Blue Nile’s efforts to make its international operations sparkle were hampered in the latest quarter as weakness in Canadian and Australian currencies made the Seattle online jewelry retailer’s diamonds pricier in those countries.
The foreign-exchange issue was the principal reason the company brought in less revenue than analysts expected in the first quarter of 2014, chief financial officer David Binder said in an earnings call Thursday.
International sales represent about 17 percent of the company’s revenue, and are a critical element of Blue Nile’s plans for future growth.
Blue Nile on Thursday reported earnings of $1.1 million, or 8 cents per share, up from $832,000 in the same period last year, topping Wall Street estimates.
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But revenues, at $103.7 million, came in under expectations.
Analysts polled by Bloomberg expected the retailer to post $105.6 million in sales.
Canada and Australia “created challenges for growth as local prices in those countries increased sharply,” Binder said. That “currency headwind may continue to be a challenge and we’ll cautiously manage our investments in marketing and then the pricing of our products in local currency.”
Weakness in foreign currencies also has another impact: Sales translate into fewer dollars when Blue Nile does its bookkeeping.
International sales for the first quarter amounted to $17.9 million, up 1.9 percent from the same period last year.
But if that figure were to exclude the impact from changes in foreign-exchange rates, those sales would have increased 6.4 percent.
Canada, Blue Nile’s single largest foreign market, has seen its currency lose strength as signs of economic weakness there stoke fears about potential interest-rate cuts, generally an action that encourages local investors to move money abroad, where it can earn higher rates.
Australia is a major exporter of commodities to China, and its currency has weakened as uncertainties emerge about China’s hitherto explosive growth.
While the Australian and Canadian results were disappointing, sales in China, where Blue Nile is staking a big part of its international effort, helped drive growth of 11 percent in the Asia-Pacific region.
CEO Harvey Kanter said that the market for engagement and diamond jewelry in the Chinese market will surpass the size of the U.S. market for the same products in the near future.
Kanter added that the aspects of Blue Nile’s business that resonate with U.S. consumers translate well to the Chinese market, “and we continue to see evidence of this from our experience on the ground,” he said.
Investors, perhaps reacting to the shortfall in revenue, sent Blue Nile shares down $1.99 or 5.7 percent to close Wednesday at $32.74.
Ángel González: 206-464-2250 or firstname.lastname@example.org. On Twitter: @gonzalezseattle