Online jewelry retailer Blue Nile (NASDAQ:NILE) just posted third quarter earnings results that included good news for investors: The company announced steady sales growth, accelerating profit gains, and a new $100 million stock buyback plan.

Source: Blue Nile

Here's how Blue Nile's headline results stacked up against the year-ago period:

 Metric

Q3 2015

Q3 2014

YoY Growth

Revenue

$110 million

$106 million

4%

Net Income

$2 million

$1.7 million

18%

EPS

$0.17

$0.14

21%

Source: Blue Nile's financial filings

What happened with Blue Nile this quarter?
The 4% revenue improvement was a minor slowdown from the prior quarter's 7% jump. But investors shouldn't obsess over short-term results, as they can be influenced by just a handful of sales in Blue Nile's high-end jewelry segment. Over the last nine months, the retailer has grown at a 4.4% pace.

The key highlights of the quarter include:

  • Engagement jewelry sales in the U.S. rose 6.9% to $65 million.
  • Non-engagement U.S. sales rose 6.7% to $25 million.
  • International sales rose 3%, excluding the impact from foreign currency swings.
  • Gross profit rose to $21 million as profitability ticked higher by a full percentage point to 19% of sales.
  • Operating margin improved from 2.4% of sales to 2.8%.
  • Cash on the books totaled $34 million.
  • Share repurchase spending was $200,000.
  • Management approved a new $100 million, two-year stock buyback authorization.

What management had to say
CEO Harvey Kanter highlighted the fact that Blue Nile was able to deliver sales gains without needing to resort to price cuts this quarter. "We expanded profitability while at the same time investing in initiatives to drive greater long-term growth," he said. That's been a consistent story for Blue Nile in 2015. So far this year, gross profit has risen from 18.3% to 19.2% of sales even as revenue climbed 4% higher.

As for investments in future growth, executives called out their increased spending on marketing and their latest Webroom concept that allows customers in places like New York and Seattle to try on jewelry in person before making any purchases. "Online and offline marketing and the Webroom concept [help us] focus on building awareness and generating a greater level of trust for buying diamonds and fine jewelry online," Kanter said.

Looking forward
Management confirmed its full-year outlook, saying sales should come in at rough $500 million as profits improve to about $0.93 per share. That forecast implies slow, but significant 4% revenue growth over 2014 results. "We are cautiously optimistic about what we will accomplish for the remainder of the year," Kanter said.

The holiday shopping quarter often brings increased retailing challenges, both from competitors and from more demanding shoppers. Added to those concerns is the fact that Blue Nile executives have recently noticed increased volatility at the high end of the business, which they define as products costing more than $25,000. In a conference call with investors, Chief Financial Officer David Binder called that segment's most recent performance "consistently weak".

Still, Blue Nile is finding robust growth at lower price points, which should help in its mission to bring online jewelry shopping into the mainstream. Executives see this quarter's gains in sales and profits continuing into the holiday season, even with another soft turnout expected at the high end of the business.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Blue Nile. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.