Blue Nile’s Sales Hit by June Drop-Off

The company announced plans to open a fifth webroom

Blue Nile reported mixed results for its second quarter (ended July 3), after sales experienced a decline in June that left executives scratching their heads.

On a conference call following the release of the company’s financial results, CEO Harvey Kanter said that global uncertainty may have sparked the June dip, which occurred worldwide across all product categories.

Chief financial officer David Binder later told analysts that sales have since improved, despite a “tough” start to July.

For the second quarter, the Seattle-based e-tailer’s sales grew 0.1 percent to $113.8 million, compared to the prior year’s $113.7 million. Net income totaled $2.1 million, down 8 percent from the prior year’s $2.3 million.

The company’s decision to boost investments dented profits, Kanter said.

“These results are short of what we expected,” he said. “We’re making improvements to the user experience and made a strategic decision within the quarter to increase our pace of investment. This creates pressure on earnings in the short term, but we believe it is the right move for long-term results and shareholder value.”

The company remains high on its webroom concept. Three brick-and-mortar locations have already opened, a fourth is coming, and a fifth may debut later this year, Kanter said. He did not say where the fifth store will be located.

While the webrooms don’t actually sell product, sales in the area around the first Garden City, N.Y., location have outperformed historical trends for that market, Binder said. The two recently opened webrooms have also showed “promising results,” noted Kanter.

“We are comfortable with where we are in the development of the concept and [its] ability to actually build trust and convert customers,” he added.

Blue Nile’s high-end business (defined as $25,000 and more) showed improvement, reported Kanter: “While it is still not where we wanted to be, we are encouraged.”

U.S. engagement net sales fell 4.4 percent to $62.6 million, compared to $65.5 million last year, due in part to a lower average sales price. Sales did rise in terms of units.

U.S. nonengagement net sales for the second quarter of 2016 increased 5.9 percent to $30.4 million, compared to last year’s $28.7 million. Its wedding-band business saw double-digit unit growth. Sales of diamond jewelry grew, while fashion jewelry posted a small decline.

International net sales rose 6.4 percent to $20.8 million and 9.4 percent on a constant currency basis.

JCK News Director