[R]1:00PM New York---International sales push Blue Nile third quarter profit up 26.5%, as company raises profit guidance.[/R]

Blue Nile Inc, Internet based jewelry retailer, reported third quarter net sales increase of 26.5% to $67.4 million compared with $53.2 million reported in the year ago quarter.

The growth was led by a 105% increase in international sales with U.K and Canada sales increased to $4.5 million.

In the quarter, net earnings rose 66.7% to $3 million from $1.8 million from a year earlier. This translated in per share earnings of 18 cents up 63.6% from 11 cents posted in the same period in 2006.

In early Wednesday trade, Blue Nile stocks surged 8.22% or $6.72 to $81.40 from Tuesday closing price of $74.68.

Blue Nile said operating income gained 67.3% to $3.6 million from $2.2 million a year earlier. Gross profit increased 28.4% to $13.4 million from $10.4 million previously. As a percentage of sales, gross profit margins increased to 19.8% from 19.5%.

Net cash generated in the quarter rose to $33.2 million compared to $30.3 million last year on capital expenditures of $1.5 million, up 200% from $0.5 million in the prior year.

Expenses rose 18% to $9.7 million from $8.2 million and as a percentage of sales fell to 14.5% from 15.5% in 2006. Included in the overhead figure is a stock based compensation expense of $1.4 million from $1.2 million.

In the nine months to September 30, Blue Nile net sales rose 28.9% to $207.35 million from $160.85 million in the year ago quarter.

Net earnings rose 35.6% to $9.91 million or 59 cents per share from $7.31 million or 42 cents per share last year.

Blue Nile has raised fourth quarter net sales forecasts to between $109 million and $115 million and between $316 million and $322 million at full-year. Analysts at Thomson Financial have guided fourth quarter sales at $82.69 million and $321.7 million for fiscal 2007.

Blue Nile estimated fourth quarter earnings in the range of 40 cents per share to 45 cents per share. For the year, earnings per share are estimated between $1 and $1.05.

Capital expenditures are expected to be approximately $5 million for the year. Capital expenditures for 2007 include investments related to the expansion of the company''s U.S. fulfillment centre and its new international facility in Ireland.

Blue Nile, Inc. sells diamonds and fine jewelry online only. In the last 52-weeks Blue Nile has traded between $33.05 and $106.16 and trades at a earnings multiple of 93.50 on trailing earnings.

[R]11:00AM New York – U.S. stocks declined in the morning hours on falling dollar, rising metals prices, and less than expected decline in weekly oil inventory.[/R]

U.S. market averages fell in the first hour of trading on rising oil and metals prices, declining dollar, and a huge loss from General Motors.

Dow Jones Industrial Average declined 131 to 13,527, Nasdaq lost 29 to 2,796, and S&P 500 fell 17 to 1,503.29.

Chinese government official indicated that China may diversify its large and growing foreign currency reserve away from a ‘weak’ currency like dollar. China has $1.43 trillion in foreign reserves. Separately Japan reported that at the end of October its foreign currency reserve stood near $890 billion.

The comments from the Chinese official sent dollar to a record low against euro and pound and multi-year low against Australian dollar, Indian rupee, Thai baht, and Korean Won.