Blue Nile reports better-than-expected 1Q results

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Blue Nile reports better-than-expected 1Q results

'We are gaining market share,' says CEO

May 08, 2009

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Seattle--In what may be another sign that jewelry sales are on the mend, online retailer Blue Nile Inc. reported a sales decline of 11.4 percent in the first quarter of 2009, a marked improvement from the previous quarter.

Sales totaled $62.4 million for Blue Nile in the first quarter, down from $70.5 million in the first quarter of 2008, the company reported.

In an investor conference call held on Thursday afternoon, Blue Nile Chief Executive Officer Diane Irvine said the company was pleased with its first-quarter results, which reflected an improvement over fourth quarter 2008 when sales decreased 36.6 percent.

"We delivered strong profitability in the first quarter and gained market share in a challenging economic environment," she said. "We expanded our gross margin, managed our costs diligently and achieved higher non-GAAP EBITDA compared to the first quarter a year ago. Importantly, we are providing our consumers with high-quality products at a compelling value and demonstrating our ability to enhance our competitive position in this climate."

During the call, Irvine said that bridal jewelry has held up well for the company but non-bridal sales continue to be impacted by the economy.

Also greatly impacted by the downturn are sales of items priced at $25,000 or higher, she said.

Commenting on the jewelry retail landscape, Irvine noted the high number of bankruptcies and store closures in the jewelry industry this year.

"Traditional jewelry stores, many of which are highly leveraged, are finding it difficult to continue operating in this challenging economy," she said, adding that such consolidation "creates tremendous opportunities" for Blue Nile.

"There is no doubt we are gaining market share," Irvine said.

Blue Nile plans to launch a redesigned Web site later this year that emphasizes the customer experience.

Consistent with last quarter, the Seattle-based company has declined to provide specific financial guidance but, during the call, Blue Nile revealed that earnings are expected to continue to decline in the second and third quarters but anticipates positive sales growth in the fourth quarter.

The release of Blue Nile's improved earnings on Thursday coincided with an announcement by Sterling Jewelers Inc., which operates Kay Jewelers and Jared The Galleria Of Jewelry stores, that its same-store sales declined only 2.6 percent in the first quarter, after a fourth quarter in which sales slid 16.1 percent.

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