Higher diamond prices impact Blue Nile Q2 results

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US diamond jeweller adjusts pricing on jewellery as sales drop 1.3%.

US and international online diamond jewellery retailer Blue Nile, Inc. has announced a decline in total net sales of 1.3% in the second quarter of 2014 ending June 29, totalling US$106.6 million (£63m), versus the $108 million (£64m) recorded in Q2 2013.

The business’ operating income for the quarter totalled $3.2 million (£1.9m), representing an operating margin of 3% of net sales, compared to $3.4 million (£2m) in operating income and 3.2% operating margin for the second quarter of 2013. Blue Nile’s net income for Q2 reached $2.2 million (£1.3m), or $0.18 per diluted share.

However, the international arm of the business showed some positivity, with international net sales for Q2 hitting $18.0 million (£10m), compared to $17.1 million for the second quarter 2013, an increase of 4.8%. Excluding the impact from changes in foreign exchange rates, international net sales increased 6.7%.

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According to Blue Nile chairman, chief executive officer and president Harvey Kanter, increased diamond prices impacted trade in the second quarter, with Blue Nile adjusting its product prices.

Kanter said: "The diamond price environment in Q2 materially impacted our performance. As a result we executed strategic and targeted price changes to ensure that Blue Nile’s superior value is absolutely clear to the consumer.

"With these changes we are seeing a return to growth, and when diamond prices normalise, we expect to see even greater benefits from ongoing investments we’re making in the user experience. Without question, Blue Nile offers the highest quality products and selection, incredible service, and industry-leading value to our customers," Kanter added.

Looking ahead to the remainder of the year, Blue Nile’s expectations for Q3 forecast net sales of between $105 million (£62m) and $108 million (£64m).

Its expectations for the fiscal year 2014 (year ending January 4, 2015), are net sales of between $475 million (£282m) and $490 million (£291m).

Blue Nile Q2 Highlights

• U.S. engagement net sales for the second quarter 2014 decreased 4.6% to $60.9 million, compared to $63.9 million for the second quarter of 2013.

• U.S. non-engagement net sales for the second quarter 2014 increased 2.6% to $27.7 million, compared to $27.0 million for the second quarter of 2013.

• International net sales for the second quarter 2014 were $18.0 million, compared to $17.1 million for the second quarter 2013, an increase of 4.8%. Excluding the impact from changes in foreign exchange rates, international net sales increased 6.7%.

• Gross profit for the second quarter 2014 totalled $20.2 million. As a percent of net sales, gross profit was 18.9% compared to 18.6% for the second quarter of 2013.

• Selling, general and administrative expenses for the second quarter 2014 were $17.0 million, compared to $16.7 million in the second quarter of 2013. Selling, general and administrative expenses includes stock-based compensation expense of $1.1 million for the second quarter in 2014 and $1.3 million for the second quarter in 2013.

• Earnings per diluted share included stock-based compensation expense of $0.05 for the second quarter 2014 and $0.07 for the second quarter 2013.

• At the end of the second quarter 2014, cash and cash equivalents totalled $39.5 million.

• During the second quarter 2014, Blue Nile repurchased 674,571 shares of its common stock for $22.2 million.
 

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