The end of spring and early summer might not spark as many marriage proposals as the holidays or Valentine's Day, but Blue Nile (NASDAQ:NILE) seems to be doing fine nonetheless. The company that pioneered online diamond sales reported some rather impressive earnings numbers yesterday evening.

Blue Nile's second-quarter net income increased 50% to $2.8 million, or $0.15 per diluted share. Sales increased 25% to $43.8 million. Average order size was $1,441, an 11% increase from this time last year. Gross profit increased 26% on a year-over-year basis, while gross margin increased to 22.8%, which Blue Nile said was its highest gross margin since the first quarter of 2004.

As usual, Blue Nile deserves commendation for having a pile of cash and no debt, although its cash reserves have dwindled a bit. Meanwhile, it's been hard at work on share repurchases and has increased its fiscal 2005 earnings outlook.

Plenty of Fools are Blue Nile fans -- after all, it's a Motley Fool Rule Breakers selection. Among the stock's possible catalysts are recent data showing that people are increasingly willing to buy fine jewelry online. Match that with research predicting skyrocketing use of broadband Internet -- Forrester sees broadband in 62% of households by 2010, compared with just 29% last year -- and you've got a recipe for some pretty good times for Internet retail.

Meanwhile, Blue Nile has pioneered innovative techniques, including diamond education and the ability to create your own engagement ring on the Internet. Don't think other companies haven't seen the writing on the wall, either. (NASDAQ:OSTK) and (NASDAQ:AMZN) sell jewelry on their sites, and as of yesterday, both now ape Blue Nile's "build your own ring" idea.

Regardless, it's still easy to see why Blue Nile, with its upscale sensibilities, might consider Tiffany (NYSE:TIF) its top competitor. Blue Nile CEO Mark Vadon said as much when David Gardner interviewed him for The Motley Fool Radio Show back in February. In its conference call, the company stated its intent to combat competition by investing in more marketing and experimenting with new marketing vehicles this year.

Blue Nile's numbers argue that the company continues to make headway in a market that only recently seemed a questionable draw for customers. The intrusion of competitors, and Blue Nile's continued sales and earnings increases, show that the space is a solid one. If it can continue to differentiate itself from rivals, provide users with a better shopping experience, and capitalize on some of the current trends in e-commerce, Blue Nile's got the wind at its back.

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Blue Nile and are Motley Fool Rule Breakers picks. is a Motley Fool Stock Advisor pick.

Alyce Lomax does not own shares of any of the companies mentioned.