Blue Nile Fourth Quarter Sales Up 23%

Diamond and jewelry online retailer Blue Nile, Inc. said Tuesday that net sales for the fourth quarter (ended Dec. 30, 2007) grew 23.3 percent to $111.9 million, compared to $90.7 million in the fourth quarter of 2006. 

Operating income for the quarter rose 24 percent to $10.1 million, from $8.1 million in the fourth quarter of 2006. Net income totaled $7.5 million, an increase of 31.1 percent year-over-year.Non-GAAP adjusted EBITDA increased 26.1 percent year-over-year to $12.4 million for the quarter.

For the full year (ended Dec. 30, 2007), Blue Nile reported net sales of $319.3 million, an increase of 26.9 percent from fiscal year 2006. 

Operating income rose 35.4 percent year-over-year to $22.4. Net income for the year increased 33.6 percent year-over-year to $17.5 million. Non-GAAP adjusted EBITDA for 2007 increased 31.4 percent year-over-year to $29.9 million.

“We are very pleased with our financial performance for the fourth quarter, which reflects excellent growth in sales and profitability,” said Mark Vadon, Blue Nile executive chairman (a new title for the founder of the Seattle-based company). “We believe our results are even more impressive given the overall weakness in the retail jewelry category during the holiday season. The year 2007 was exceptional for Blue Nile—we delivered outstanding sales growth, even stronger earnings growth, and ended the year with a very healthy cash balance of $123 million. We expanded our market share domestically and made significant progress in our international business.”

However, Vandon presented a cautionary outlook for 2008.

“As we enter 2008, we are well positioned to enhance our category leadership,” he said. “Our competitive position is strong, and we have an incredible team that is among the best in all of e-commerce. Given the current economic environment, however, we believe it is prudent to be extremely cautious in our expectations for the year. There is tremendous uncertainty in the luxury retail sector, which is experiencing a widely reported consumer slowdown. Within this challenging environment, we will be disciplined in our execution of our unique business model. We will continue to focus obsessively on our customers, providing an exceptional Blue Nile experience. I firmly believe that challenging times can provide opportunities to create great value for our shareholders over the long term.”

The company said it expects net sales for the first quarter of 2008 (ending March 30) to be relatively flat with the first quarter of 2007.

For the upcoming year (ending Jan. 4, 2009), it expects to grow net sales by at least 10 percent.

The Seattle-based company also announced that its board of directors authorized the repurchase of up to an additional $100 million of the company’s common stock over 24 months. Its current repurchase authorization now totals $150 million.

In addition to Vadon’s new role of executive chairman of Blue Nile, Diane Irvine was named the chief executive officer of the company, in addition to her current role as president and member of the Board of Directors. Vadon, who will retain his position as board chairman, was previously CEO of the compnay. The personnel announcements were made Tuesday in a separate release.

Other financial highlights:

* Gross profit for the quarter grew 25.9 percent to $23.7 million, from $18.8 million for the fourth quarter of 2006. Gross profit as a percentage of sales increased to 21.1 percent for the quarter, compared to 20.7 percent for the fourth quarter of 2006.

* International sales totaled $7.2 million in the quarter, an increase of 155 percent year-over-year. For the full year, international sales totaled $17.2 million, an 108 percent increase compared to sales of $8.3 million for fiscal 2006.