that revised guidance positions us up ~25% in revenue versus the FY20 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."

"While our initial guidance for FY23 anticipated the impact of stimulus in the base period and the level of inflation that we were seeing at that time, we have seen a further deterioration in consumer spending, including at higher price points, in July," said Joan Hilson, Chief Financial and Strategy Officer. "Assuming this trend will persist in the back half of the year, we are modestly reducing our FY23 guidance. Importantly, our outlook continues to reflect a double digit annual operating margin based on the strength of our transformed business model."

Non-GAAP Measures

Forecasted non-GAAP operating income provided above excludes potential non-recurring charges. However, given the potential impact of non-recurring charges to operating income calculated in accordance with accounting principles generally accepted in the US ("GAAP"), we cannot provide forecasted GAAP operating income or the probable significance of such items without unreasonable efforts. As such, we do not present a reconciliation of forecasted non-GAAP operating income to corresponding GAAP operating income.

In addition to financial measures calculated and presented in accordance with GAAP, the Company believes that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating historical trends and current period performance. For these reasons, internal management reporting and the Company's guidance includes non-GAAP measures. Items may be excluded from GAAP financial measures when the Company believes this provides useful supplementary information to management and investors in assessing the operating performance of our business. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for the GAAP financial measures presented in the Company's consolidated financial statements and other publicly filed reports. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies.



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