Blue Nile Sales Up 0.8%

Diamond and fine jewelry Internet retailer Blue Nile, Inc. said Thursday that net sales for the third quarter rose 0.8 percent, year-over-year, to $67.5 million, led by non-engagement jewelry. The Seattle-based company said it expects strong sales growth in the fourth quarter.

Operating income for the company increased 9.8 percent to $4.2 million. Operating income represented 6.3 percent of net sales, compared to 5.8 percent a year ago. Net income increased 7.7 percent to $2.8 million.

Non-GAAP adjusted EBITDA for the quarter totaled $6.6 million, a record third quarter level. For the trailing twelve month period ended October 3, 2010, net cash provided by operating activities totaled $26.2 million and non-GAAP free cash flow totaled $24.3 million.

“We delivered record third quarter sales, operating income, non-GAAP adjusted EBITDA, and earnings per share in what remains a challenging consumer environment. During the quarter, sales trends were uneven and reflected consumer confidence levels, which were at historic lows,” said Diane Irvine, Blue Nile CEO. "Sales trends have improved in the current quarter, and we remain focused on providing an exceptional experience to our customers. Across the business, we are gearing up for our peak holiday season.”

The company said fourth quarter net sales are expected to be between $106 million and $115 million, representing a year-over-year growth of 3 percent to 12 percent compared to fourth quarter 2009.

Highlights for the third quarter, ended October 3, include:

* International sales grew 5.7 percent in the quarter to $9.3 million, representing a record 14 percent of total sales. Excluding the impact from foreign exchange rates, international sales increased 3.4 percent. The company reported strong sales growth in its Canada and Asia/Asia-Pacific markets, while sales were weak in the U.K. and Europe because of global economic concerns combined with weaker currencies compared to the U.S. dollar.

* Gross profit for the quarter totaled $14.6 million, compared to $14.8 million a year ago. As a percentage of sales, gross profit totaled 21.7 percent. Within product categories, sales growth was relatively stronger in non-engagement jewelry as compared to the diamond engagement category.

* Selling, general and administrative expenses for the quarter were $10.4 million, compared to $10.9 million in the previous year, representing 15.4 percent of sales, compared to 16.3 percent last year.