Blue Nile Sales Jump 16.9 Percent, “Not Clear” About Effect of Sales Tax

Blue Nile reported that its first quarter sales jumped 16.9 percent, and profits rose as well. 

The Seattle-based e-tailer’s sales hit $97.1 million, a first quarter record, the company said. Operating income hit $1.2 million, while net income totaled $800,000, an increase from the prior year’s $154,000.

“More people bought a diamond engagement ring in the first quarter of 2013 than in any other first quarter in our history,” said an upbeat CEO Harvey Kanter in a conference call following the release of Blue Nile’s financial results.

Chief financial officer David Binder added that the company has now seen four consecutive quarters of double-digit growth, with diamond jewelry and wedding band sales particularly strong. He said he was particularly pleased that the growth came when the price of diamonds was stabilizing.

Katner said the company was “still evolving” its non-engagement strategy.

“We have pared back our expectations for how quickly the non-engagement fashion part of the mix will ramp,” Kanter said, but noted that the company will likely expand its Monique Lhuillier-branded offerings and will likely “futher leverage” leading designers.

Asked about the possible effect of an online sales tax, Binder said it was “not clear,” though he did note that the company already collects tax in New York and Washington.

“We really don’t know what is going to happen with the current proposed legislation,” Binder said. “It does seem like it’s moving its way through Congress, and we’re obviously watching that very closely. We currently don’t expect it to be implemented this year although it’s a possibility and we are prepared if it does take effect. 

“Our business has a fundamentally lower cost structure,” Binder continued. “We’re based on a much higher level of efficiency … and we flow that efficiency through to our pricing. That price advantage that we have with our customers is regardless of sales tax. So we still see a compelling value proposition with or without sales tax.”

Kanter added: “We are a little bit cautious that when you change the charges that you’re imposing to your customers in the short run that it might be a little bit disjointed, but it’s not really clear to us what impact that would be in the immediate term.”

Kanter said the e-tailer will continue its efforts in social media, particularly Pinterest, adding that Blue Nile’s revenues from social media are “in the millions.”

“If you really look at the social media practice we have, it’s most influencing and interacting with women,” Kanter said. “We still believe, based on everything we can see, that we’re in the top 1 percent of jewelry brands on Facebook. And clearly, the No. 1 jeweler on Pinterest.

“The intent isn’t about specifically driving a sale,” Kanter added. “It’s about driving engagement for the brand and what we are doing. And through that, creating greater awareness and really a viral effort that will drive customers to the site.”

Binder also said the company will continue to promote itself on daily deal sites, as they bring in “high quality” customers.

Highlights of Blue Nile’s financial results (for the first quarter, ended March 31): 

  • U.S. engagement sales: Up 19 percent to $55.3 million
  • U.S. non-engagement sales: Up 7.4 percent to $24.2 million
  • International net sales: Up 24.8 percent to $17.6 million
  • Gross profit: $17.6 million

JCK News Director