Tag - Nile

In an interview on CNBC, Blue Nile President and CEO Diane Irvine said "[Monday] looks to be our best Cyber Monday ever…we've exceeded our expectations, and I think what you're seeing is that consumers are coming online and seeing the convenience and the value".

There's that word again, value. But while Blue Nile may offer value to affluent shoppers, with a trailing P/E of 81, the stock sure doesn't offer any value to investors.

Blue Nile was founded in 1999 and has grown into the largest online retailer of certified diamonds and fine jewelry in what is an extremely fragmented market, largely dominated by small mom-and-pop shops. But the company fills a definite need and market demand based on a simple idea: diamonds can be simple to understand and choosing an engagement ring need not be complicated.

The company's success allaying consumer anxiety and educating buyers has won accolades from Time, The Wall Street Journal, and Forbes over its ten year history. Two of my good friends bought engagement rings and wedding bands from the site, and raved about the outstanding value and great service. 

But oftentimes the share price of strong performers exceeds the true value of the company. And this is certainly the case with Blue Nile.

Blue Nile's stock has increased 168% over the last 52-weeks. That performance tops the S&P 500's 34% rally and the S&P Retail Index's 69% gain. But this extreme out-performance is not where the story ends with this high flyer.

Blue Nile has grown revenues at just an average annual rate of 7.6% from 2006 through 2009 (including estimates for 2009 Q4), and increased earnings per share at only 8.3%. Hardly the explosive growth that the stock's current P/E would suggest. Clearly forward guidance should validate the share price, right?

Wrong. Consensus analyst estimates for 2010 revenue and EPS growth are 15% and 29%, respectively. That puts 2010 EPS at $1.12, and the stock is trading at forward P/E of 53. That's still extremely rich, no matter what kind of jewels the company sells. And even though affluent shoppers may increasingly opt for a $20,000 piece of jewelry from Blue Nile versus the same thing on Fifth Avenue for $30,000, the company's slim 3.8% profit margin will require much more then 15% revenue growth to justify the stocks price.

There is an expectation building in the market that I just can't support – and it has everything to do with the American consumer. Retail stocks are trading at elevated multiples on expectations that the consumer is healthier then economic data suggests. But don't be fooled, these stocks are expensive and the last thing you want to do going into the New Year is buy an overpriced stock - especially when you should be bargain hunting.

American consumers will begin to show their true colors when they make an appearance at their favorite mall or retail outlet this Black Friday - the official kick-off to the holiday shopping season.

The Friday after Thanksgiving marks the day when many retailers can count on high store traffic as consumers hit shopping malls and web sites around the country. But it can also be a rather dark day for consumers who find themselves racing through isle after isle to get the goods, crammed elbow to elbow while they wait in the cashier's line, and sit in traffic with the rest of the county.

While this may indeed be a Black Friday for retailers and consumers, I'm not expecting great results from the overall holiday shopping season.

But don't tell that to the market, as it seems to think boon times are ahead for the retail sector. The stock market is pricing in a strong holiday shopping season according to the current price level of the S&P Retail Index (Chicago Options: ^RLX). The index is trading just 1.8% below the 52-week high it hit last Monday, and at levels not seen since September of 2008. And since the 2009 March lows, the index has outperformed the broader S&P 500 by 15%.

For an industry that has experienced the negative impact of this recession first hand, it seems surprising that investors have flocked to retailers. Certainly the retail companies that have survived the downturn thus far are likely to remain in business through this economic cycle. But the dismal financial performance of many retailers makes it difficult to justify the recent run up in their share prices. And the recent rise of retail stocks tells me the market has priced in more than we should expect out of this year's holiday sales.

Sinovac Biotech Ltd. (Nasdaq:SVA), Nanometrics Inc. (Nasdaq:NANO) and Aspect Medical Systems Inc. (Nasdaq:ASPM) are among the new 52-week highs in Tuesday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Internet Gold-Golden Lines Ltd. (Nasdaq:IGLD), Blue Nile Inc. (Nasdaq:NILE), Big 5 Sporting Goods Corp. (Nasdaq:BGFV), Evercore Partners Inc. (Nasdaq:EVR), Radian Group Inc. (Nasdaq:RDN) and Broadpoint Gleacher Securities Group Inc. (Nasdaq:BPSG).

Hi-Tech Pharmacal Inc. (Nasdaq:HITK), Noven Pharmaceuticals Inc. (Nasdaq:NOVN) and Interactive Intelligence Inc. (Nasdaq:ININ) are among the biggest percentage gainers in Tuesday's trading among companies with market capitalizations under $1 billion.

