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Originally published Thursday, November 1, 2012 at 1:59 PM

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Blue Nile says profit fell in 3Q

The Seattle-based Internet jeweler said it’s spending more on marketing to attract new customers.

Seattle Times business reporter

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Internet jeweler Blue Nile, which earlier this year lagged behind overall growth in the U.S. e-commerce sector, is spending more on marketing to attract new customers, squeezing profit margins.

Seattle-based Blue Nile said its third-quarter profit declined 7 percent to $1.7 million, or 14 cents a share, a penny above the consensus estimate on Wall Street.

Sales rose 20 percent to $89.8 million, also beating analysts’ forecast.

The stock initially plunged as much as 13 percent in after-hours trading Thursday, but eventually made a full recovery.

Chief Financial Officer David Binder said Blue Nile’s profits are under pressure from increased marketing expenditures, as well as “really lean pricing to make sure that we’re acquiring customers.”

“Our primary focus right now is customer growth, revenue growth and then building a greater business through the lifetime value of new customers,” Binder said in a call with analysts.

Blue Nile long has catered to the male engagement-ring buyer, but it’s broadening its assortment of nonbridal jewelry and responding more quickly to fashion trends to appeal to women.

Last month, it introduced an exclusive line of engagement rings and wedding bands by designer Monique Lhuillier, representing a departure for an e-tailer that specializes in nonbranded, customized jewelry.

“Their new strategy is to be willing to give up some margins for top-line growth, and they’re pushing more nonengagement merchandise to try to reach the female demographic,” said analyst Herman Leung, of Susquehanna Financial in San Francisco. “There’s some testing in that strategy.”

Blue Nile, which announced its earnings after the close of regular trading, projected a fourth-quarter profit of 44 cents to 50 cents a share, with a midpoint slightly lower than Wall Street’s forecast of 48 cents.

Earlier Thursday, the stock closed up 5 percent at $39.59, then fell 13 percent to $34.60 after-hours, before rebounding to $39.59.

Blue Nile expects the fourth quarter to account for about 35 percent of its projected annual sales of $404 million to $417 million.

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com

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