Blue Nile shares rise as profit falls but beats expectations

After the market closed on Tuesday, Blue Nile said first-quarter profit fell 19 percent to $2.6 million, or 16 cents per share, from $3.2 million, or 19 cents per share a year ago. Analysts polled by Thomson Financial predicted profit of 14 cents per share.

The company said results exceeded its expectations amid a weak consumer environment. Consumers are cutting back on big-ticket items such as jewelry as they face rising gas and food prices and a tightening credit market.

Revenue rose 3.8 percent to $70.5 million from $67.9 million last year.

Also on Tuesday, the Seattle-based company said it expects 2008 earnings between 15 cents and 18 cents per share, including an 8 cent per share in stock option expenses. Analysts, who typically exclude one-time items, expect a profit of 20 cents per share.

Stifel Nicolaus & Co. analyst Scott Devitt said results were "respectable" amid a difficult U.S. retail environment.

"Blue Nile benefits uniquely from high dollar transactions and is a distinct beneficiary of a strong economy," Devitt wrote. "As the financial markets have become difficult, Blue Nile's high dollar transactions stopped growing."

He kept his "Buy" rating and $54 price target on the stock.

"Investors should continue to focus on its structural advantage and its capital efficient model," Devitt wrote.

Blue Nile shares rose $1.27, or 2.8 percent, to $46.45 during afternoon trading. The stock has traded between $38.35 and $106.16 in the past 52 weeks.