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Breakingviews - Capital Calls - Rent-a-bling deal shines up Signet

The sign for the Zale jewelry store is seen in Broomfield, Colorado September 9, 2009. REUTERS/Rick Wilking

NEW YORK (Reuters Breakingviews) - DEAL CHARMS. Signet Jewelers is upping its bling. The owner of lower-end diamond retailers Kay and Zales said Tuesday it was buying jewelry rental firm Rocksbox. With roughly half of its revenue coming from bridal jewelry – and brick-and-mortar retailers going broke – changing course is probably Signet’s best next step.

The $3 billion firm’s revenue fell 15% in the year ended Jan. 30, and it wasn’t solely pandemic-related. Sales have been on a decline for several years. Despite shares rocketing ninefold in the past year, its enterprise value-to-EBITDA multiple of around 8 times is half that of Coach owner Tapestry. LVMH is valued almost three times as highly.

Rocksbox, which charges $21 a month to rent its baubles, can make Signet more like RealReal, an online second-hand designer clothes retailer. Assuming that users will be interested in renting Zales’ Unstoppable Heart Shaped Pendant might be a stretch. Still, RealReal has roughly 6% of Signet’s revenue but a market capitalization about two-thirds as large. For Signet, that promises more than a spit shine. (By Jennifer Saba and Lauren Silva Laughlin)

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