Earnings Recap: Online Jewelry
MSN MoneyCentral
NEW YORK (AP) – At the same time Blue Nile Inc., an online jewelry vendor, reduced its guidance for 2006 after its fourth-quarter results came in below Wall Street estimates, Amazon.com Inc. said its jewelry sales were up more than 100 percent during the period.
After the bell Tuesday, Blue Nile reported a profit of $5.3 million, a 16 percent increase from a year ago, but the results and the company’s 2006 outlook fell short of analyst expectations, causing shares to tumble Wednesday.
The Seattle-based company’s shares were down $5.05, or 13.5 percent, to $32.24 in afternoon trading on the Nasdaq, and earlier in the session changed hands as low as $29.21.
The soft results prompted Merrill Lynch’s Mark A. Friedman to reduce his 2006 and 2007 earnings estimates, but the analyst was somewhat forgiving, noting that the company faced unusual challenges in the period.
During the quarter, Google increased its “click rates” by more than 50 percent, while top keyword costs were up about 80 percent from a year ago, boosting Blue Nile’s online marketing costs substantially, Friedman said in a note to clients.
“Competitors both big and small entered the online advertising market aggressively and perhaps irrationally during the holiday season pushing up the cost for search engines,” he wrote.
As a result, the retailer plans to be more conservative with its paid search advertising in 2006 and might chose to direct more of its advertising budget outside of the Internet, he said.
In addition, a larger number of online retailers chose to advertise through online search engines late in the holiday season, reducing Blue Nile’s exposure on sites such as Google, Friedman said.
Amazon.com, which did not provide specific jewelry sales figures, credited its strong sales to low prices and increased selection. Zale Corp., which operates zales.com and bailybanksandbiddle.com in addition to its brick-and-mortar stores, is scheduled to report results for the quarter on Feb. 17.
Overstock.com Inc. an online closeout retailer which includes a large selection of jewelry on its site, on Tuesday reported a loss for the fourth quarter, despite a 44 percent rise in sales, but did not break its revenue down by product category.
Friedman said Blue Nile needs to expand its offerings outside of engagement and diamond jewelry, which accounted for the bulk of its sales last year, in order give satisfied customers more reasons to come back.
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