Tiffany and Blue Nile's Clash of the Titans: A Recap

Old school versus new school. A battle of giants from different eras. That's what this recap is all about. While Tiffany's (NYSE: TIF  ) has been a classic luxury jewelry icon for more than a hundred years, scrappy e-tailer Blue Nile (Nasdaq: NILE  ) has been making inroads in the engagement-ring market. They're after the same market -- in fact, Blue Nile CEO Mark Vadon recently told us that the company is "going after Tiffany-type customers." That's a threat if I ever heard one. But just how have these two rivals stacked up recently? Take a look at some of their financials for the most recent quarter:

TIF	Q3 2006	Q3 2005	Change
Sales	$547,786	$500,105	9.5%
Net Profit	$29,142	$23,789	22.5%
EPS	$0.21	$0.16	31.3%
Diluted Shares	138,872	144,993	(4.2%)
Gross Margin	53.57%	54.09%	(0.52)
Operating Margin	8.04%	7.96%	0.08
Net Margin	5.32%	4.76%	0.56

NILE	Q3 2006	Q3 2005	Change
Sales	$53,248	$41,996	26.8%
Net Profit	$1,824	$2,469	(26.1%)
EPS	$0.11	$0.13	(15.4%)
Diluted Shares	16,670	18,540	(10.1%)
Gross Margin	19.59%	22.01%	(2.42)
Operating Margin	4.06%	7.61%	(3.55)
Net Margin	3.43%	5.88%	(2.45)

Tiffany managed to keep sales growth moderately strong, but that was nothing compared to Blue Nile. But old school definitely won on the earnings front -- growth beats out declines any day.

Tiffany is focusing its expertise on capturing the international market -- as Nate Parmelee pointed out, the company has plenty of opportunity in China and other Southeast Asian countries. Tiffany isn't stagnant by any means -- it's been growing sales by the high single digits over the past few years. And by taking its strong brand name overseas, Tiffany should continue to experience robust sales over the long term.

Meanwhile, Blue Nile's stock has been on a run recently. That type of performance results in high expectations. Declining earnings growth caused the market to punish Blue Nile after this earnings report, sending the stock plummeting by almost 10%. But overall, Blue Nile has been doing a lot of things right -- including revenue growth of more than 20% for the past five years and strong free cash flow generation. As more customers experience the personalization and knowledge of Blue Nile's sales force, its brand should continue to build.

Tiffany's an old player in this space. The company knows how to keep costs low and leverage its brand presence. Blue Nile is an up-and-comer; it's experiencing some growing pains, but it's poised for an ever-growing future of Internet commerce and research.

That forward-thinking approach is just one reason why Blue Nile has been recommended to subscribers of both the Motley Fool Hidden Gems newsletter and the Motley Fool Rule Breakers newsletter. To see why both Tom and David Gardner believe that Blue Nile is pick-worthy, take a free 30-day trial to either newsletter today.

Motley Fool sector head Shruti Basavaraj owns shares of Blue Nile. The Motley Fool's disclosure policy is a titan worth remembering.