Blue Nile delivers strong financial results for Q1

May 07, 2008 - United States Of America

Blue Nile Inc reported financial results for its first quarter ended March 30, 2008.

The company posted net sales of $70.5 million, up from $67.9 million in the first quarter of 2007. Operating income for the quarter totaled $3.0 million. Net income totaled $2.6 million, or $0.16 per diluted share.

Net cash provided by operating activities totaled $29.4 million for the trailing twelve month period ended March 30, 2008. Non-GAAP adjusted free cash flow was $24.2 million for the trailing twelve month period ended March 30, 2008.

"We are pleased to have delivered financial results that exceeded our expectations, particularly in light of the weak consumer environment in the U.S.," said Diane Irvine, Chief Executive Officer.

"In this uncertain environment, we are keenly focused on enhancing the Blue Nile customer experience and vigorously managing our costs. We will invest prudently in our business and execute our unique business model to build long-term value for our shareholders."

Irvine concluded, "Our international business continued its rapid growth during the quarter, and we are extremely pleased with the early results of our recent launches into 25 new countries. Customers around the world are embracing the Blue Nile value proposition in increasing numbers."

During the quarter, the company repurchased 990,700 shares of its common stock for $41.7 million.

In a separate release, the Company announced the appointment of Marc Stolzman as Chief Financial Officer. Stolzman will join the Company on June 9, 2008.

Selected Financial Highlights:
• Gross profit for the quarter grew 5.1% to $13.9 million, from $13.2 million for the first quarter of 2007. Gross profit as a percentage of sales increased to 19.8%, compared to 19.5% for the first quarter of 2007.
• Selling, general and administrative expenses for the quarter were $10.9 million, compared to $9.6 million in the first quarter of 2007. Selling, general and administrative expenses include stock-based compensation expense of $1.7 million, compared to $1.2 million in the first quarter of the prior year.
• Non-GAAP adjusted EBITDA was $5.2 million for the quarter.
• Net income per diluted share for the quarter includes stock-based compensation expense of $0.07, compared to $0.05 for the first quarter of 2007.
• International sales totaled $5.7 million in the quarter, an increase of 124% over the first quarter of 2007.
• The Company's cash and cash equivalents totaled $42.7 million at March 30, 2008.
• Capital expenditures in the first quarter totaled $0.5 million, compared to $0.2 million in the first quarter of 2007.

Financial Guidance:
Actual results may be materially affected by many factors, such as consumer spending, economic conditions and the various factors detailed below.

Expectations for the second quarter 2008 (Quarter Ending June 29, 2008):
• Net sales growth is expected to be in the range of 0 to 5%.
• Net income is expected to be in a range of $0.15 to $0.18 per diluted share. The estimated net income per diluted share includes the estimated impact of stock compensation expense of approximately $0.08 per diluted share, compared to $0.05 per diluted share in the second quarter of 2007.
• The effective tax rate for the quarter is expected to be approximately 35%.

Expectations for fiscal year 2008 (Year Ending January 4, 2009):
• Our goal is to grow net sales by at least 10% for the year and to grow non-GAAP adjusted EBITDA by at least 10%.
• Our net income per diluted share goal for 2008 is to achieve a GAAP EPS level that approximates 2007.
• Stock compensation expense for the year is estimated at approximately $0.30 per diluted share, an incremental impact of $0.08 per diluted share compared to 2007.
• The effective tax rate for the year is expected to be approximately 35%.
• Capital expenditures are expected to be approximately $2.5 million.

Blue Nile reports fiscal results on a 52/53-week format. The Company's fiscal 2008 reporting period includes 53 weeks, with the additional week falling into the fourth quarter.