Blue Nile Q3 Sales Up 10.1%, Net Sales Total $2.9 Million

Blue Nile, Inc. said Thursday that net sales increased 10.1% year-over-year to $98.9 million for the third quarter ended September 29. Operating income for the quarter totaled $2.5 million, representing an operating margin of 2.5% of net sales. Net income for the period totaled $2.9 million (compared with $1.7 million in the third quarter of 2012) or $0.23 per diluted share.

Non-GAAP adjusted EBITDA for the quarter totaled $4.6 million. 

"These results demonstrate once again that our strategy is working. Our third quarter sales increase of 10.1% is on top of 19.8% in the prior year and is our sixth consecutive quarter of double digit growth," said Harvey Kanter, president and CEO of the diamond and jewelry online retailer. 

Blue Nile's Board of Directors authorized the renewal of the company's share repurchase program. It has the authority to repurchase up to $100 million of its common stock over the next two years. 

Third quarter financial highlights for the Seattle-based company include the following:

* U.S. engagement net sales increased 7.1% to $57.9 million.

* U.S. non-engagement net sales increased 9.6% to $23.9 million.

* International net sales increased nearly 23% to $17.1 million. Excluding the impact from changes in foreign exchange rates, international net sales increased 27.6%.

* Gross profit totaled $18.7 million. As a percent of net sales, gross profit was 18.9% compared to 18.8% for the third quarter of 2012. 

* Selling, general and administrative expenses were $16.2 million, compared to $14.3 million in the third quarter of 2012. These expenses include stock-based compensation expense of $1.2 million, compared to $1.3 million for the third quarter 2012.

* Earnings per diluted share included stock-based compensation expense of $0.06 for the third quarter 2013 and for the third quarter 2012.

At the end of the third quarter 2013, cash and cash equivalents totaled $47.9 million.

In its outlook, Blue Nile said it expects fourth quarter net sales to be between $146 million and $161 million. Earnings per diluted share are projected at $0.37 to $0.46.

For the year, the company said it expects net sales to be between $450 million and $465 million with earnings per diluted share are projected at $0.84 to $0.93.

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Blue Nile Q4 Net Sales Up 21%

Blue Nile said Tuesday that net sales increased 21.2 percent to $136.1 million for the fourth quarter, led by a 30 percent increase in bridal jewelry sales. Operating income for the period, ended December 30, 2012, totaled $7.1 million, representing an operating margin of 5.2 percent of net sales. Net income totaled $4.9 million, or $0.39 per diluted share. Non-GAAP adjusted EBITDA for the quarter totaled $9.1 million.

For the full year, the online diamond and fine jewelry retailer reported that net sales increased by 14.9 percent to $400 million. Operating income for the full year was $12.3 million, compared to $16.9 million in the prior year. Net income for the year was $8.4 million and earnings per diluted share totaled $0.63. Non-GAAP adjusted EBITDA for 2012 was $20.6 million.

Harvey Kanter, Blue Nile president and CEO of the Seattle-based company, noted that non-engagement jewelry sales for the holidays did not meet expectations but growth for the fourth quarter was still greater than 5 percent.

Net cash provided by operating activities totaled $34.4 million for the year compared to $15.4 million for the prior year. Non-GAAP free cash flow for the year was $31.9 million compared to $10.1 million for the prior year.

In its outlook, Blue Nile said it expects net sales to be between $94 million and $100 million with earnings per diluted share projected at $0.05 to $0.08. For the 2013 fiscal it expects net sales to be between $440 million and $470 million and earnings per diluted share are projected at $0.75 to $0.85.

"The fourth quarter caps off a great year of growth at Blue Nile, building upon our sequential growth while posting greater profitability versus the prior year. Investments we made in 2012 paid off with the highest annual levels of revenue growth and customer acquisition in five years, exceptional strength in engagement sales in the U.S., and a return to strong growth internationally,” said Harvey Kanter, Blue Nile president and CEO. “While we fell short of our expected sales of non-engagement jewelry during the holiday season, in part due to a weaker environment for consumer discretionary spending, we gained valuable insight that will guide the evolution of our product mix. We believe that our strategy to accelerate this part of our business is on track."

The company also announced it has entered into an agreement with U.S. Bank National Association for borrowing under a $35 million revolving credit facility maturing in 2014.

Among the highlights:

* U.S. engagement net sales for the fourth quarter 2012 increased 31 percent to $73.6 million. U.S. engagement net sales for the full year 2012 increased 21.7 percent to $226.6 million.

* U.S. non-engagement net sales for the fourth quarter 2012 increased 5.3 percent to $42.5 million. U.S. non-engagement net sales for the full year 2012 increased 4.9 percent to $111 million.
    
* International net sales for the fourth quarter 2012 increased 26.8 percent to $20 million. International net sales for the full year 2012 increased 11.7 percent to $62.4 million. Excluding the impact from changes in foreign exchange rates, international net sales increased 12.6 percent for the fiscal year.
    
