Brilliant Earth Reports Strong Q1 But Lowers 2022 Guidance
The company is feeling the impact of the uncertain geopolitical and macroeconomic environment, said CEO Beth Gerstein.
“The first quarter saw strength across key operating metrics including robust sales growth, expansion in gross margin and strong profitability,” CEO Beth Gerstein said in a press release about the results.
Gerstein attributed the success in part to the company’s popularity with millennials and Gen Z shoppers and its omnichannel growth initiatives.
The jewelry company, which went public last September, has been steadily growing its store footprint.
Here are five takeaways from its latest earnings report, released Thursday evening.
Brilliant Earth had a solid first quarter.
Net sales were $100 million, a 42 percent increase year-over-year compared with $70.7 million in the first quarter of last year.
Compared with Q1 2020, sales more than doubled, up 102 percent, said CEO Beth Gerstein during the company’s earnings call Thursday.
Net income was $3.4 million, a 42 percent increase over $2.4 million in the previous first quarter.
Total orders were up 50 percent year-over-year.
Looking to the year ahead, the company expects second quarter net sales in the range of $103 million to $109 million.
The company lowered its full-year outlook, anticipating sales in the range of $450 million to $470 million, down from prior guidance of $485 million to $500 million.
Now in its fiscal second quarter, Gerstein said the company has been feeling the impact of the current geopolitical and economic environment.
During the call, Chief Financial Officer Jeff Kuo added, “While we continue to see strong overall demand, we have seen a more moderate rate of growth, which is most notable in ecommerce.”
Another jewelry company, Pandora, also recently said it expects to see a slowdown in the U.S. market, citing inflation, geopolitical unrest, and other factors.
Brilliant Earth has been growing its retail footprint.
The company announced its 18th showroom opening Monday, cutting the ribbon on a new store in Houston, Texas. It marks the company’s third store in Texas, with the other two in Austin and Dallas opening last year.
Brilliant Earth touts its “digital-first” strategy but has been building its store network to complement its digital channels.
Having both options allows customers “to shop for jewelry how, when and where they want, and in a way that transitions seamlessly between an online and in-person shopping experience,” said Brilliant Earth in a press release about the Houston showroom.
In Brilliant Earth showrooms, customers can visit in person or make a virtual appointment to try on different pieces of jewelry, but will receive their purchase at a later date, as most styles are made to order.
New stores are expected to open this year in Cleveland, Ohio; Detroit, Michigan; and Minneapolis, Minnesota, said Gerstein.
“Our showrooms have outperformed our initial expectations,” said Kuo.
Brilliant Earth’s new fine jewelry category is doing well.
Known for its bridal offerings, the company has also curated trend-driven collections in the gemstone and fine jewelry categories.
Kuo said the company saw broad-based growth across its product assortment but highlighted its new fine jewelry category in particular.
“We continue to see outsized growth within our newer category [of] fine jewelry,” he said.
“While it remains a small percentage of our total business, we know that customers are seeking out our trend-forward fine jewelry and that it represents tremendous growth and differentiation for our brand.”
The fine jewelry category will be prioritized in its near- and long-term growth plans, said Kuo.
He added that Brilliant Earth’s fine jewelry customers, and those who visit a showroom, show higher repeat purchase behavior than its overall customer base.
Gerstein highlighted several collections that have been top-performers, including the “Wildflower” collection and its Greenland Ruby collection, featuring rubies that are traceable from mine to market.
The Virtu Gems collection, which features gemstones from artisanal miners in Zambia, Kenya, and Malawi, also performed well. The gems are traceable through blockchain, said Brilliant Earth.
In January, the company partnered with Tacori on a collection of bridal jewelry, which has been “very strongly received and has been outperforming our expectations,” said Kuo.
Despite a lowered outlook, Gerstein asserted fine jewelry is a resilient category.
“We do find that in more uncertain times, the fine jewelry category does remain quite strong,” said Gerstein.
Gerstein and Kuo both stated on the call that while growth has taken a more moderate pace, overall demand is still strong.
In uncertain times, consumers invest more in personal relationships, said Gerstein, pointing to the forecasted uptick in engagements and weddings.
The Knot expects 2.6 million weddings will take place in the United States this year.
“In times of inflation, consumers see it as a physical good. It’s more tangible and has inherent value,” she added.
The consumer price index, which measures the average change in prices over time consumers will pay for a basket of goods and services, rose 8.3 percent year-over-year in April, the highest level since the summer of 1982.
“We do have higher price points, and so as a more considered purchase, it ends up taking a little bit longer in times of uncertainty for customers to actually make their decisions, and that ends up extending the overall sales cycle, which has created a little bit of a slower ramp in terms of overall revenue growth,” said Gerstein.
Brilliant Earth is maintaining its focus on sustainability initiatives.
From its founding, Brilliant Earth has marketed its commitment to taking an ethical and sustainable approach to its business.
Its website touts “conflict-free” diamonds and “recycled” precious metals as a way to promote ethical practices and minimize its carbon footprint. It also offers diamonds and gemstones traceable through blockchain.
The company released its first sustainability report in March, titled “A Brilliant Future,” which outlines its work and goals related to its Environmental, Social, and Governance initiatives.
Its 2023 goals include increasing blockchain diamonds to 20 percent of its natural diamond inventory and conducting a lifecycle assessment of key raw materials to understand the impact on biodiversity, water, and energy use.
By 2025, the company aims to have 50 percent of its lab-grown diamonds certified to an environmental product standard, source all of its gold and silver from recycled sources, increase its purchase of Fairmined gold from artisanal small-scale miners, and eliminate single-use plastics in showrooms and corporate spaces.
By 2030, it looks to get to zero waste in its showrooms and corporate spaces.
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