Sales in the second quarter for web-only jewelry retailer Blue Nile Inc. “fell short” of expectations, as company executives report declining average order values of engagement rings and a sharp drop-off in total unit sales that began in June.
Blue Nile, No. 82 in the Internet Retailer 2016 Top 500 Guide, said total sales reached $113.8 million in the quarter, up 0.1% from $113.7 million in the prior year quarter. This follows a 3% decline in the first quarter, and a 5% decline in the fourth quarter.
“Engagement ring sales were actually strong for the quarter, and until we hit June, where we saw a deceleration in total unit sales, which significantly impacted the quarter,” CEO Harvey Kanter told analysts on a conference call Monday transcribed by SeekingAlpha. “We are still assessing what happened, but the drop-off was broad across geography and product categories, such that we can’t discount macro issues, given that June was an exceptionally volatile month for the U.S. and the world.”
Also during the call, Blue Nile executives for the first time revealed some metrics on its recent push into a form of bricks-and-mortal retailing. The merchant now has three physical locations up and running—what it calls webrooms—and these are each generating roughly the same amount of revenue on a per-employee basis as the online-only side of its business. The webrooms allow consumers to look at—and in the case of rings, be fitted for—the merchant’s jewelry selection, but all orders are made online using iPads in the showroom and items purchased are delivered to the home.
Blue Nile as a whole generates about $1.4 million of revenue per full-time employee, Kanter said on the call. The same is true of its webrooms, each of which typically has five or six employees, he added. This means its physical locations are bringing in roughly $7.7 million per year each. Blue Nile generated more than $480 million in total sales last year.
These results are promising enough for Blue Nile to accelerate the opening of two additional locations by the Thanksgiving holiday. “The webroom experience is fundamentally different than any traditional jewelry store and it’s becoming clear that a segment of our customers want our easy, educational and pressure-free experience in a physical environment,” Kanter said.
For the quarter ended July 3, Blue Nile reported:
- Net sales of $113.8 million, up 0.1% from $113.7 million in the second quarter of last year.
- International net sales of $20.8 million, up 6.6% compared to $19.5 million for the second quarter 2015. Excluding the impact from changes in foreign exchange rates, international net sales increased 9.4%.
- Net income of $2.1 million versus $2.3 million.
- U.S. engagement net sales were $62.6 million, down 4.4% compared to $65.5 million.
- U.S. non-engagement net sales increased 5.9% to $30.4 million, compared to $28.7 million.
For the first six months of the year, Blue Nile also reported:
- Net sales of $216.8 million, a 1.5% decline from $220.1 million in the first half of 2015.
- Net income of $3.2 million compared with $3.5 million.