Executives predicted declines for the period, but say they’re “encouraged” by second quarter results to date.

Jewelry e-retailer Blue Nile Inc. reported a drop in sales in the first quarter, its second quarter in a row with year-over-year declines.

In January, Blue Nile executives predicted between $103 million and $106 million in sales for the first quarter, and sales came in at the low end of that forecast.

“As expected, it was a challenging environment for us in the first quarter,” says Blue Nile president and CEO Harvey Kanter. “However, we are encouraged by what we’ve seen to date in the second quarter and are making good progress on key initiatives, which we expect to fundamentally improve performance long term.”

Blue Nile continues to report strong results from its initial foray into bricks-and-mortar retail, with sales from what it calls its Webrooms improving. “Our first Webroom in Roosevelt Field Mall in New York continues to exceed our expectations, and average weekly volume is accelerating,” Kanter told analysts on a conference call today. “Consumers simply love our reimagined retail experience, which is so different from what consumers expect in retail, yet alone jewelry store, and that’s core to our DNA.”

In addition to its first location in New York, Blue Nile plans to open three more this year. Today, the merchant announced plans are in the works for additional locations beyond those in 2017.

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For the period ended April 3, Blue Nile reported:

  • Total sales of $103.1 million, down 3.1% from $106.4 million in the first quarter of 2015.
  • Sales of engagement-related jewelry in the U.S. of $56.7 million, down 7.0% from $61.0 million.
  • Non-engagement sales of $27.1 million, up 4.2% compared with $26.0 million.
  • Net income of $1.1 million, down slightly from $1.2 million.

Much of the drop in sales comes from high-end products, Blue Nile says, as the merchant experienced a $3 million decrease in sales of products at price points above $25,000. Declines come on the heels of what Blue Nile executives called a “disappointing” fourth quarter, during which sales fell 5% year over year.

Earlier this week, Blue Nile announced plans to cut off sales to consumers in South Dakota following enactment of a law that requires online retailers to collect sales tax for all online orders shipped to South Dakota residents, even if the merchants don’t have a physical location there.

Blue Nile is ranked No. 82 in the Internet Retailer 2016 Top 500 Guide.

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