August 6, 2008, 12:00 AM

Q2 net income drops as sales rise 2% for Blue Nile

Online jeweler Blue Nile Inc. reported net sales of $73.7 million for the quarter ended June 29, up 2% from $72.1 million in the year-ago second quarter. Net income for the quarter dropped to $3.2 million.

Online jeweler Blue Nile Inc. reported net sales of $73.7 million for the quarter ended June 29, up 2% from $72.1 million in the year-ago second quarter. Net income for the quarter dropped to $3.2 million, compared with $3.8 million a year ago.

“Our disciplined focus on profitability across the business enabled us to deliver earnings that exceeded our expectations,” says Diane Irvine, chief executive officer. “We are confident that our differentiated business model will allow us to continue to gain share and further strengthen our competitive position in the industry as we manage through a challenging economic environment in the U.S.”

For the first half, Blue Nile reported net sales of $144.2 million, compared with $140 million in the first half of 2007. For January through June, Blue Nile posted net income of $5.8 million, compared with $6.9 million in last year’s first half.

The company, No. 48 in the Internet Retailer Top 500 Guide, reports that the number of countries to which it ships expanded from four to nearly 30 over the past year. In turn international sales in the second quarter grew 179% to $8.1 million from $2.9 million a year ago.

For the third quarter, Blue Nile is projecting net sales to be flat or only grow up to 5% over a year ago. For the full year, Blue Nile revised its earlier revenue projection of 10%, or $351 million, to “mid-single digit” growth.

The rising price of diamonds and a tightened market for consumer credit are affecting Blue Nile’s ability to provide financing for customers seeking higher-priced diamonds, according to analyst Herman Leung of the investment firm Deutsche Bank. “A tough consumer market for luxury goods and weakening demand metrics are still concerns, despite its unique direct-to-consumer model,” he says in a research report.

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