Blue Nile’s 2007 financial results

Blue Nile, Inc. reported financial results for its fourth quarter and fiscal year ended December 30, 2007.

Net sales grew 23.3% to $111.9 million, compared to $90.7 million in the fourth quarter of 2006. Operating income for the quarter rose 24.0% to $10.1 million from $8.1 million in the fourth quarter of 2006. Net income totaled $7.5 million, an increase of 31.1% over the fourth quarter last year. Earnings per diluted share increased 28.6% to $0.45, compared to $0.35 in the fourth quarter last year. Non-GAAP adjusted EBITDA increased 26.1% to $12.4 million for the quarter, compared to $9.8 million for the fourth quarter of 2006.

For the full year, Blue Nile reported net sales of $319.3 million, an increase of 26.9% from fiscal year 2006. Operating income rose 35.4% to $22.4 million from $16.6 million for the prior year. Net income for the year increased 33.6% to $17.5 million, and net income per diluted share increased 36.8% to $1.04. Non-GAAP adjusted EBITDA for 2007 increased 31.4% to $29.9 million.

We are very pleased with our financial performance for the fourth quarter, which reflects excellent growth in sales and profitability. We believe our results are even more impressive given the overall weakness in the retail jewelry category during the holiday season, said Mark Vadon, Executive Chairman. The year 2007 was exceptional for Blue Nile — we delivered outstanding sales growth, even stronger earnings growth, and ended the year with a very healthy cash balance of $123 million. We expanded our market share domestically and made significant progress in our international business.

As we enter 2008, we are well positioned to enhance our category leadership, continued Vadon. Our competitive position is strong, and we have an incredible team that is among the best in all of e-commerce. Given the current economic environment, however, we believe it is prudent to be extremely cautious in our expectations for the year. There is tremendous uncertainty in the luxury retail sector, which is experiencing a widely reported consumer slowdown. Within this challenging environment, we will be disciplined in our execution of our unique business model. We will continue to focus obsessively on our customers, providing an exceptional Blue Nile experience. I firmly believe that challenging times can provide opportunities to create great value for our shareholders over the long term.

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