Blue Nile Inc. Earnings: Margins Shrink as Costs Rise, Profit Falls

Blue Nile Inc. (NASDAQ:NILE) reported a lower net income in first quarter, missing analysts’ estimates. Blue Nile is an online retailer of high quality diamonds and fine jewelry in the United States.

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Blue Nile Earnings Cheat Sheet for the First Quarter

Results: Net income for Blue Nile Inc. fell to $154,000 (one cent per share) vs. $2.4 million (16 cents per share) a year earlier. This is a decline of 93.6% from the year-earlier quarter.

Revenue: Rose 3.6% to $83.1 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Blue Nile Inc. fell short of the mean analyst estimate of 6 cents per share. Analysts were expecting revenue of $82.3 million.

Quoting Management: “We are pleased with our return to growth in revenue, as well as the increasing momentum we gained from the fourth quarter in attracting new customers to Blue Nile. In January, we launched a plan to accelerate growth in the business through increased investments in the U.S. and international markets. As expected, our financial results reflect the costs of these investments in reduced profitability versus a year ago. We are still in the early stages of executing this plan, and I am excited by the opportunities I see after my first 30 days as CEO. We have unique and disruptive capabilities to serve the diamond engagement market and have built a brand centered on high quality diamonds and excellent customer service. From this foundation, we are developing a broader non-engagement jewelry mix of compelling products in an inspirational environment. The next evolution of our business is aimed at returning to significant growth and improving the financial performance of the business for the long term,” said Harvey Kanter, Chief Executive Officer.

Key Stats:

The company has missed analyst estiamtes for four quarters in a row. It fell short by 12 cents in the fourth quarter of the last fiscal year, by 5 cents in the third quarter of the last fiscal year, and by 3 cents in the second quarter of the last fiscal year.

Gross margin shrank 2.7 percentage points to 18.4%. The contraction appeared to be driven by increased costs, which rose 7.2% from the year earlier quarter while revenue rose 3.6%.

The company’s net income has fallen for the last three quarters. In the fourth quarter of the last fiscal year, net income fell 31.7% from the year earlier, while the figure fell 32.6% in the third quarter of the last fiscal year.

Revenue rose last quarter after seeing a drop the quarter before. Revenue fell 2.1% to $112.3 million in the fourth quarter of the last fiscal year from the year earlier.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the second quarter has moved down from 23 cents a share to 16 cents over the last ninety days. For the fiscal year, the average estimate has moved down from $1.06 a share to 72 cents over the last ninety days.

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

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