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.
The jewelry industry has an image problem. Younger consumers find the jewelry store environment intimidating. More importantly, these same consumers, who spend much of their time with digital media, find websites from retailers, designers and manufacturers equally imposing.
Innovation online has largely come from outside the industry, such as website Blue Nile. However, the Blue Nile model with its focus on jewelry and diamonds as a commodity seems to be losing ground as the digital landscape has again dramatically changed with the wide acceptance of social and mobile media.
To address this new reality, two websites (again founded by people outside the industry) have launched that are working to bridge the gap among e-commerce, social media and bricks-and-mortar retail: Adornia and Stone & Strand.
Adornia co-founders Becca Aronson and Moran Amir met at Wharton and didn’t wait to leave the business school before starting their own company. Both are scheduled to graduate in May but launched Adornia in September 2012 out of their apartments. They plan to return to New York to set up a permanent home for their business. Aronson was the former Lucky accessories editor and Amir handled retail operations for Catherine Malandrino and Diesel. Their experiences are complementary with Aronson the creative person while Aronson handles much of the business. “She’s Photoshop and I’m PowerPoint,” Amir says.
The website sells affordable fine fashion jewelry at a price range from approximately $75 to $2,300. Their customer is very specific: fashion-forward, professional, urban women from the ages of 25 to 45 who have a strong sense of personal style. This site’s main customers are women who buy their own jewelry (the self-purchasing woman).
Aronson and Amir purchase all of the jewelry themselves. In addition to curating the pieces, they organize them in separate collections with names like “Heavy Metal,” “Deco After Dark” and “Darkest Jungle.” The idea is to make personal jewelry shopping easier for women who know their own style. While the site is geared for women, they say that this presentation also makes it easier for men and friends to purchase gifts. They also discuss fashion trends through their blog, “The United States of Adornia.”
The co-founders take their brand to the people, holding trunk shows from San Francisco to Shanghai, China. One of their plans is to do a cross country bus tour.
Meanwhile, Wharton grad Nadine McCarthy Kahane launched her website, Stone & Strand, April 18. A former strategy consultant, she has traveled extensively for work and pleasure and has lived in Singapore, London and Buenos Aires before settling in New York.
Instead of curating the jewelry collection like Adornia, Kahane is curating a group of jewelry designers. She opened the site with a group of 24 designers. The result is a broad jewelry collection that ranges in material from wood to high-karat gold and in price from $115 to well over $20,000. For now all of the designers reside in the U.S. (although several are from other countries) but Kahane said she will expand to include designers from around the world.
This is a site geared toward a clientele who love the search for original adornment almost as much as they love wearing the pieces. “People want things they can fall in love with,” Kahane says. It’s really nice to be able to tap into that passion.”
On this website, the focus is totally on designers. Their works and their stories are presented front and center. They provide access to designers’ studios through personal meetings and special events.
For Kahane the inspiration to start this site was personal. First, she discussed the difficulties of learning about jewelry on her own (such as style, materials and cost). Then she said she has two friends who are jewelry designers who were having difficulty finding an online home for their work.
“We in business are trained to spot opportunities and we feel jewelry is going through this transformation,” she said. “It’s been so conservative. A lot of the designers don’t sell online or they sell a very small portion of their collection online. We do see things changing quickly. We see people buying off Instagram these days. It’s all about access.”
Another thing both sites share is free shipping to U.S. and customer-friendly return policies. Of course both brands appear on all of the standard social media platforms.Please join me on the Jewelry News Network Facebook Page, on Twitter @JewelryNewsNet and on the Forbes Website.
