Brilliant Earth Reports Steady Growth Amidst Market Headwinds

Brilliant Earth Group, Inc. (NASDAQ: BRLT), a leader in ethically sourced fine jewelry, has announced its financial results for the second quarter of 2024, marking the company’s twelfth consecutive quarter of profitability. Although net sales experienced a slight 4% decrease year-over-year to $105.4 million, this figure remained within the company’s guidance range. Additionally, total orders increased by 4% year-over-year, supported by a significant 17% rise in repeat orders.

The average selling price across Brilliant Earth’s product range also saw an increase. The company reported a robust gross margin of 60.8%, reflecting a 320 basis point improvement year-on-year, alongside an adjusted EBITDA of $5.5 million, which exceeded expectations. Despite this positive performance, the company acknowledged ongoing challenges in the industry and economic uncertainty but expressed confidence in its long-term growth strategy.

Key Takeaways:

• Net sales declined by 4% year-over-year but remained within guidance.
• Total orders rose by 4% year-over-year, with repeat orders climbing 17%.
• Average selling prices increased, suggesting a focus on premium products.
• Gross margin improved to 60.8%, a 320 basis point increase year-over-year.
• Adjusted EBITDA reached $5.5 million.
• The company plans to open three new showrooms and has set targets for emission reductions.
• Despite a weaker consumer landscape, full-year sales guidance has been adjusted to $410 million to $425 million, with adjusted EBITDA expectations set at $12 million to $16 million.

Company Outlook:

• The company expects a continued softness in consumer spending, particularly in bridal and e-commerce for the latter half of the year.
• Q3 net sales are anticipated to decline between 11% to 14% year-over-year.
• A stronger performance is expected in Q4, fueled by showroom activity, fine jewelry sales, and brand-building initiatives.
• Full-year net sales guidance has been revised to $410 million to $425 million, with adjusted EBITDA guidance from $12 million to $16 million.

Bearish Highlights:

• Selling, General and Administrative (SG&A) expenses rose to 59.7% of net sales, up from 56.4% in the corresponding quarter of the previous year.
• Q3 is projected to see a decrease in net sales between 11% to 14% year-over-year.

Bullish Highlights:

• The company has maintained profitability for twelve consecutive quarters.
• Gross margins showed significant improvement, and adjusted EBITDA surpassed expectations.
• Brilliant Earth holds a strong cash position with $152 million, having no net debt, and has repurchased $160,000 worth of common stock during Q2.

Misses:

• Net sales declined by 4% year-over-year, with expectations of further decline in Q3.

Q&A Highlights:

• CEO Beth Gerstein spoke about trends in engagement and diamond pricing, noting a normalization in engagement while consumers remain cautious.
• She emphasized that the average selling prices for bridal products have consistently increased, reinforcing the company’s premium brand positioning.
• The company is leveraging dynamic pricing algorithms to adapt to market conditions and avoid heavy discounting practices seen in the industry.

In summary, Brilliant Earth’s financial outcomes indicate resilience amid a challenging market, with a strategic emphasis on profitability and brand strength. The company’s asset-light structure, data-informed decision-making, and commitment to ethical sourcing position it favorably for continued success in the luxury jewelry sector.