Blue Nile Announces Third Quarter 2010 Financial Results

Record Third Quarter Sales of $67.5 Million

Record Third Quarter Non-GAAP Adjusted EBITDA Totals $6.6 Million

Net Income Increases 7.7% to $2.8 Million

Earnings Per Diluted Share Total $0.19

SEATTLE, Nov. 4, 2010 (GLOBE NEWSWIRE) -- Blue Nile, Inc. (Nasdaq:NILE), the leading online retailer of diamonds and fine jewelry, today reported financial results for its third quarter ended October 3, 2010.

Net sales totaled $67.5 million compared to $66.9 million a year ago. Operating income increased 9.8% to $4.2 million compared to $3.9 million a year ago. Operating income represented 6.3% of net sales compared to 5.8% a year ago. Net income increased 7.7% to $2.8 million, or $0.19 per diluted share, up from $0.17 a year ago.

Non-GAAP adjusted EBITDA for the quarter totaled $6.6 million, a record third quarter level. For the trailing twelve month period ended October 3, 2010, net cash provided by operating activities totaled $26.2 million and non-GAAP free cash flow totaled $24.3 million.

"We delivered record third quarter sales, operating income, non-GAAP adjusted EBITDA, and earnings per share in what remains a challenging consumer environment. During the quarter, sales trends were uneven and reflected consumer confidence levels, which were at historic lows," said Diane Irvine, Chief Executive Officer. "Sales trends have improved in the current quarter, and we remain focused on providing an exceptional experience to our customers. Across the business, we are gearing up for our peak holiday season. We are prepared with what we believe is our best product assortment ever at tremendous values, and we are competitively well positioned to continue to gain market share in the industry."

Highlights

• International sales grew 5.7% in the quarter to $9.3 million, representing a record 14% of total sales. Excluding the impact from changes in foreign exchange rates, international sales increased 3.4%. Sales growth was very strong in Canada and Asia/Asia-Pacific, while sales were weak in the U.K. and Europe as a result of global economic concerns combined with weaker currencies compared to the U.S. dollar.
• Gross profit for the quarter totaled $14.6 million, compared to $14.8 million a year ago. As a percentage of sales, gross profit totaled 21.7%.  Within product categories, sales growth was relatively stronger in non-engagement jewelry as compared to the diamond engagement category.
• Selling, general and administrative expenses for the quarter were $10.4 million, compared to $10.9 million in the previous year. Selling, general and administrative expenses represented 15.4% of sales, compared to 16.3% last year. Selling, general and administrative expenses include stock-based compensation expense of $1.6 million in the third quarter.
• Net income per diluted share for the quarter includes stock-based compensation expense of $0.07.
• At the end of the third quarter, cash and cash equivalents totaled $49.0 million compared to cash and cash equivalents and short-term investments of $47.5 million a year ago.  In 2010, Blue Nile has repurchased 507,101 shares of its common stock for $25.3 million.

Financial Guidance

The following forward-looking statements reflect Blue Nile's expectations as of November 4, 2010. Actual results may be materially affected by many factors, such as consumer spending, economic conditions and the various factors detailed below.