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Blue Nile Announces First Quarter 2014 Financial Results

Blue Nile Announces First Quarter 2014 Financial Results

             First Quarter Sales Increased 6.8% to $103.7 million
           First Quarter Net Income Increased 29.7% to $1.1 million
             First Quarter Earnings Per Diluted Share Total $0.08

SEATTLE, May 1, 2014 (GLOBE NEWSWIRE) -- Blue Nile, Inc. (Nasdaq:NILE), the
leading online retailer of diamonds and fine jewelry, today reported financial
results for its first quarter ended March 30, 2014.

Net sales increased 6.8% to $103.7 million for the first quarter ended
March30, 2014 compared to $97.1 million for the first quarter ended March31,
2013. Operating income for the quarter totaled $1.6 million, representing an
operating margin of 1.6% of net sales, compared to $1.2 million in operating
income and 1.2% operating margin for the first quarter of 2013. Net income
totaled $1.1 million, or $0.08 per diluted share.

Non-GAAP adjusted EBITDA for the quarter totaled $3.6 million compared to $3.1
million for the first quarter of 2013. For the trailing twelve month period
ended March30, 2014, net cash provided by operating activities totaled $24.0
million compared to $21.3 million for the trailing twelve month period ended
March31, 2013. For the trailing twelve month period ended March30, 2014,
non-GAAP free cash flow totaled $18.8 million, as compared to $18.6 million
for the trailing twelve month period ended March31, 2013.

"As we announce our financial performance, we remain steadfast in our
execution of three key initiatives in 2014," said Harvey Kanter, President and
Chief Executive Officer."These include enhancing the user experience;
developing our product lines in bridal and diamond jewelry, as well as fashion
pieces through The Designer Collective; and expanding internationally by
building our presence in China and growing our established markets. Through
these initiatives, we continue on our quest to be nothing less than the
worldwide leading retailer of bridal and fine jewelry."

Highlights

  *U.S. engagement net sales for the first quarter 2014 increased 8.0% to
    $59.7 million, compared to $55.3 million for the first quarter of 2013.
    
  *U.S. non-engagement net sales for the first quarter 2014 increased 7.6% to
    $26.1 million, compared to $24.2 million for the first quarter of 2013.
    
  *International net sales for the first quarter 2014 were $17.9 million,
    compared to $17.6 million for the first quarter 2013, an increase of 1.9%.
    Excluding the impact from changes in foreign exchange rates, international
    net sales increased 6.4%.
    
  *Gross profit for the first quarter 2014 totaled $19.1 million.As a
    percent of net sales, gross profit was 18.4% compared to 18.2% for the
    first quarter of 2013.
    
  *Selling, general and administrative expenses for the first quarter 2014
    were $17.5 million, compared to $16.5 million in the first quarter of
    2013. Selling, general and administrative expenses includes stock-based
    compensation expense of $1.1 million for the first quarter in 2014 and
    2013.
    
  *Earnings per diluted share included stock-based compensation expense of
    $0.06 for the first quarter 2014 and $0.05 for the first quarter 2013.
    
  *At the end of the first quarter 2014, cash and cash equivalents totaled
    $56.7 million.
    
  *During the first quarter 2014, Blue Nile repurchased 476,144 shares of its
    common stock for $16.5 million.

Financial Guidance

The following forward-looking statements reflect Blue Nile's expectations as
of May1, 2014.Actual results may be materially affected by many factors,
such as consumer spending, economic conditions and the various factors
detailed below.

Expectations for the second quarter of 2014 (Quarter Ending June29, 2014):

  *Net sales are expected to be between $108 million and $113 million.
  *Earnings per diluted share are projected at $0.18 to $0.21.

Expectations for the fiscal year 2014 (Year Ending January4, 2015):

  *Net sales are expected to be between $485 million and $510 million.
  *Earnings per diluted share are projected at $0.85 to $0.90.

