Blue Nile reported a 19.8 percent increase in sales for the third quarter of 2012—but that jump once again came at the expense of profits.

The company’s net sales reached $89.8 million for the third quarter ended Sept. 30. However, net income totaled $1.7 million, a 7.3 percent fall from last year’s $1.9 million. As a percent of net sales, gross profit was 18.8 percent, compared with 19.8 percent for the third quarter of 2011.

“Overall margins in the business continue to be impacted by greater marketing spend as well as really lean pricing to make sure that we’re acquiring new customers,” said chief financial officer David Binder in a conference call following the release of the company’s financial results.

But he said margins could pick up in the fourth quarter, as the company shifts its focus to non-engagement products.

Other highlights:

• U.S. engagement sales grew by 31.5 percent to $54.1 million, compared with $41.1 million for the third quarter of 2011. This is the highest growth rate in engagement rings and loose diamonds that the company has seen in seven years, Binder said.

• U.S. sales of non-engagement jewelry, a growing focus for the company, increased 12 percent to $21.8 million, compared with $19.4 million to the year before. The company is now concentrating its efforts on diamond jewelry, precious and semiprecious stones and metals, and classic pearls, said CEO Harvey Kanter. “For the holidays, you will see many elements of this evolving curated mix, including diamond necklaces and earrings, precious stone, rings and bracelets, sterling and gold chains, plus Tahitian and Akoya pearls and more,” he said. “Our new assortment includes drop, tassel, and threader earrings [and] diamonds for black tie and cocktail moments to casual denim.’

• New customers grew 22.4 percent in this quarter, compared with the third quarter of 2011. 

JCK