Blue Nile Sees Sales Fall, Halts Business in South Dakota

Engagement ring sales took a particularly strong hit

Blue Nile’s sales dropped 3.2 percent in the first quarter of fiscal 2016, with results affected by weak high-end sales and a lower average purchase price.

The company’s sales for the period (ended April 3) totaled $103 million. Net income came in at $1.1 million, down $100,000 from last year.

Engagement ring sales took a particularly big hit, dropping 7 percent, even though unit volume increased.

Nonengagement sales had a better quarter, rising 4 percent to $27.1 million, with wedding-band sales enjoying a double-digit increase.

On a conference call following the release of its financial results, CEO Harvey Kanter continued to talk up results from the brick-and-mortar webroom the company opened last year at the Roosevelt Field Mall in Garden City, N.Y.: “Consumers simply love our reimagined retail experience, which is so different form what consumers expect at retail, let alone a jewelry store,” he said.

This summer, the company will open three more of the compact stores, in Virginia, Oregon, and White Plains, N.Y.

“It’s very much a learning period for us [regarding the webrooms],” said chief financial officer David Binder on the call.  “We’re very optimistic, but we’re also cautious what a different market may do relative to the success that we’ve had at Roosevelt Field.”

In other news, the company is halting shipments to South Dakota, after the state passed a new law that mandates remote sellers collect sales tax from in-state buyers if they do $100,000 in annual business or conduct more than 200 transactions with customers there.

“South Dakota’s law is in direct contradiction to federal law, and we made the difficult decision to temporarily suspend shipping to South Dakota until this unconstitutional law can be addressed,” said a Blue Nile statement. “We are disappointed we can no longer ship to our customers in South Dakota.”

NetChoice, a group that generally opposes efforts to institute an online sales tax, has filed suit against the new law, calling it “unconstitutional and unworkable.”

Currently, Blue Nile collects sales tax in the states of New York and Washington. It expects to collect sales tax in Virginia when it opens a webroom there later this year.

In other news from the company’s balance sheet:

– It saw an increase in gross margin, from 18.8 percent to 19.6 percent.

– Sales in China grew in 9 percent, and sales to Europe increased 25 percent.

– The company’s marketing spend decreased by $300,000, with money shifting to the webrooms.

JCK News Director