Blue Nile returns to top line growth

06 Nov '09

4 min read

Blue Nile, Inc., the leading online retailer of diamonds and fine jewelry, today reported financial results for its third quarter ended October 4, 2009.

Net sales of $66.9 million increased 2.4% compared to the third quarter of 2008 on strength in bridal jewelry sales and growth in international markets. Operating income for the quarter grew 17.6% to $3.9 million compared to $3.3 million in the third quarter last year. Operating margin expanded 80 basis points to 5.8% of net sales compared to 5.0% of net sales in the third quarter of 2008. Net income improved 10.3% to $2.6 million, or $0.17 per diluted share compared to $2.3 million, or $0.15 per diluted share in the third quarter of 2008.

Non-GAAP adjusted EBITDA for the third quarter totaled $6.3 million, an increase of 17.4% over the same quarter in 2008 and a record level for any third quarter in the Company's history. As a percent of sales, non-GAAP adjusted EBITDA improved to 9.5% compared to 8.3% in the third quarter of 2008. Net cash provided by operating activities totaled $23.4 million for the trailing twelve month period ended October 4, 2009. Non-GAAP free cash flow for the trailing twelve month period ended October 4, 2009 increased to $20.9 million from $20.1 million a year ago.

“Our third quarter results were excellent and reflect continued positive momentum in the business. We returned to top line growth and delivered strong profitability,” said Diane Irvine, Chief Executive Officer. “The Blue Nile brand is resonating with consumers in the current environment, and we are gaining market share. As we look toward the important holiday season, we are well positioned with a broad selection of diamond engagement rings and fine jewelry and a newly redesigned website to showcase these products.”

Selected Financial Highlights
International sales grew 27.5% in the quarter to a record level $8.8 million compared to $6.9 million in the third quarter of 2008. Excluding the impact from changes in foreign exchange rates, international sales increased 34.8%.

Gross profit for the quarter totaled $14.8 million. As a percent of sales, gross profit improved 180 basis points to 22.1% compared to 20.3% for the third quarter of 2008. The Company continued to achieve year over year gross margin improvement due largely to improved product sourcing in both diamonds and jewelry.

Selling, general and administrative expenses for the quarter were $10.9 million, compared to $10.0 million in the third quarter of 2008. The increase was due to lower expenses in the third quarter of 2008 related to forfeited options and a reduction in incentive accruals. In addition, 2009 includes expenses related to technology investments in support of key initiatives such as the website redesign. Selling, general and administrative expenses include stock-based compensation expense of $1.8 million in the third quarter of 2009, compared to $1.6 million in the third quarter last year.

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