Blue Nile, Inc.’s net sales of $66.9 million for its third quarter ended October 4, 2009 increased 2.4% compared to the third quarter of 2008 on strength in bridal jewelry sales and growth in international markets. Operating income for the quarter grew 17.6% to $3.9 million compared to $3.3 million in the third quarter last year. Operating margin expanded 80 basis points to 5.8% of net sales compared to 5.0% of net sales in the third quarter of 2008. Net income improved 10.3% to $2.6 million, or $0.17 per diluted share compared to $2.3 million, or $0.15 per diluted share in the third quarter of 2008.
“Our third quarter results were excellent and reflect continued positive momentum in the business. We returned to top line growth and delivered strong profitability,” said Diane Irvine, Chief Executive Officer. “The Blue Nile brand is resonating with consumers in the current environment, and we are gaining market share. As we look toward the important holiday season, we are well positioned with a broad selection of diamond engagement rings and fine jewelry and a newly redesigned website to showcase these products.”Selected Financial Highlights
International sales grew 27.5% in the quarter to a record level $8.8 million compared to $6.9 million in the third quarter of 2008. Excluding the impact from changes in foreign exchange rates, international sales increased 34.8%.
Gross profit for the quarter totaled $14.8 million. As a percent of sales, gross profit improved 180 basis points to 22.1% compared to 20.3% for the third quarter of 2008. The Company continued to achieve year over year gross margin improvement due largely to improved product sourcing in both diamonds and jewelry.
Selling, general and administrative expenses for the quarter were $10.9 million, compared to $10.0 million in the third quarter of 2008. The increase was due to lower expenses in the third quarter of 2008 related to forfeited options and a reduction in incentive accruals. In addition, 2009 includes expenses related to technology investments in support of key initiatives such as the website redesign. Selling, general and administrative expenses include stock-based compensation expense of $1.8 million in the third quarter of 2009, compared to $1.6 million in the third quarter last year.
Net income per diluted share for the quarter includes stock-based compensation expense of $0.08 compared to $0.07 for the third quarter of 2008.
Cash and cash equivalents plus short-term investments at the end of the third quarter totaled $47.5 million compared to $26.6 million at the end of the third quarter last year.
“The trends in the business during the third quarter improved sequentially, and we project that trend to continue in the fourth quarter. Based on our third quarter results and our expectations for the fourth quarter, we are raising our guidance,” said Marc Stolzman, Chief Financial Officer. “We are projecting fourth quarter net sales between $100 million and $109 million, and diluted earnings per share in the range of $0.35 to $0.39.”
Selected Financial Highlights
International sales grew 27.5% in the quarter to a record level $8.8 million compared to $6.9 million in the third quarter of 2008. Excluding the impact from changes in foreign exchange rates, international sales increased 34.8%.
Gross profit for the quarter totaled $14.8 million. As a percent of sales, gross profit improved 180 basis points to 22.1% compared to 20.3% for the third quarter of 2008. The Company continued to achieve year over year gross margin improvement due largely to improved product sourcing in both diamonds and jewelry.
Selling, general and administrative expenses for the quarter were $10.9 million, compared to $10.0 million in the third quarter of 2008. The increase was due to lower expenses in the third quarter of 2008 related to forfeited options and a reduction in incentive accruals. In addition, 2009 includes expenses related to technology investments in support of key initiatives such as the website redesign. Selling, general and administrative expenses include stock-based compensation expense of $1.8 million in the third quarter of 2009, compared to $1.6 million in the third quarter last year.
Net income per diluted share for the quarter includes stock-based compensation expense of $0.08 compared to $0.07 for the third quarter of 2008.
Cash and cash equivalents plus short-term investments at the end of the third quarter totaled $47.5 million compared to $26.6 million at the end of the third quarter last year.
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