Blue Nile’s 4Q Sales -2%, Profit -32% to $4M

Blue Nile’s fourth-quarter sales slipped 2.1 percent year on year to $112.3 million, while its cost of sales was flat at $89.1 million, for the three months that ended on January 1, 2012. Gross margin as a percentage of sales fell to 20.7 percent from 22 percent one year ago. Net income dropped 32 percent to $4.2 million. The number of orders that Blue Nile fulfilled in fourth-quarter, however, rose 22 percent year on year,

International sales during the quarter increased just slightly to $15.7 million, but the figure would have been up 23 percent without the impact of foreign exchange rates. U.S. sales fell almost 3 percent year on year to approximately $96.6 million.

”The fourth quarter was challenging for Blue Nile, with weakness in demand from our high-end diamond customers and some of our international markets, as well as the continued impact of inflationary pressure on commodity costs,” according to Blue Nile’s chief executive, Vijay Talwar.

”While we managed the business through these headwinds, we implemented components of a new strategy designed to accelerate growth. This plan centers around the acquisition of non-engagement customers, which we believe in the long-term will feed growth in our engagement and non-engagement businesses. This strategy drove positive momentum, resulting in our strongest period of customer acquisition since 2007, with new customer growth of 15 percent. Additionally, in the fourth quarter we achieved order growth of 22 percent and unit growth of 30 percent compared to the fourth quarter of 2010. Growth in all three of these metrics accelerated in December and we believe these trends are important indicators of the long term growth potential of our business,” Talwar said.

For the fiscal year 2011, Blue Nile reported a sales increase of 4.5 percent year on year to $348 million, but cost of sales rose 5.7 percent to $275.9 million. Net income for the year fell 20 percent to $11.4 million.

Blue Nile stated that U.S. engagement-related net sales for the year were $186.2 million compared with $189.5 million in 2010. But U.S. jewelry sales climbed to $105.9 million from $100.1 million one year earlier. International sales for the year were $55.9 million, up from $43.3 million in 2010. Excluding the impact from changes in foreign exchange rates, international sales increased 23 percent for the fiscal year.

Capital expenditures during 2011 totaled $5.4 million compared with only $1.8 million in 2010.

Shares in Blue Nile closed in New York at $41.83 on February 15, or 3 percent lower for the day.

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