Brilliant Earth has revised its financial outlook for fiscal year 2024 following a decline in sales during the second quarter.
The company, specializing in bridal and fine jewelry, reported a 4 percent drop in net sales for Q2, citing challenges within the industry and broader macroeconomic conditions.
Q2 Financial Performance
For the quarter ending June 30, 2024, Brilliant Earth reported net sales of $105.4 million, a decrease from $110.2 million in the same period the previous year. The company’s first-half net sales also declined, totalling $202.8 million, down 3 percent year-over-year. Despite the dip in sales, the company managed to expand its gross profit margins, achieving a 61 percent gross profit margin for Q2, compared to 58 percent in Q2 2023.
Adjusted EBITDA for the quarter was $5.5 million, reflecting a 29 percent year-over-year decrease. However, this figure surpassed the company’s internal expectations. For the first half of the year, adjusted EBITDA stood at $10.6 million, representing 5 percent of net sales, compared to 6 percent in the prior year.
CEO Beth Gerstein acknowledged the challenging environment, noting, “I’m pleased with our ability to manage the business with agility and discipline in the face of a challenging industry and macroeconomic backdrop.” Despite the setbacks, net income for Q2 increased slightly to $1.4 million, up from $1.2 million in the same period last year.
Industry-Wide Challenges and Strategic Response
Brilliant Earth’s performance in Q2 was influenced by ongoing difficulties in the bridal jewelry sector and heightened competition within the e-commerce space. The company observed increased discounting activities among competitors, a trend that has persisted into the third quarter. Gerstein highlighted that while bridal jewelry sales were down by low double digits, the company is witnessing some growth in specific areas, such as engagement ring design bookings and men’s wedding bands, which saw a 32 percent year-over-year increase.
In response to these challenges, Brilliant Earth has been diversifying its product offerings by expanding its fine jewelry segment. The company reported a 29 percent year-over-year increase in fine jewelry bookings during Q2.
Expansion and Future Outlook
Brilliant Earth plans to open three new showrooms in the second half of 2024, including two in Boston and its first street-level location in New York City’s Nolita neighbourhood.
Looking ahead, Brilliant Earth has adjusted its fiscal year 2024 guidance, now projecting net sales of $410 million to $425 million, down from its previous forecast of $455 million to $469 million. Adjusted EBITDA is expected to range between $12 million and $16 million, a reduction from the prior estimate of $14 million to $22 million. For the third quarter, the company anticipates an 11 to 14 percent decline in net sales year-over-year, with adjusted EBITDA either breaking even or achieving a low single-digit margin.
Despite the lowered outlook, CFO Jeff Kuo expressed optimism about Q4, highlighting expected uplift from new showrooms, strong fine jewelry sales, and continued brand-building efforts during the holiday season. Gerstein echoed this cautious optimism, noting that while the consumer environment remains uncertain, the company is focused on sustaining its brand strength and adapting to the evolving market conditions.
Implications for the Jewelry Industry
Brilliant Earth’s performance and strategic adjustments reflect broader trends in the our industry, where economic uncertainty and shifting consumer preferences are challenging traditional business models.
The company’s emphasis on fine jewelry and physical retail expansion signals a potential shift in focus away from the heavily saturated bridal market, which may have implications for other retailers in the sector. As the industry continues to navigate these challenges, jewellers may need to consider similar diversification strategies and increased investments in brand resilience to maintain profitability in a competitive landscape.
