Ethical Demand And Omnichannel Expansion Will Transform Jewelry Retail

Key Takeaways

• Growth driven by rising demand for ethical jewelry and expanded omnichannel presence, deepening brand recognition and diversifying revenue.
  
• Technology investments and strong financial flexibility support sustained margin expansion, cost discipline, and long-term shareholder value.
  
• A shift toward lower-priced jewelry, rising input and compliance costs, and growing showroom expenses threaten margins, revenue growth, and brand positioning amid competitive and regulatory pressures.

Catalysts

Designs, procures, and sells diamonds, gemstones, and jewelry in the United States and internationally.

• Rising consumer demand for ethically sourced and sustainable jewelry, especially among Millennials and Gen Z, is fueling growth in both engagement and fine jewelry segments, as evidenced by strong year-over-year total order and repeat order growth; this ongoing shift supports higher long-term revenue.
  
• Continued expansion of an omnichannel retail model-with new and optimized showroom formats driving strong metro uplifts and increased walk-in traffic, alongside robust digital marketing leverage-is expected to deepen brand recognition and diversify revenue streams, enhancing total revenue and operating leverage.
  
• Strategic investments in proprietary technology and AI-driven data analytics are improving marketing spend efficiency, supply chain agility, and overall cost discipline, leading to sustained margin expansion and positive EBITDA performance despite industry-wide headwinds.
  
• The accelerating growth of lab-grown and fine jewelry offerings-areas where the company is a category leader-positions Brilliant Earth to capitalize on evolving consumer preferences for cost-effective, environmentally conscious products, supporting premium gross margins and higher inventory turns.
  
• Strong financial flexibility from a robust cash position, removal of debt, and the ability to maintain growth investments (e.g., new showrooms, technology, brand partnerships), even after shareholder capital returns, sets the stage for sustained earnings and long-term shareholder value creation.

Brilliant Earth Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Brilliant Earth Group's revenue will grow by 6.1% annually over the next 3 years.
• Analysts are not forecasting that Brilliant Earth Group will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Brilliant Earth Group's profit margin will increase from -0.1% to the average US Specialty Retail industry of 4.7% in 3 years.
• If Brilliant Earth Group's profit margin were to converge on the industry average, you could expect earnings to reach $24.0 million (and earnings per share of $0.2) by about August 2028, up from $-415.0 thousand today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.4x on those 2028 earnings, up from -76.7x today. This future PE is lower than the current PE for the US Specialty Retail industry at 19.0x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.07%, as per the Simply Wall St company report.

Brilliant Earth Group Future Earnings Per Share Growth

Risks

• The company's strategic focus on growing lower-priced fine jewelry (which is driving bookings growth) results in declining average order values and could structurally shift the business mix away from higher-margin bridal and engagement pieces, thereby suppressing long-term revenue growth and pressuring gross margins.
  
• The continued expansion of physical showrooms increases fixed costs and exposes Brilliant Earth to higher overhead and operating expenses, which could become a liability during periods of weak demand, ultimately reducing net margins and amplifying earnings volatility.
  
• Rising gold and platinum costs, alongside the imposition of new tariffs (particularly the recent 25% tariff on Indian imports), could significantly increase Brilliant Earth's input costs, challenging the company's ability to maintain targeted gross margins and eroding profitability if these costs cannot be fully passed to customers.
  
• Increased regulatory scrutiny and compliance pressures around ethical sourcing, responsible supply chains, and environmental disclosures may lead to higher compliance costs and resource allocation, negatively impacting net margins and stretching the company's operational capacity.
  
• Brilliant Earth's premium brand positioning as an ethical and sustainable jewelry retailer may come under threat if competitors enhance their own credentials or if the company faces reputational challenges, which could diminish brand equity, suppress revenue growth, and force increased SG&A spending to protect market share.

Valuation

• The analysts have a consensus price target of $2.175 for Brilliant Earth Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $3.0, and the most bearish reporting a price target of just $1.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $504.5 million, earnings will come to $24.0 million, and it would be trading on a PE ratio of 14.4x, assuming you use a discount rate of 9.1%.
• Given the current share price of $2.15, the analyst price target of $2.17 is 1.1% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.