By Michelle Graff
michelle.graff@nationaljeweler.com
Seattle--Blue Nile Inc. reported solid second quarter results Friday, with total sales increasing 7 percent year-over-year as falling diamond prices boosted engagement ring sales.

Net sales in the second quarter ended July 5 totaled $113.7 million compared with $106.6 million in the second quarter 2014. This included a 15 percent increase (on a constant exchange rate basis) in international sales.

Gross profit rose from $20.2 million, or 18.9 percent of net sales, to $22.1 million, or 19.4 percent of net sales.

Net income was essentially flat at $2.3 million.

U.S. engagement ring sales were up 8 percent year-over-year, from $60.9 million to $65.5 million. Chief Financial Officer David Binder said during the company’s quarterly earnings call Friday that diamond prices, which have been “volatile” but “coming down for the most part,” acted as a “tailwind” that helped their U.S. engagement ring business in the second quarter.

Non-engagement ring sales in the U.S., which includes both wedding bands and fashion jewelry, rose 4 percent from $27.7 million to $28.7 million.

Blue Nile CEO Harvey Kanter said during the call that fashion jewelry sales increased for the third consecutive quarter but wedding band sales continue to be difficult because consumers want cheaper bands than what Blue Nile is offering. He said the retailer will continue to examine its pricing and “promotional activity” around wedding bands.

When asked by an analyst on the call about the use of designers such as Monique Lhuillier and Zac Posen on the site, Kanter said that they won’t exceed five designers for bridal and eight for the Designer Collective, the area of the website where it sells fashion jewelry from established and emerging designers, at any one time. The e-tailer currently has five outside designers in the Designer Collective and three for bridal.

“We are not looking to become a marketplace,” Kanter said. “We are looking to make sure that we are curating a collection of designers … that’s on target with our millennial customer and really that’s what’s critical.”

Kanter also fielded a number of questions on the call about the store, or “webroom,” Blue Nile opened in June at the Roosevelt Field Mall on New York’s Long Island. The e-tailer feted the opening of the space--where consumers can try on, but not buy, engagement rings (all purchasing still must be done through the Blue Nile website)--with an appearance by Blue Nile spokesman Colin Cowie, who also has a line of engagement rings that’s sold on the site.

Kanter said the webroom has seen “really incredible levels of traffic” and a lot more in-store purchases--meaning people who use the iPads to buy from BlueNile.com when they are in the store--than they did with the showcases they had at the two Nordstrom stores.

But neither Kanter nor Binder answered when asked by an analyst if they plan on increasing the number of webrooms, and Binder said the store hasn’t yet had a “meaningful impact” on Blue Nile’s sales in the greater New York area.

“At this stage right now, it’s hard to see the performance of the webroom materially impacting the conversion rates in that area in general,” he said.





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