Blue Nile is combatting another quarter of disappointing financial results by dropping prices on its core engagement ring product.
“We are going to get even more aggressive on our prices of engagement rings,” said Vijay Talwar, interim CEO of the Seattle-based site, during a conference call with investors following release of the company’s financial results. “In January we reduced our prices.… Our pricing change will allow us to grow a much larger engagement ring business.”
CFO David Binder said sales have been hurt by rising diamond prices.
“At one point during the [last] year the price of diamonds was up almost 50 percent,” he noted. “That makes our value proposition get squeezed.… In a normal environment, we are 40 percent cheaper [than traditional jewelers]. Over the last year that 40 percent got compressed somewhat.”
Binder added that he “suspects a lot of jewelers aren’t too happy” that Blue Nile is lowering prices.
Chairman Mark Vadon noted the company’s consumers are “very responsive” to price decreases.
“When we talk to our customer these are the things they always call out: quality, selection, price,” he said. “Price is incredibly important to them. [This business] is very price elastic.”
Vadon also reiterated his company’s intention to expand into other types of jewelry, which he called a larger market with higher margins and greater repeat business.
The news comes as the company’s fourth quarter financial results showed decreasing sales and profits.
Net sales for the fourth quarter decreased 2.1 percent to $112.3 million, from $114.8 million in the fourth quarter of 2010. Operating income for the quarter was $6.3 million, compared with $9.2 million in the fourth quarter of 2010.
Other highlights of Blue Nile’s financial statement:
Blue Nile also announced its board had authorized the repurchase of up to $100 million of its common stock over 24 months.