The shares of the online retailer Blue Nile NASDAQ:NILE were up on Tuesday after Citigroup upgraded the company from ‘hold’ to ‘Buy’. The shares soared by up to 11%.
Analysts say that improving polished diamond prices contributed to a better second quarter. There was also improvement in the rate of decline of revenues.
What makes Blue Nile unique is that it buys diamonds in real time which will enable it to make extra profit from the lower prices immediately.
According to Wall Street Journal , Blue Nile shares jumped 11% to $42.27, making it a top performer in the S&P retail sector. Stocks of other jewelers rose as well. Tiffany & Co (TIF) was up 5% to $26.52 while Zale Corp (ZLC) jumped 3.6% to $4.27. Most analysts noted that there was an improvement in the online sales of jewelry.
The average price of a diamond ring from Blue Nile was $6200 in 2007 but has dropped to $6000 today. Apart from the fact that Blue Nile has several hundred settings to choose from, these days the company is offering 20 to 40 discount off the average retailer. Blue Nile holds the record for the online sale of a large diamond for $1.5 million.
Established in 1999 Blue Nile had to struggle to compete with other jewelry retailers such as Tiffanys and Harry Winstons but today have listed over 60,000 diamonds online with sales of engagement rings which rival Tiffany’s.