Diamond and fine jewelry Internet retailer Blue Nile reported that its third quarter net sales increased 26.5 percent to $67.4 million, compared to $53.2 million in the third quarter of 2006. During the quarter, operating income rose 67.3 percent to $3.6 million, compared to $2.2 million in the third quarter of 2006. Net income in the third quarter totaled $3 million compared to $1.8 million in the prior year.

Net cash provided by operating activities was $33.2 million for the trailing twelve-month period ended Sept. 30, compared to $30.3 million for the trailing twelve month period ended Oct. 1, 2006. Non-GAAP adjusted EBITDA increased $1.5 million to $5.4 million for the third quarter 2007, compared to $3.9 million for the third quarter 2006.

“Our third quarter performance was excellent, with strong momentum in all product categories,” said Mark Vadon, Blue Nile chief executive officer. “Our results reflect the way in which the Blue Nile brand and experience resonate with our customers. We executed well across all areas of the business and generated exceptional profitability. Our international markets made tremendous progress during the quarter.”

Gross profit increased 28.4 percent to $13.4 million, from $10.4 million in the third quarter of 2006. Gross profit as a percentage of net sales increased to 19.8 percent in the third quarter of 2007 from 19.5 percent in the third quarter of 2006.
 
International sales, representing the Seattle-based company’s Canada and U.K. Web sites, totaled $4.5 million in the third quarter, an increase of 104.5 percent year over year.

The company said it expects fourth quarter net sales to be between $109 million and $115 million.

JCK