Dive Brief:

• Signet Jewelers on Tuesday said it has an agreement to acquire off-mall rival Diamonds Direct for $490 million. The all-cash deal is expected to close in Q4 of fiscal 2022, subject to customary closing conditions and regulatory approval, per a Signet press release.

• Diamonds Direct's leadership team will remain, with company president Itay Berger reporting directly to Signet CEO Virginia Drosos, the company said.

• Signet also raised its guidance for the third quarter and full year, based "on continued strong business momentum," per the release.

Dive Insight:

This marks the second time in recent months that Signet boosted its guidance, with a hike for the third quarter and full year that was hailed by Wells Fargo analysts Tuesday as an even bigger deal than this acquisition. The mall-based jeweler, whose banners include Jared, Kay and Zales, in September raised expectations for the year after second quarter comps nearly doubled. 

As far as the deal goes, the Wells Fargo team led by Ike Boruchow called it "highly productive and profitable." 

"[Signet] is now comping the difficult comparison of [last year] in stride, and with muted supply chain impacts this holiday, [it] appears to be one of the best positioned companies in our universe heading into 4Q," Boruchow said.

Notably, the company is largely escaping the supply chain travails that is unnerving much of the industry heading into the holidays. Its products are small and light enough to be shipped by air, thus avoiding the current cargo ship backlogs; its sourcing isn't centered in troubled spots like Vietnam; and it placed many orders early, Wells Fargo analysts noted earlier this month.

"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 Chief Financial and Strategy Officer Joan Hilson said in a statement Tuesday. "Signet uses air freight for the transit of the vast majority of our merchandise, thus avoiding current ocean freight congestion."

This acquisition helps Signet fulfill its stated goal to expand its market share, estimated by Wells Fargo to stand at about 6% now, with a goal to reach closer to 9% in coming years. But it's not entirely smooth sailing for the jewelry juggernaut.

"The company has numerous competitive advantages that cannot be replicated by its smaller, independent/regional competitors including robust digital and omni-channel capabilities," Wells Fargo analysts said. "That said, emerging competition from department stores that have aggressively entered the market as well as online pure plays could hamper [its] ability to achieve its ~9% market share goal."