You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
June is the traditional month for weddings, but for engagements, December takes the prize. One out of five engagements are said to occur in the last month of the year. Between all those engagements and regular holiday gifts, this is make-or-break time for diamond sellers in general and for Blue Nile in particular. Analysts figure that Blue Nile's fourth-quarter sales will approach $92 million, or 36% of total 2006 sales.
Since its founding in 1999, Blue Nile has grown into the largest online retailer of diamonds and engagement rings in the U.S. Yet the Seattle-based company, which sold 27,000 engagement rings in 2005, estimates that it accounts for only about 3% of engagement-ring sales, which traditionally are made by mom-and-pop operations.
To draw customers out of jewelry shops and to its Web site, Blue Nile touts both its broad selection and the ability to customize rings. And because of special arrangements with its suppliers, Blue Nile can charge 20% to 40% less than brick-and-mortar rivals can.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The relationships with suppliers are key to Blue Nile's success, says Morningstar analyst Kimberly Picciola. Diamond manufactures agree to sell their loose diamonds exclusively through Blue Nile's Web site. But Blue Nile doesn't keep an inventory of stones on its books. Instead, the supplier generally ships a diamond to the retailer's warehouse after a customer places an order, and Blue Nile doesn't pay the manufacturer until well after the transaction is completed. "This leads to returns on invested capital that far exceed [the company's] cost of capital," says Picciola. The exclusive relationships with high-quality suppliers also give Blue Nile a leg up against the competition. Picciola expects the firm's earnings to grow 22% annually over the next five years, as it captures a larger share of the expanding business for online jewelry sales.
Jordan Rohan, an analyst at RBC Capital Markets, thinks Blue Nile is well positioned to succeed. He upgraded the stock (symbol NILE) to "outperform" from "sector perform" on December 5. One reason: Skyrocketing Internet advertising rates that hurt Blue Nile's fourth-quarter earnings last year don't seem to be materializing this year. (The company earned 29 cents a share in the fourth quarter of 2005, below the 33 cents a share that analysts expected, and the stock plunged from $44 in November 2005 to as low as $24 last August.) Rohan also applauds Blue Nile for cutting prices slightly, a move that has prompted a greater percentage of customers who visit the site to make a purchase.
Rohan says that last year's earnings hiccup has led to a more realistic view of the company's prospects. Whereas last year many investors saw the company's business model as unassailable, he says, this year the company is considered simply "a well-run e-commerce company."
The stock, which closed at $34.92 on December 5 (up 3.6% for the day), is certainly not cheap. It sells for 38 times analysts' average 2007 earnings estimates of 92 cents per share, according to Thomson First Call. But considering the company's advantageous business model, debt-free balance sheet, and growth prospects, the stock could still yet sparkle.
-
How Much It Costs to Host a Super Bowl Party in 2026Hosting a Super Bowl party in 2026 could cost you. Here's a breakdown of food, drink and entertainment costs — plus ways to save.
-
3 Reasons to Use a 5-Year CD As You Approach RetirementA five-year CD can help you reach other milestones as you approach retirement.
-
Your Adult Kids Are Doing Fine. Is It Time To Spend Some of Their Inheritance?If your kids are successful, do they need an inheritance? Ask yourself these four questions before passing down another dollar.
-
If You'd Put $1,000 Into AMD Stock 20 Years Ago, Here's What You'd Have TodayAdvanced Micro Devices stock is soaring thanks to AI, but as a buy-and-hold bet, it's been a market laggard.
-
If You'd Put $1,000 Into UPS Stock 20 Years Ago, Here's What You'd Have TodayUnited Parcel Service stock has been a massive long-term laggard.
-
How the Stock Market Performed in the First Year of Trump's Second TermSix months after President Donald Trump's inauguration, take a look at how the stock market has performed.
-
If You'd Put $1,000 Into Lowe's Stock 20 Years Ago, Here's What You'd Have TodayLowe's stock has delivered disappointing returns recently, but it's been a great holding for truly patient investors.
-
If You'd Put $1,000 Into 3M Stock 20 Years Ago, Here's What You'd Have TodayMMM stock has been a pit of despair for truly long-term shareholders.
-
If You'd Put $1,000 Into Coca-Cola Stock 20 Years Ago, Here's What You'd Have TodayEven with its reliable dividend growth and generous stock buybacks, Coca-Cola has underperformed the broad market in the long term.
-
If You Put $1,000 into Qualcomm Stock 20 Years Ago, Here's What You Would Have TodayQualcomm stock has been a big disappointment for truly long-term investors.
-
If You'd Put $1,000 Into Home Depot Stock 20 Years Ago, Here's What You'd Have TodayHome Depot stock has been a buy-and-hold banger for truly long-term investors.
