Blue Nile Continuing Brick-and-Mortar Expansion

Blue Nile may be coming to a mall near you.

The company plans to open four more compact, non-inventory-selling stores (or webrooms) in the first half of 2016, said CEO Harvey Kanter on a conference call following the release of its financial results. He did not specify their locations.

The company’s first webroom, at the Roosevelt Field mall in Garden City, N.Y., has “exceeded our expectations,” Kanter said, according to a SeekingAlpha transcript.  “We are seeing an uptick…within a certain radius of the store and materially impacting that geography.”

Interestingly, most transactions have occurred inside the webrooms on the sales associate’s iPads. (The mini-stores don’t actually sell anything.) That is different from its initial store-in-store tests in two Nordstroms, where most sales occurred after the visit.

The company also announced its financial results for the third quarter (ended Oct. 4), which showed the standard rising sales and subdued profits:

– Net sales increased 4 percent to $109.9 million.

–  Operating income for the quarter totaled $3 million, representing a 2.8 percent operating margin of net sales. (Last year’s operating margin was 2.4 percent.) Net income was $2 million, a 19.8 percent increase.

– U.S. engagement net sales for the third quarter 2015 increased 6.9 percent to $65 million.

– Nonengagement sales rose 6.7 percent to $25 million. Wedding bands showed double-digit growth. 

– High price points remain a problem: The over-$25,000 segment was its weakest. “While this segment is always volatile, it has been a challenge long enough to be somewhat the new normal,” Kanter said.

– Fashion jewelry sales were flat following three quarters of growth.

– International sales fell 7.2 percent to $19.9 million but rose 3 percent on a constant exchange basis.

– The company expects 2015 sales to come in between $488 million and $498 million, falling just shy of the $500 million benchmark.

– Marketing spend grew to 5.8 percent of net sales, from 5.2 percent last year.

– The company is also renewing its $100 million stock repurchase program.

JCK News Director