Blue Nile Shows Zero Visibility (NILE)

Blue Nile, Inc. (NASDAQ: NILE) has posted its quarterly earnings, and it looks like the results are probably not as bad as many would have guessed.  The leading online retailer of diamonds and fine jewelry reported net income of $2.3 million, or $0.15 per share.  This is down from $3.0 million, or $0.18, last year.  Net sales were $65.4 million, a decrease of 2.9%, from $67.4 million.

Thomson Reuters (First Call) had estimates of $0.16 and $68.77 million in revenue, so it missed estimates on both counts. 

The company said the declines were from the further weakening in the economy. This holiday season will be challenging "based on theuncertainty in the external environment and extremely cautious consumerspending trends," according to the Blue Nile.

Blue Nile does expect to generate profits and cash flow despitedifficult market conditions, BUT… management said it is not providingfinancial guidance because of the economic uncertainty.  That meansit has no way to know how this season will go, or when things will get better.

The company repurchased 593,700 shares of common stock for $23.2million, bringing the total spent in buybacks at 4.4 million shares or$160 million.

As of mid-October, the short interest here was listed as 6.77 million shares.  That is the lowest level in over 6 months.

Shares closed down 1.6% at $28.25 today, and the stock is only down0.25% after the report.  These results held up better than many mighthave assumed, but it is amazing that shares are holding up this muchbased upon its total lack of any visibility.  The 52-week trading rangeis $23.04 to $85.00.

Jon C. Ogg
November 4, 2008