Blue Nile Q4 Sales Down 23%

Internet diamond and jewelry retailer Blue Nile Inc. reported Wednesday that net sales declined 23.4 percent to $85.8 million for its 14-week fourth quarter of 2008, compared to $111.9 million for the 13-week fourth quarter of 2007. Excluding sales from the additional week, sales for the period totaled $81.9 million.

Operating income for the quarter, ended Jan. 4, totaled $5.3 million, compared to $10.1 million in the fourth quarter of 2007, a 47.5 percent decline the Seattle-based company said. Net income totaled $3.5 million compared to $7.5 million for the fourth quarter of 2007, a 53.3 percent decline.

For the full year (53 weeks), Blue Nile reported that net sales declined 7.5 percent to $295.3 million, compared to $319.3 million for the 2007 fiscal year (52 weeks). Excluding sales from the additional week in fiscal 2008, net sales decreased 8.7 percent.

Operating income totaled $16 million for 2008 compared to $22.4 million in 2007. Net income for 2008 was $11.6 million, compared to $17.5 million for 2007. Non-GAAP adjusted EBITDA for 2008 totaled $25.1 million.

“The 2008 holiday season was the most challenging one for retailers in four decades, and our business was impacted by the pull back in consumer spending in this weak economic climate,” said Diane Irvine, Blue Nile chief executive officer. “Despite the difficult environment, we were able to achieve significant profitability and adjusted EBITDA, and, more importantly, strong relative performance for the year.”

Financial highlights include:
• The company ended the year with cash and cash equivalents totaling $54.5 million. 
  
• For the full year, international sales totaled $27.7 million, a 62.9 percent increase compared to sales of $17 million for fiscal year 2007. International sales totaled $6.9 million in the quarter, a decrease of 4.2 percent from the fourth quarter of 2007. 
  
• Gross profit for the quarter totaled $17.7 million. As a percent of net sales, gross profit was 20.6 percent compared to 21.1 percent for the fourth quarter of 2007. The decrease in gross profit margin was due to the mix of sales in the quarter, with sales in the lower margin engagement jewelry category representing a larger portion of fourth quarter sales as compared to the prior year fourth quarter. 
 
• Selling, general and administrative expenses for the quarter were $12.4 million, compared to $13.6 million in the fourth quarter of 2007. Selling, general and administrative expense for the quarter includes stock-based compensation expense of $1.8 million, compared to $1.7 million in the fourth quarter of the prior year. 
  
• During the quarter, the company repurchased 31,400 shares of its common stock for $1.2 million. For the full year 2008, the company repurchased 1.6 million shares of its common stock for $66.5 million.

“Given the uncertainty surrounding the economic environment and consumer spending, we are not providing financial guidance at this time,” said Marc Stolzman, Blue Nile chief financial officer. “We are in a strong financial position, with no debt and a healthy cash position, and we are focused on executing on our strategies to extend our leadership position and deliver profitable results.”