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bluenile-nordstromSeattle online jewelry retailer Blue Nile said today that its business was materially impacted by fluctuations in the diamond trade, causing sales to decrease 1.3 percent to $106.6 million and operating income to drop to $3.2 million.

In a conference call with analysts, Blue Nile CEO Harvey Kanter cited “volatile” diamond prices which has caused an inflation in the price of loose diamonds.

“The breadth and depth of these changes accelerated greater in late March. This impacted our results,” said Kanter. “In our 15 years of business, we have seen this headwind before.”

The Wall Street Journal reported last month that he average price per carat had risen to about $99, up from just over $60 per carat in 2004.

Harvey Kanter
Harvey Kanter

At the end of June, Blue Nile implemented price changes “to ensure that Blue Nile’s superior value is absolutely clear to the consumer,” Kanter said. The price changes were put in place across 160,000 certified stones.

During the quarter, U.S. engagement sales decreased 4.6 percent to $60.9 million.

Kanter also said that Blue Nile is using a new “data science” program to better understand the “inflection points” around price elasticity.

While diamond prices rise, Kanter said the company is investing heavily in China. International net sales increased 4.8 percent to $18 million during the quarter.

Shares of Blue Nile fell slightly on the earnings report. They are down 46 percent so far this year, with the company now boasting a market value of $306 million.

Blue Nile said that it expects revenues of $475 million to $490 million during the fiscal 2014 year.

Shares of Blue NIle have continued to fall through 2014.
Shares of Blue NIle have continued to fall through 2014.
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