Blue Nile reports fiscal results on a 52/53-week format. The Company's fiscal
2014 reporting period includes 53 weeks, with an additional week falling into
the fourth quarter.

Forward-Looking Statements

This press release contains forward-looking statements that include risks and
uncertainties, including, without limitation, all statements related to future
financial and business performance, market opportunity and plans to grow our
business. Words such as "expect," "anticipate," "believe," "project," "will"
and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are based upon our current expectations.
Forward-looking statements involve risks and uncertainties. Our actual results
and the timing of events could differ materially from those anticipated in
such forward-looking statements as a result of these risks and uncertainties,
which include, without limitation, risks related to general economic
conditions, consumer spending (particularly spending by high-end consumers),
product assortment, our fluctuating operating results, currency fluctuations,
seasonality in our business, our ability to acquire products on reasonable
terms, our online business model, demand for our products, our ability to
attract customers in a cost effective manner, the strength of our brand,
competition, fraud, system interruptions, our ability to fulfill orders and
other risks detailed in our filings with the Securities and Exchange
Commission, including our quarterly reports on Form 10-Q and our Annual Report
on Form 10-K for the year ended December29, 2013.Additional information will
also be set forth in our Quarterly Report on Form 10-Q for the quarter ended
March30, 2014, which we expect to file with the Securities and Exchange
Commission on or before May9, 2014. You are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
of this press release. All forward-looking statements are qualified in their
entirety by this cautionary statement, and Blue Nile undertakes no obligation
to revise or update any forward-looking statements to reflect events or
circumstances after the date hereof.

Conference Call

Blue Nile will host a conference call to discuss its first quarter financial
results today at 5:30 a.m. PT/8:30 a.m. ET. A live webcast of the conference
call may be accessed athttp://investor.bluenile.com. Following the completion
of the call, a recorded replay of the webcast will be available for 30 days at
the same Internet address. This call will contain forward-looking statements
and other material information regarding Blue Nile's financial and operating
results. In the event that any non-GAAP financial measure is discussed on the
conference call that is not described in this release, related complementary
information will be made available at http://investor.bluenile.com as soon as
practicable after the conclusion of the conference call.

Non-GAAP Financial Measures

To supplement Blue Nile's consolidated financial statements presented in
accordance with generally accepted accounting principles ("GAAP"), Blue Nile
uses non-GAAP adjusted EBITDA and non-GAAP free cash flow as measures of
certain components of financial performance. Blue Nile defines non-GAAP
adjusted EBITDA as earnings before interest and other income, taxes,
depreciation and amortization, adjusted to exclude the effects of stock-based
compensation expense. Blue Nile defines non-GAAP free cash flow as net cash
provided by (used in) operating activities less cash outflows for purchases of
fixed assets, including internal-use software and website development. Blue
Nile reports sales information in accordance with GAAP. Internally, management
monitors its sales performance on a non-GAAP basis that eliminates the
positive or negative effects that result from translating international sales
into U.S. dollars (the "constant exchange rate basis"). Blue Nile's management
does not itself, nor does it suggest that investors should, consider such
non-GAAP financial measures in isolation from, or as a substitute for,
financial information prepared in accordance with GAAP. Investors should also
note that the non-GAAP financial measures used by Blue Nile may not be the
same non-GAAP financial measures, and may not be calculated in the same
manner, as that of other companies. Whenever Blue Nile uses such non-GAAP
financial measures, it provides a reconciliation of non-GAAP financial
measures to the most closely applicable GAAP financial measures. Investors are
encouraged to review the related GAAP financial measures and the
reconciliation of these non-GAAP financial measures to their most directly
comparable GAAP financial measures.

