Blue Nile on Tuesday reported net sales of $50.7 million in the first quarter of 2006, compared to net sales of $44.1 million in the first quarter of 2005, an increase of 14.9%. Net income in the first quarter totaled $2.4 million, compared to $2.6 million in the prior year.

In the first quarter of 2006, the company said it adopted the new accounting requirements, related to expensing stock-based compensation, which reduced net income by $0.03 per diluted share.

Non-GAAP free cash flow increased 53.9 percent to $29.6 million for the year ended April 2, compared to $19.2 million for the same period in 2005. Net cash provided by operating activities increased 47.4 percent to $31.1 million for the year compared to $21.1 million for the same period in 2005.

“Our first quarter net sales growth reflects our focus on providing an exceptional experience for our customers,” said Mark Vadon, chief executive officer. “We are pleased with the sales growth we achieved in the first quarter, despite the challenging cost environment for online marketing, while performing at a high level of execution for our customers and operating efficiently throughout the business. Our trailing twelve month free cash flow results at the end of the first quarter highlight the strong cash flow generation capabilities of our business model.”

He added, “Through the balance of 2006, we will focus on enhancing the Blue Nile customer experience and building upon our market leadership position in online diamond and jewelry retailing. We will remain disciplined in our focus on profitable growth.”

Blue Nile also announced that it repurchased 187,400 shares of its common stock during the quarter ended April 2 for $6.1 million. In Feb. 2005, the Seattle-based company board of directors authorized the repurchase of up to $100 million of the company’s common stock over 24 months. So far, the company has repurchased 752,575 shares of its common stock, or 4 percent of its outstanding shares.

JCK