* Gross profit for the fourth quarter totaled $25.7 million. As a percent of net sales, gross profit was 18.8 percent compared to 20.7 percent for the fourth quarter of 2011. Gross profit for the year totaled $75.1 million.
    
    New customers, which are defined as individuals who have not made a prior purchase from Blue Nile, grew 7.8 percent in the fourth quarter of 2012 compared to the fourth quarter of 2011. For the full year, new customers grew 17.6 percent compared to the full year of 2011.
    
* Selling, general and administrative expenses for the fourth quarter were $18.6 million, compared to $16.9 million in the fourth quarter of 2011. Selling, general and administrative expenses for the full year were $62.8 million, compared to $55.2 million for the full year 2011.
    
* Earnings per diluted share for the fourth quarter included stock-based compensation expense of $0.06 for the fourth quarter of 2012 and 2011.
    
* Cash and cash equivalents at the end of the fiscal year totaled $87 million, compared to $89.4 million at the end of the fiscal year 2011.

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Blue Nile Sales Up 19.8 Percent

Blue Nile said Thursday its net sales increased 19.8%, year-over-year, to $89.8 million for the third quarter due to a increases in all its product categories, including its new focus on fashion jewelry, and a large increase in new customers. However, international sales fell for the period ended September 30.

Operating income for the diamonds and jewelry Internet retailer totaled $2.7 million, representing an operating margin of 3 percent of net sales. Net income totaled $1.7 million, or $0.14 per diluted share. Non-GAAP adjusted EBITDA for the quarter totaled $4.8 million.

"We are excited to report solid results in the third quarter, with accelerating revenue growth and expanding earnings per share, said Harvey Kanter, president and CEO of the Seattle-based company. “The execution of our strategy is clearly on track. Investments we made in marketing and pricing are working and building momentum behind the strength of our diamond engagement products. Sales of our non-engagement products also improved this quarter, and we are only beginning to launch an assortment of new jewelry aimed to further accelerate our growth. With continued steady execution of our strategy coupled with exciting product offerings for the holiday season, we believe we are well positioned to achieve our goals for 2012.”

Among the highlights for the third quarter:

* U.S. engagement net sales increased 31.5 percent to $54.1 million.
    
* U.S. non-engagement net sales (a new focus for the company) increased 12 percent to $21.8 million.
    
* International net sales fell 3.3 percent to $14.4 million for the third quarter 2011. Excluding the impact from changes in foreign exchange rates, international net sales decreased 1.5 percent.
    
* Gross profit totaled $16.9 million. As a percent of net sales, gross profit was 18.8 percent compared to 19.8 percent for the third quarter of 2011.
    
* New customers grew 22.4 percent.  
    
* Selling, general and administrative expenses were $14.3 million, compared to $12 million in the third quarter of 2011.
    
* At the end of the third quarter, cash and cash equivalents totaled $30.2 million.

In its financial guidance, the company said it expects fourth quarter net sales to be between $140 million and $153 million, with earnings per diluted share are projected at $0.44 to $0.50.

For the fiscal year it expects net sales to be between $404 million and $417 million, with earnings per diluted share are projected at $0.70 to $0.75.

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Blue Nile Names New CEO

Harvey Kanter

Online diamond and jewelry retailer, Blue Nile, has appointed retail industry veteran Harvey Kanter as CEO and president, effective March 30. He will also be appointed to the Seattle-based company’s board of directors. He replaces Diane Irvine who resigned suddenly in November.

Interim CEO, Vijay Talwar, has been named general manager and president of International, and will lead Blue Nile’s international business.

Kanter has more than 25 years of merchandising and retail experience, including multichannel retail and merchandising positions. Prior to joining Blue Nile, he served as president and CEO of Moosejaw Mountaineering and Backcountry Travel, Inc., a leading multichannel retailer of premium outdoor apparel and gear. Under his leadership, Kanter developed Moosejaw’s enhanced brand architecture and market positioning by clearly defining the merchandising, marketing, and consumer experience strategy and initiatives. During his tenure, Moosejaw experienced double-digit revenue growth and was the recipient of numerous industry awards, including: Internet Retailer Hot 100 and Hot 100 Mobile, and Ad Age Top 50 Marketing Company.

Before Moosejaw, Kanter served as executive VP and managing director of Michaels Stores, the nation’s largest craft store chain in the United States and Canada, with nearly $4 billion in annual sales. While at Michaels, Kanter led the overhaul of the company’s product merchandising and was responsible for product trend development.

“Harvey brings a vibrant leadership style and a unique ability to align product strategy and marketing in such a way that inspires consumers,” said Mark Vadon, Blue Nile chairman. “His dynamism and passion, coupled with his experience in online and traditional retail, are just what we need to drive growth and inspire the next generation of Blue Nile customers.”