Blue Nile's management believes that non-GAAP adjusted EBITDA and non-GAAP
free cash flow, as defined, as well as international sales on a constant
exchange rate basis provide meaningful supplemental information to the company
and to investors. Blue Nile believes that both management and investors
benefit from referring to these non-GAAP measures in assessing the performance
of Blue Nile and when planning and forecasting future periods. Further,
management believes that the inclusion of the non-GAAP adjusted EBITDA and
non-GAAP free cash flow calculations provide consistency in Blue Nile's
financial reporting and comparability with similar companies in Blue Nile's
industry. Management believes the constant exchange rate measurement provides
a more representative assessment of the sales performance and provides better
comparability between reporting periods.

A reconciliation of non-GAAP adjusted EBITDA to net income is as follows (in
thousands):

                             Quarter ended  Quarter ended
                             March 30, 2014 March 31, 2013
Net income                    $1,079         $832
Income tax expense            575            470
Other income, net             (46)           (144)
Depreciation and amortization 922            777
Stock-based compensation      1,081          1,164
Non-GAAP adjusted EBITDA      $3,611         $3,099

A reconciliation of differences of non-GAAP free cash flow from the comparable
GAAP measure of net cash provided by (used in) operating activities is as
follows (in thousands):

                                    Quarter ended        Quarter ended
                                    March 30, 2014       March 31, 2013
Net cash used in operating           $(43,809)            $(44,406)
activities
Purchases of fixed assets, including
internal-use software and website    (628)                (911)
development
Non-GAAP free cash flow              $(44,437)            $(45,317)
                                                        
                                                        
                                    Twelve months ended Twelve months ended
                                    March 30, 2014       March 31, 2013
Net cash provided by operating       $24,035              $21,312
activities
Purchases of fixed assets, including
internal-use software and website    (5,245)              (2,666)
development
Non-GAAP free cash flow              $18,790              $18,646

The following table reconciles year-over-year international net sales
percentage increases (decreases) from the GAAP sales measures to the non-GAAP
constant exchange rate basis:

                                                             Year over year
Quarter ended March                       Effectofforeign  growth on
30, 2014            Yearoveryeargrowth exchangemovements constant
                                                             exchange rate
                                                             basis
International net   1.9%                  (4.5)%             6.4%
sales
                                                             Year over year
Quarter ended March                       Effect of foreign  growth on
31, 2013            Year over year growth exchange movements constant
                                                             exchange rate
                                                             basis
International net   24.8%                 (1.1)%             25.9%
sales

About Blue Nile, Inc.

Blue Nile, Inc. is the leading online retailer of diamonds and fine jewelry.
The Company delivers the ultimate customer experience, providing consumers
with a superior way to buy engagement rings, wedding rings and fine jewelry.
Blue Nile offers in-depth educational materials and unique online tools that
place consumers in control of the jewelry shopping process. The Company has
some of the highest quality standards in the industry and offers thousands of
independently certified diamonds and fine jewelry at prices significantly
below traditional retail. Blue Nile can be found online at
www.bluenile.com.Blue Nile's shares are traded on the Nasdaq Stock Market LLC
under the symbol NILE.

BLUE NILE, INC.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)

                                             March 30, December 29, March 31,
                                              2014     2013        2013
                                                                  
