In a While, Blue Nile

High-end jewelry retailer Blue Nile (Nasdaq: NILE  ) has been able to convince potential fiancees to buy their engagement rings online, but can it talk Wall Street into getting hitched?

Yesterday's report out of the specialty Internet retailer offered a tempting proposal. Earnings soared to $0.18 a share, or $0.21 a share before stock-based compensation expenses. Sales soared nearly 30% higher to $56.9 million. Analysts were expecting the company to earn $0.13 a share on $52.6 million in sales.

The stock soared 17% higher in after-hours trading on the news, but silly Wall Street should know better. Blue Nile has topped analysts every quarter but one over the past two years. The only real mystery is why, given the company's nearly immaculate track record of trouncing the market, the shares are trading lower instead of higher since David Gardner recommended the shares to Rule Breakers newsletter readers nearly two years ago. (His brother Tom followed his lead and recommended Blue Nile to Motley Fool Hidden Gems subscribers in last September's issue.)

The company is also scratching its head, kicking off an ambitious share repurchase that may find Blue Nile swallowing down 7% to 8% of the company's outstanding shares.

No, this isn't the meaty part of the calendar for Blue Nile. Springtime weddings may be all the rage (don't ask me, I got married in November), but it's the fourth quarter when Blue Nile really sparkles like one of its shiny diamond rings. Maybe it's the holidays. Maybe it's the New Year's Eve clock countdown on bended knee.

But we still shouldn't discount the company's spectacular springtime performance. It helps set the tone for the second half of the year.

Investors are no doubt weary of the jewelry sector. Tiffany's (NYSE: TIF  ) hit a fresh 52-week low last month. Low-end jewelry auctioneer Bidz.com recently postponed its IPO. Birks & Mayors (AMEX: BMJ  ) is trading higher than it was after last year's consolidation, but that appears to be the rare exception to the malaise.

The concern is understandable. Everywhere you turn, economists are pointing to higher gas prices and soaring interest rates as the one-two punch that will stall big ticket vanity purchases like high-end jewelry. The market is seeing ruby red instead of emerald green, but Blue Nile's amazing performance tells a different story. Even in a stagnant sector, there will always be disruptors like Blue Nile taking advantage of the circumstances to carve out thicker slices of market share.

Take the ring, Wall Street. You can't expect Blue Nile to be trading at prices this low forever.

Blue Nile is a Rule Breakers pick. Take the newsletter for a30-day free trial. As mentioned above, it's also a Hidden Gems recommendation.

Longtime Fool contributor Rick Munarriz proposed to his eventual wife 16 years ago. There was no Internet around at the time. Then again, knowing him, if the situation were to arise today, he would not have a problem turning to Blue Nile. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.