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Signet to Acquire Diamonds Direct for $490M; Ups Guidance

Shares of Signet Jewelers Limited (SIG) gained 3.2% in Tuesday’s early trade after the company announced its plans to acquire Diamonds Direct USA Inc. in an all-cash deal of $490 million. The company engages in the retailing of jewelry, watches and associated services. Diamonds Direct is an off-mall, destination jeweler in the U.S.

The deal is expected to close in the fourth quarter of Fiscal Year 2022, subject to customary closing conditions and regulatory approval. 

Signet expects the deal to be immediately accretive. It plans to drive operating synergies by leveraging scale in purchasing, targeted marketing, connected commerce and jewelry services. (See Signet stock charts on TipRanks)

The CEO of Signet, Virginia C. Drosos, said, “The accretive addition of Diamonds Direct to our portfolio will further drive shareholder value with its distinct bridal-focused shopping experience and add a new entry point as we build lifetime customer relationships and strive to reach our $9 billion revenue goal over time.”

Meanwhile, Signet disclosed that it has raised revenue guidance for Q3 and Fiscal Year 2022 due to the reduction in government stimulus and positive response to its new product launches.

The company expects its Q3 revenue to be in the range of $1.42 billion to $1.45 billion, up from $1.26 billion to $1.31 billion previously expected. Also, revenue for Fiscal Year 2022 is likely to be between $7.04 billion and $7.19 billion, compared to the previous guidance of $6.80 billion to $6.95 billion.

Last week, Wells Fargo analyst Ike Boruchow maintained a Buy rating on Signet with a price target of $100 (upside potential of 21.9%). Boruchow expects Signet to post earnings per share of $4.10 for Q4 2021.

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The stock has a Hold consensus rating based on 1 Buy, 2 Holds and 1 Sell. The average Signet price target of $91 implies 10.9% upside potential.

SIG scores a 9 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock is likely to outperform market averages.

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