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$41.96 4.43 (11.80%)
10/10/2008 4:00 PM

Blue Nile, Inc. (NILE)

CAPS Rating:
***

An online retailer of diamonds and fine jewelry. The Company also provides guidance and support to enable customers to learn about and purchase diamonds as well as classically styled fine jewelry.

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Avatar NetscribeECommer (80.56) Submitted: 12/29/06 4:05 AM : Outperform Start Price: $36.80 NILE Score: 51.71

Blue Nile Inc. engaged in the business of online retailing of high quality diamond and fine jewelry, has operations in US, Canada and UK. Diamond engagement jewelry contributed 72% of its revenue, with non-engagement diamond and non-diamond jewelry contributing 18% and 10% of revenues in 2005. US remain the major market for Blue Nile contributing 98% of revenues for the same period. The online diamond engagement ring market is worth $4.5 billion, with Blue Nile having over 50% market share.

Blue Nile enjoys key competitive advantage through enhanced supply chain relationships with world’s premier diamond manufacturers, which helps the company to offer consumer a wide range of diamonds at lower prices. Their strategy is to heavily invest in marketing and advertising to position itself as a high-end online retailer of fine diamond and non-diamond jewelry which is reflected through overall spend in their selling, general and administrative expenses to strengthen its brand.

Expanding its operations mainly in Canada and UK markets, where it already has presence, would be the strong focus in the next year, which would boost up the company top line. The management expects expand its geographical presence in Japan and EU countries.

The company’s ability to offer lower prices as compared to traditional retailers and jewelers would prove handy to attract a large customer base. As we move onwards to an internet savvy generation, Blue Nile envisages a bright future

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Avatar NetscribeECommer (80.56) Submitted: 4/16/07 5:50 AM

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Blue Nile enjoys the advantage of low cost business model, relying on sales over internet, which helps in to gain market share from traditional retailers. Its enhanced supply chain relationships with world’s premier diamond manufacturers, helps the company to offer consumers a wide range of diamonds at lower prices. As more customers shop on the internet, Blue Nile's share of the jewelry market is expected to grow substantially. BlueNile’s merchandise consist of high quality diamonds

Revenues grew by 24% for the fourth quarter of fiscal 2006. Also for the same period earnings grew by 21%. Blue Nile’s marketing strategy is designed to increase Blue Nile brand recognition, generate consumer traffic, acquire customers, build a loyal customer base and promote repeat purchases.

For the valentine season, BlueNile initiated the launch of Google Checkout, a checkout process wherein online shopping is faster and convenient. Google Checkout users received $ 10 off on purchases made above $ 30 from BlueNile.

The company plans to expand its infrastructure in selective international markets where it already has presence. Also it has plans to expand its jewelry offerings, both in terms of price points and product mix, through additional customized and non-customized products. Its board has recently increased its share repurchase authorization to $ 150 million, which will boost up its earnings. Considering the above facts, shares of BlueNile provide potential upsides over a long term.

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