Please ensure Javascript is enabled for purposes of website accessibility

Shares Plunge as Blue Nile Inc Reins In Its Growth Outlook for 2016

By Demitri Kalogeropoulos - Feb 11, 2016 at 4:22PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The online retailer forecast a flat 2016 after selling conditions worsened over the holiday quarter.

Online jewelry retailer Blue Nile (NILE) posted fourth quarter earnings results on Feb. 11 that were marked by a surprise sales drop over the holiday season. Yet profitability improved, which powered the company's best earnings per share performance in eight years.

Here's how the headline results stacked up against the prior-year period:


Q4 2015 Actuals

Q4 2014 Actuals

YoY Growth


$150.0 million

$157.5 million


Net Income

$5.0 million

$4.8 million


Earnings Per Share




Source: Blue Nile financial filings

What happened this quarter?
Sales growth came in below management's guidance provided in November -- $493 million of full-year revenue. Instead, Blue Nile ended 2015 at just $480 million in sales.

Source: Blue Nile

Other key highlights of the quarter include:

  • U.S. engagement jewelry sales fell 8%, compared to a 7% gain in the third quarter.
  • U.S. non-engagement sales were flat, compared to a 7% rise last quarter.
  • International sales, which account for roughly 20% of the business, rose 5% for an acceleration from last quarter's 3% uptick.
  • Profitability continued to improve thanks to healthy pricing and expense discipline. Gross margin rose to 19.4% of sales from 18.1%, and operating margin jumped to 5.1% from 4.4%.
  • Blue Nile ended the year with $87 million of cash.

What management had to say
Calling the fourth quarter sales result "disappointing", CEO Harvey Kanter said that the business was hurt by foreign currency swings, declining demand for high-ticket items (those costing over $25,000), and lower selling prices on engagement products.

At least Blue Nile has good company in this struggle. As it lowered its full-year sales outlook last month, rival Tiffany said that its jewelry sales fell 3% over the holiday season worldwide and 7% in the key U.S. market.

Blue Nile also managed some important wins despite that weak selling environment, executives noted. "In spite of these challenges, we sold a record number of engagement rings [and] expanded gross margin rate," Kanter said.

Looking forward
Blue Nile plans to double down on the sales initiatives that have been working well, including its Webroom concept, which allows customers in select cities to try jewelry on in person before making their purchases. The company also expects to continue expanding its profit margin this year.

But sales growth will be hard to come by. The retailer's 2016 forecast calls for revenue of $480 million at the midpoint of guidance, representing zero improvement over 2015. Earnings per share should also clock in near the same $0.90 per share that it generated last year.

Perhaps reflecting that reduced growth forecast, Blue Nile announced its first-ever dividend of $0.70 per share, or about 80% of last year's profit. This is a special annual dividend, and so shareholders can't expect regular quarterly payouts. But the company said it plans to review its earnings performance at the end of each fiscal year to decide on additional special dividends.

However, investors were unimpressed with the results and weak guidance as Blue Nile shares traded down nearly 25% following the release.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Blue Nile, Inc. Stock Quote
Blue Nile, Inc.
Tiffany & Co. Stock Quote
Tiffany & Co.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.