Brilliant Earth sees rising demand for lab-made diamonds

As consumers make affordability and ethicalsourcing a priority, lab-grown diamonds are gaining popularity.

One of the jewelry companies that are seeing this trend first hand is the Brilliant Earth BRLT. The affordability of the lab-made diamonds is one of the reasons consumers are turning to the lab-made diamonds and the fact that they don't require mining, according to Beth Gerstein, CEO.

The stones have the same physical and chemical properties as mined diamonds, but without the conflict and questionable ethical practices that are common in some diamond mines, according to Brilliant Earth. Lab-grown diamonds are less expensive than their traditional counterparts.

They allow you to get that bigger diamond you've been eyeing on, Gerstein said.

According to the International Gem Society, lab-grown diamonds typically cost less than 30% when comparing stones with similar qualities, depending on the target size range, and it appears consumers are buying into the lower price point.

In December 2022, lab-grown diamonds accounted for 15.7% of all engagement rings sold in the US, nearly double the 2021 figure of 7.9%, according to Tenoris, a jewelry-industry analytics company.

Gerstein believes that most shoppers don't buy diamonds for their resale value. They're buying a diamond for the emotional value. It's a symbol of love and commitment, and so customers are buying this because of how it makes them feel. Brilliant Earth sells both lab-grown and traditional diamonds, but that's not necessarily making a big dent in the company's bottom line.

In its fourth quarter, Brilliant Earth saw sales drop slightly year-over-year, to $119 million compared to $121.9 million in 2021. The company said in Q 1 of 2023 that it expects a drop in sales, from $96 million to $94 million, while its total orders increased by 13.7% year-over-year in 2022. Since the company's IPO in September 2021, the shares of Brilliant Earth are down more than 77%.

In February retail sales fell 0.4%, and the results aren't all that surprising, considering Americans have cut back on discretionary spending.

Brilliant Earth started as a digital-first brand and is expanding its physical footprint.

The company opened three showrooms in Palo Alto, Santa Monica and Baltimore last quarter, bringing to 25 locations the year-end total. In Q 1 of 2023, Brilliant Earth plans to open a showroom in Charlotte, North Carolina and later in the year in Brooklyn, Tampa and Pasadena.

Gerstein said that the winning model for jewelry is both digital and physical, in this space it's really about omni-channel. She said that showrooms drive conversion.

They'll customers do a lot of research. They really like coming into the showroom and being able to touch and feel the product. The jewelry specialists are a high touch sale and we are working with them one on one. Follow her on Twitter at BrookeDiPalma or email her at bdipalma yahoofinance.com.