Shareholders have asked engagement ring specialist Blue Nile (NASDAQ:NILE) to produce some heady growth. The online retailer's response?
"I do!"
Tuesday night, Blue Nile reported a 44% spike in profits to $0.13 per share on a 24% spurt in sales. Earnings came in a penny above the market's expectations -- the matrimonial equivalent of a wedding singer throwing in a polka for free.
Seasonally speaking, this has traditionally been the company's weakest quarter. The current quarter, however, is a different story. Blue Nile sells a fair amount of high-end gift jewelry over the holidays, and you probably know a few nervous grooms who, trite as it may seem, have resorted to proposing on bended knee on New Year's Eve. So as good as the results may seem for the company's quarter that ended in September, it's typical for sales to nearly double and profits to nearly triple sequentially.
Yes, selling jewelry online can be competitive. Everyone from Amazon.com (NASDAQ:AMZN) to Overstock.com (NASDAQ:OSTK) to Wal-Mart (NYSE:WMT) sells a good deal of jewelry. However, they typically sell low-end decorative jewelry, whereas folks heading to BlueNile.com spend an average of $1,300 per order. That makes the company's more logical competitors mostly offline titans like Tiffany's (NYSE:TIF) and Zales.
Blue Nile has been around for six years but went public just last year. The company has done more than a few things right since its market debut. For starters, thanks to an aggressive share buyback policy, diluted shares outstanding have been dipping sequentially. A rare accretive company in a dilutive world? You bet.
Blue Nile has also been able to grow at a healthy clip domestically, and now it is making a logical push into the United Kingdom. Free cash flow, up 76% to $23.1 million over the past year, is growing even faster than earnings. For all of 2005, the company is now looking to earn between $0.70 and $0.74 a share. Its top-line guidance calls for a sales range between $205 million to $212 million.
As David Gardner's very first selection in the Rule Breakers newsletter, Blue Nile has lived up to the research service's growth-stock bent. The shares have risen twice as fast as the S&P 500 since last year's selection. A strong holiday season and early success overseas may keep the shares shining like one of its brilliant-cut diamonds. More recently, Tom Gardner also selected Blue Nile as a recommendation for his Motley Fool Hidden Gems newsletter.
Will the company let investors down? Let's hope that "I don't" is the appropriate response for that particular query.
Longtime Fool contributor Rick Munarriz proposed to his wife 16 years ago. There was no Internet around at the time, but 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. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