ASSETS                                                             
Current assets:                                                    
Cash and cash equivalents                     $56,713   $115,942     $40,518
Trade accounts receivable                     2,856     3,005        1,853
Other accounts receivable                     255       521          745
Inventories                                   35,181    34,530       34,013
Deferred income taxes                         711       1,038        749
Prepaid income taxes                          627       247          —
Prepaids and other current assets             1,488     1,318        930
Total current assets                          97,831    156,601      78,808
Property and equipment, net                   9,945     10,188       7,800
Intangible assets, net                        130       140          181
Deferred income taxes                         5,526     5,470        8,044
Note receivable                               2,000     2,000        2,000
Other investments                             2,280     2,280        2,000
Other assets                                  241       246          119
Total assets                                  $117,953  $176,925     $98,952
LIABILITIES AND STOCKHOLDERS' EQUITY                               
Current liabilities:                                               
Accounts payable                              $81,876   $122,322     $74,547
Accrued liabilities                           5,614     10,751       6,396
Current portion of long-term financing        36        51           60
obligation
Current portion of deferred rent              281       279          246
Total current liabilities                     87,807    133,403      81,249
Long-term financing obligation, less current  574       574          610
portion
Deferred rent, less current portion           2,170     2,229        2,141
Other long-term liabilities                   114       114          25
Stockholders' equity:                                              
Common stock                                  22        22           21
Additional paid-in capital                    225,399   223,261      198,691
Accumulated other comprehensive loss          (32)      (26)         (144)
Retained earnings                             94,837    93,758       83,715
Treasury stock                                (292,938) (276,410)    (267,356)
Total stockholders' equity                    27,288    40,605       14,927
Total liabilities and stockholders' equity    $117,953  $176,925     $98,952


BLUE NILE, INC.
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)

                                            Quarter ended
                                            March 30, March 31,
                                             2014     2013
Net sales                                    $103,726  $97,111
Cost of sales                                84,601    79,465
Gross profit                                 19,125    17,646
Selling, general and administrative expenses 17,517    16,488
Operating income                             1,608     1,158
Other income, net                                     
Interest income, net                         48        42
Other (loss) income, net                     (2)       102
Total other income, net                      46        144
Income before income taxes                   1,654     1,302
Income tax expense                           575       470
Net income                                   $1,079    $832
Basic net income per share                   $0.08     $0.07
Diluted net income per share                 $0.08     $0.07
                                                     
Shares used for computation (in thousands):           
Basic                                        12,800    12,482
Diluted                                      12,913    12,693


BLUE NILE, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)

                                                          Quarter ended
                                                          March 30, March 31,
                                                           2014     2013
Operating activities:                                               
Net income                                                 $1,079    $832
Adjustments to reconcile net income to net cash used in             
operating activities:
Depreciation and amortization                              922       777
Stock-based compensation                                   1,101     1,184
Deferred income taxes                                      271       (81)
Tax benefit (deficiency) from exercise of stock options    103       (33)
Excess tax benefit from exercise of stock options          (155)     (14)
Changes in assets and liabilities:                                  
Receivables                                                415       887
Inventories                                                (651)     (743)
Prepaid federal income taxes                               (380)     —
Prepaid expenses and other assets                          (165)     297
Accounts payable                                           (41,155)  (41,422)
Accrued liabilities                                        (5,137)   (6,043)
Deferred rent and other                                    (57)      (47)
Net cash used in operating activities                      (43,809)  (44,406)
Investing activities:                                               
Purchases of property and equipment                        (628)     (911)
Net cash used in investing activities                      (628)     (911)
Financing activities:                                               
Repurchase of common stock                                 (15,836)  (1,379)
Proceeds from stock option exercises                       1,084     219
Taxes paid for net share settlement of equity awards       (176)     —
Excess tax benefit from exercise of stock options          155       14
Principal payments under long-term financing obligation    (15)      (15)
Net cash used in financing activities                      (14,788)  (1,161)
                                                                   
Effect of exchange rate changes on cash and cash           (4)       (21)
equivalents
                                                                   
Net decrease in cash and cash equivalents                  (59,229)  (46,499)
                                                                   
Cash and cash equivalents, beginning of period             115,942   87,017
Cash and cash equivalents, end of period                   $56,713   $40,518
                                                                   
Supplemental disclosure of cash flow information:                   
Cash paid for income taxes                                 $582      $2,895
Non-cash investing and financing activities:                        
Unsettled repurchases of common stock                      $692      $—

CONTACT: Blue Nile, Inc.
         Nancy Shipp, 206.388.3626 (Investors)
         nancys@bluenile.com
         or
         Josh Holland, 206.336.6773 (Media)
         joshh@bluenile.com

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