Rising diamond prices again took their toll on Blue Nile, with sales of engagement rings taking one of the bigger hits.
Revenue for the Seattle-based e-tailer’s second quarter of fiscal 2014 (ended June 29) fell 1.3 percent to $106.6 million. Engagement ring sales sank 4.6 percent to $60.9 million.
“We struggled to maintain growth specifically in the sale of diamond products in carat ranges,” said chief financial officer David Binder on a conference call following release of the financial results. “The cost of small-size stones were up by significant double-digit percentages versus the prior year, and the cost of mid-size stones increased significantly in March.” With larger sizes, where the cost increases were more moderate, sales still grew, he said.
In response, the company instituted “targeted price changes” in its diamond prices, CEO Harvey Kanter said on the call. The decreases, Kanter indicated, were not as steep as they were in response to price increases in 2012.
Net income for the quarter totaled $2.2 million, which was flat from the prior year.
Other notes from the call:
– Regarding the company’s boutiques in two Nordstrom stores—one of its first brick-and-mortar ventures in the United States—Kanter said the company is still not sure if, and when, it will expand the venture.
“The customer’s definitely responding,” he said. “But we are in a learning mode, and we don’t really have a view of what will happen as we move forward…. We are happy and comfortable about where it is, but it is a test, and it continues to be just that.”
– U.S. nonengagement net sales for the second quarter 2014 increased 2.6 percent to $27.7 million. But growth rates for non-diamond products were “significant double digits,” Binder said. “That tells us the rest of what we are doing is working, aside from the volatility around diamond prices.”
– Kanter said that the designer collective and Monique Lhuillier collection are doing well. It is also bringing in a new designer that is “well regarded” with an “established following…along the caliber of Monique.”
– The company continues to see the majority of its traffic coming from mobile devices, Kanter said.