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Internet jeweler Blue Nile reported strong sales growth and a healthier bottom line Thursday, boosted by solid demand for diamond engagement rings.

The Seattle-based company said first-quarter sales rose 17 percent to $97.1 million, including a 19 percent jump in its U.S. engagement business to $55.3 million.

Chief Executive Harvey Kanter, citing a stock-market rally and rising home values, said Blue Nile’s young, affluent customers are feeling better about the economy.

“Our customer is better educated, more affluent and with a bigger job, so to speak. They’re aware of the challenges,” Kanter said in an interview. “But they’re comfortable with where the economy is.”

Blue Nile’s quarterly profit improved to $832,000, or 7 cents a share, up from $154,000, or a penny a share, a year ago.

Those results narrowly beat Wall Street’s expectation for $96.9 million in sales and a per-share profit of 6 cents.

But the Internet retailer faces a major headwind in the form of new online-sales-tax legislation. The Senate next week is expected to pass a bill to expand Internet sales taxes, setting the stage for a battle in the Republican-led House.

Blue Nile, the world’s largest online seller of diamond engagement rings, could see a major change in buyer behavior if forced to collect sales taxes in more states.

Deutsche Bank analyst Ross Sandler asked Chief Financial Officer David Binder about the effects of the potential new tax requirements on Blue Nile’s business during an earnings call Thursday.

With sales taxes ranging from 5 to 10 percent nationally, the average cost of a Blue Nile purchase could jump 8 percent under the proposal, Sandler noted.

“We’re based on a much higher level of efficiency,” Binder replied, adding that Blue Nile’s annual sales per employee exceed $1.6 million, well above its brick-and-mortar rivals.

“We flow that efficiency through to our pricing,” he said. “So we still see a compelling value proposition, with or without sales tax.”

Current law prohibits states from requiring Internet retailers to collect sales taxes unless they have a physical presence in that state. As a result, Blue Nile collects taxes only in New York and Washington.

The so-called Marketplace Fairness Act would help states force e-tailers to charge the tax even if they’re located elsewhere.

Looking ahead, Blue Nile forecast second-quarter sales in the range of $100 million to $105 million, and a per-share profit of between 13 and 17 cents. The outlook was in line with analysts’ estimates, but Wall Street seemed underwhelmed.

Blue Nile stock closed Thursday’s regular trading session up 5 cents, less than 1 percent, to $32.73. Shares then fell 8 percent to $30.08 in extended trading after the earnings report.

The stock has bounced between $22.94 and $43.54 in the past 52 weeks.

Amy Martinez: 206-464-2923 or On Twitter: @amyemartinez