Blue Nile Earnings: Margins Suffer for Five Quarters Straight, Profit Drops

Rising costs hurt Blue Nile Inc. (NASDAQ:NILE) in the third quarter as profit dropped from a year earlier. Blue Nile is an online retailer of high quality diamonds and fine jewelry in the United States.

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Blue Nile Inc. Earnings Cheat Sheet

Results: Net income for Blue Nile Inc. fell to $1.7 million (14 cents per share) vs. $1.9 million (13 cents per share) a year earlier. This is a decline of 6.8% from the year-earlier quarter.

Revenue: Rose 19.8% to $89.8 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Blue Nile Inc. beat the mean analyst estimate of 12 cents per share. It beat the average revenue estimate of $82.3 million.

Quoting Management: “We are excited to report solid results in the third quarter, with accelerating revenue growth and expanding earnings per share. The execution of our strategy is clearly on track. Investments we made in marketing and pricing are working and building momentum behind the strength of our diamond engagement products. Sales of our non-engagement products also improved this quarter, and we are only beginning to launch an assortment of new jewelry aimed to further accelerate our growth. With continued steady execution of our strategy coupled with exciting product offerings for the holiday season, we believe we are well positioned to achieve our goals for 2012,” said Harvey Kanter, President and Chief Executive Officer.

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell 0.9 percentage point to 18.8% from the year-earlier quarter. In that span, margins have contracted an average of 1.9 percentage points per quarter on a year-over-year basis.

Revenue has now increased for three quarters in a row. In the second quarter, revenue rose 13% to $91 million while the figure rose 3.6% in the first quarter from the year earlier.

The company has now beaten estimates the last two quarters. In the second quarter, it topped expectations with net income of 11 cents versus a mean estimate of net income of 7 cents per share.

Net income has dropped 41.8% year-over-year on average across the last five quarters. Performance was hurt by a 93.6% decline in the first quarter from the year-earlier quarter.

Looking Forward: For next quarter, analysts have a more positive outlook about the company’s expected results. The average estimate for the fourth quarter is 49 cents per share, up from 41 cents ninety days ago. For the fiscal year, the average estimate has moved up from 70 cents a share to 71 cents over the last sixty days.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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