Blue Nile Inc. Earnings Cheat Sheet: Increased Costs Strains Margins as Profit Drops

Blue Nile Inc. (NASDAQ:NILE) reported its results for the third quarter. 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 Third Quarter

Results: Net income for the catalog and mail order house fell to $1.9 million (13 cents per share) vs. $2.8 million (19 cents per share) a year earlier. This is a decline of 32.6% from the year earlier quarter.

Revenue: Rose 11.2% to $75 million from the year earlier quarter.

Actual vs. Wall St. Expectations: NILE fell short of the mean analyst estimate of 18 cents per share. It beat the average revenue estimate of $72.6 million.

Quoting Management: “Our record third quarter sales exceeded the high end of our guidance and was driven by solid growth in our engagement and non-engagement businesses. We also continue to experience exceptional growth in our international business, validating the value proposition we have for our consumers abroad. Overall, engagement sales growth at the high-end continues to perform very well, showcasing the depth of selection we have in the luxury category. Key to our strategy, we will continue to aggressively invest in our brand and business through marketing programs and additional merchandising assortments,” said Vijay Talwar, Chief Executive Officer.

Key Stats:

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the second quarter, net income rose 1.2% from the year earlier, while the figure increased 1.4% in the first quarter, 13.6% in the fourth quarter of the last fiscal year and 7.7% in the third quarter of the last fiscal year.

Gross margin shrank 1.9 percentage points to 19.8%. The contraction appeared to be driven by increased costs, which rose 13.9% from the year earlier quarter while revenue rose 11.2%.

Revenue has risen the past four quarters. Revenue increased 5.1% to $80.5 million in the second quarter. The figure rose 8.3% in the first quarter from the year earlier and climbed 11.5% in the fourth quarter of the last fiscal year from the year-ago quarter.

The company has now fallen short of estimates in the last two quarters. In the second quarter, it missed expectations by 3 cents with net income of 19 cents versus a mean estimate of net income of 22 cents per share.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the fourth quarter is 46 cents per share, down from 47 cents ninety days ago. For the fiscal year, the average estimate has moved down from $1.05 a share to $1.02 over the last ninety days.

Competitors to Watch: Zale Corporation (NYSE:ZLC), DGSE Companies, Inc. (AMEX:DGSE), Tiffany & Co. (NYSE:TIF), Birks & Mayors Inc. (AMEX:BMJ), Signet Jewelers Ltd. (NYSE:SIG), Coach, Inc. (NYSE:COH), Signet Jewelers (NYSE:SIG), Amazon.com (NASDAQ:AMZN), eBay (NASDAQ:EBAY), Nordstrom (NYSE:JWN) and Macy’s (NYSE:M).

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

 

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