February 11, 2010 / 9:31 PM / 9 years ago

UPDATE 3-Blue Nile's lackluster profit sends shares down

* Q4 EPS 35 cents vs Street’s 38 cents

* Sales up 20 percent to $102.9 mln

* Sees Q1 EPS 14 cents-16 cents

* Blue Nile shares fall 13 percent (Adds exec quotes, background, updates shares)

By Alexandria Sage

SAN FRANCISCO, Feb 11 (Reuters) - Online jewelry retailer Blue Nile Inc NILE.O posted a quarterly profit that missed Wall Street expectations and gave a weak outlook for the first quarter, sending its shares down 13 percent.

Expectations had been high for the Seattle-based Web retailer after bullish comments in recent months from Chief Executive Diane Irvine, who had said December revenues were projected to rise 26 percent.

“The hope of strong fourth-quarter revenue growth based on her comments was perhaps helping to prop the stock up,” said Benchmark Co analyst Frederick Moran. “But this shows a miss on the top and bottom line for the fourth quarter and modest guidance.”

The company also announced a $100 million share repurchase authorization.

Blue Nile reported net income of $5.4 million, or 35 cents per share, in its fiscal fourth quarter ended Jan. 3, from a profit of $3.5 million, or 24 cents per share a year earlier.

Analysts on average had forecast earnings of 38 cents per share, according to Thomson Reuters I/B/E/S. In November, the company had said fourth quarter earnings would be between 35 and 39 cents per share.

Sales rose 20 percent to $102.9 million, missing analyst expectations of $106.2 million.

Blue Nile’s international sales rose 70 percent in the quarter, but they still represent only a fraction of total sales, at $11.7 million.

Gross margins improved to 21.7 percent of sales from 20.6 percent a year earlier.

Analysts believe the company has made market share gains during turmoil in the jewelry industry, especially since last year’s bankruptcies of rivals Finlay Enterprises and Fortunoff. But sluggish consumer demand has hurt all jewelry retailers.

Zale Corp ZLC.N, for example, the largest North American jewelry store chain, is struggling to stay afloat as it faces tight credit, weak sales and internal turmoil — its CEO and other top executives left the company in January.

“Our results far outpaced the industry and public jewelry retailers,” Irvine told analysts during a conference call.

Chief Financial Officer Marc Stolzman said Blue Nile saw growth across every price point category during the fourth quarter and had “healthy demand” for items over $25,000.

Looking ahead, the company forecast first-quarter earnings to range between 14 cents and 16 cents per share on revenue of between $71.5 million and $75 million.

Wall Street has been expecting first-quarter earnings of 20 cents per share on revenue of $74.7 million.

Shares of Blue Nile fell 13 percent to $45.75 in afterhours trade after closing at $52.56, up 3 percent, in regular trading on Nasdaq. (Reporting by Alexandria Sage and Phil Wahba; Editing by Tim Dobbyn, Leslie Gevirtz)

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