Internet diamond and jewelry retailer Blue Nile, in its annual report, said its revenue grew 26.9 percent to $319.3 million for the fiscal year, ended Dec. 31, 2007.

Other financial highlights for the 2007 fiscal year, include:

• Net income increase of 33.6 percent to $17.5 million;
• Adjusted EBITDA1 increase of 31.4 percent to $29.9 million;
• Return on equity2 of 33.7 percent, up from 22.2 percent in 2006; and
• Free cash flow for the year of $36.6 million.

The Seattle-based company said it used a portion of the cash generated for the year to repurchased $20 million of its stock, bringing its total stock repurchases in the last three years to more than $95 million. The company said it ended 2007 with more than $122 million of cash and cash equivalents, and no debt. It intend to continue to use its free cash flow to repurchase stock in the coming years.

Blue Nile said international expansion will be focus of its growth for the coming year. In 2007, the company launched two local currency Web sites serving the Canadian and United Kingdom markets, and opened an operations center in Dublin, Ireland, to service the U.K. and the greater European markets. International sales doubled in 2007 from the prior year to over $17 million.

“Looking forward, sales outside the United States will surely be an increasingly important part of our business,” Mark Vadon, executive chairman and chairman of the board, and Diane Irvine, president and chief executive officer, wrote in the opening letter of the company’s annual report.

The two executives did warn that the softening of consumer spending has made them cautious in their 2008 expectations. However, they added:

“Our belief in the strength of our business model, however, is unwavering; and we believe we will emerge from any economic downturn with increased market share and a stronger financial position relative to our competitors. We are financially strong, with a lean cost structure and a capital-efficient business model.”

They added that they provide customers with value, which consumers look for during times of economic uncertainty.

The company said that in 2008, in addition to driving international growth, it will work to enhance the Blue Nile customer experience, and maintain an efficient and lean cost structure.

JCK