Also included among the results: USEC Inc. (Nasdaq:USU), Excel Maritime Carriers Ltd. (Nasdaq:EXM), American Dairy Inc. (Nasdaq:ADY), Fuqi International Inc. (Nasdaq:FUQI), Xyratex Ltd. (Nasdaq:XRTX) and Blue Nile Inc.. (Nasdaq:NILE).

Rigel Pharmaceuticals Inc. (Nasdaq:RIGL), MSC Software Corp. (Nasdaq:MSCS) and Blue Nile Inc. (Nasdaq:NILE) are among the most actively traded companies in Thursday's trading among companies with market capitalizations under $1 billion.

Also included among the results: World Acceptance Corp. (Nasdaq:WRLD), MAP Pharmaceuticals Inc. (Nasdaq:MAPP), Century Aluminum Co. (Nasdaq:CENX), Ciena Corp. (Nasdaq:CIEN), Helen of Troy Ltd. (Nasdaq:HELE) and Solarfun Power Holdings Co Ltd. (Nasdaq:SOLF).

Banco Macro SA (Nasdaq:BMA), 4 Kids Entertainment Inc. (Nasdaq:KDE) and Blue Nile Inc. (Nasdaq:NILE) are among the new 52-week lows in Tuesday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Group 1 Automotive, Inc. (Nasdaq:GPI), Quixote Corp. (Nasdaq:QUIX), Hiveld Steel Depository Receipt (Nasdaq:HSVLY), CSS Industries Inc. (Nasdaq:CSS), Federal Mogul Corp. (Nasdaq:FDML) and Intermec Inc. (Nasdaq:IN).

Here are the new 52-week lows among small caps:

The Russell 2000 (NYSE: IWM) posted a big rise following news of a surprising increase in U.S. retail sales in January. The small-cap index gained 16.45 points, or 2.33%, to 721.93, its third consecutive increase. The Dow Jones Industrial Average (INDU) advanced 178.83 points, or 1.45%, to 12,552.24.

On a year-to-date basis, the Russell 2000 has dropped 5.76%, while the Dow is missing 5.37% and the S&P 500 has fallen 6.89%.

Stocks small and large opened with a jump on news that retail sales rose 0.3% to $382.9 billion in January, according to the U.S. Commerce Department reported. The results beat economists’ forecast of a 0.2% decline and represent an improvement over December’s 0.4% drop.

Sales excluding autos also increased 0.3%, more than the projected 0.2%. Sales excluding gasoline rose just 0.1%.

The data put investors in a bullish mood, easing fears that a pullback in consumption that will send the economy into recession. Consumer spending is about 70% of U.S. gross domestic product.

But Arun Raha, vice president of Economic Research and Consulting for the North American operations of reinsurance company Swiss Re, cautions against reading too much into the data.

“While this was definitely better than another decline, it is not enough to ease fears that the economy remains weak, and that consumer spending is softening,” Raha said in a phone interview.

The numbers show that much of the gains were due to higher sales of cars and gasoline, while sales of many other goods declined.

A separate report by the Commerce Department showed that business inventories climbed by a greater-than-expected 0.6% in December, while business sales fell 0.5%.

That’s a sign of a weakening economy.

“The risk of recession in the 12 months remains elevated at around 55%,” Raha said.

The bulls nevertheless went on a rampage today, gaining strength as the session went on and making the Russell 2000 the biggest winner among the major U.S. indices.

Here are the day’s biggest percentage gainers and losers, along with top volume leaders, among companies with a market cap between $100 million and $750 million:

The Russell 2000 (NYSE: IWM) is soaring on news of surprisingly strong January U.S. retail sales.

At 1:02 p.m. ET, the small-cap index had added 10.33 points, or 1.46%, to 715.81. The Dow Jones Industrial Average (INDU) was up 97.38 points, or 0.79%, to 12,470.79.

Wall Street is enjoying a lift as news of better-than-expected U.S. retail sales in January relaxes fears of a recession.

Retail sales rose 0.3% to $382.9 billion in January, the U.S. Commerce Department reported before the start of trading. The results beat economists’ forecast of a 0.2% decline and represent an improvement over December’s 0.4% drop.

Sales excluding autos also increased 0.3%, more than the projected 0.2%. Sales excluding gasoline rose just 0.1%.

The numbers are good news for those worried that a pullback in consumption that will send the economy into recession. Consumer spending is about 70% of U.S. gross domestic product.

Breaking down the data, furniture sales fell, as did sales of electronics. Department store sales also declined, while sales of motor vehicles and parts increased.

A report by the Commerce Department after the opening bell said that business inventories climbed by a greater-than-expected 0.6% in December, while business sales fell 0.5%.