Industry Analysis

Blue Nile Sale Surprises Analysts, Argyle Auctions ‘Best’ Colours

An oval-shaped purple diamond on a pink, green, blue and white background.
The Argyle Violet is a 2.83 carat polished oval shaped diamond, the largest violet diamond from Rio Tinto’s Argyle Diamond Mine. It is part of the Chroma Collection. Photo courtesy of Rio Tinto

The deal that will see Blue Nile go to an investment group headed by Bain Capital Private Equity is likely to mean big changes for the online diamond retailer. The company, whose double-digit growth had dazzled the U.S. retail jewellery industry in the previous decade, had plateaued in recent years with sales hovering between $450 million (£360 million) and $480 million (£380 million). Its net profits were about 2% of sales, running to about $10 million (£8 million) yearly.

The purchase price of $500 million (£400 million) paid by Bain and Bow Street LLC surprised some analysts. It was 30% over the share price and the small profit ratio, even with the company’s $109 million (£87 million) in assets, means it could take many years to recoup the investment without significant changes in the company’s business model.

Engagement rings have been Blue Nile’s staple since its founding in 1999, representing 60%-75% of sales. In recent years, however, as the number of marriages in the U.S. has stagnated, the company had attempted to shift its focus to designer pieces and international sales. Its success in both areas has been limited. Neither Bain nor Bow Street indicated what changes may be in the offing, except to state they are “looking forward to working alongside Blue Nile management to execute the company’s strategy”.  

Blue Nile reported sales of $105.1 million (£83.9 million) for the third quarter of 2016, down nearly 5% from the comparable quarter last year. Net income was $1.3 million (£1 million), or slightly over 1%. Diamond engagement ring sales declined 8.5% during the period to $59.5 million (£47.5 million). International sales rose slightly in the quarter.

The deal is likely to be sealed early next year. Bain Capital Private Equity is the venture capital arm of Bain Capital.

A oval-shaped red diamond on a pink, blue, purple and white background.
The Argyle Aria, a 1.09 ct oval-shaped Fancy red diamond, is part of the Chroma Collection. Photo courtesy of Rio Tinto


Rio Tinto is finding that deeper may be better as far as fancy coloured diamonds from its Argyle Mine are concerned.

This year’s offering of fancy colours comprised the highest size, colour and clarity combination in the 32 years of auctioning such stones. All of the diamonds came from the new underground operation that began three years ago.

The group, named the Chroma Collection, consists of 63 stones, weighing 58.24 carats total. It included 57 pink, two violet and four red diamonds, all graded by GIA.  

The largest was the 2.83 carat (ct) Argyle Violet, the biggest violet diamond ever found at the mine. GIA graded the colour Fancy Deep greyish bluish violet. The other violet diamond, the Argyle Ultra, was a 1.11 ct Fancy Dark grey-violet pear shape.

Other highlights of the Chroma Collection include the Argyle Thea, a 2.24 ct Fancy Vivid purplish pink; the Argyle Viva, a 1.21 ct Fancy Vivid purple-pink; and the Argyle Aria, a 1.09 ct Fancy red.

Rio Tinto said in a statement that this tender achieved record results, but it did not announce sale prices or the total realised for the collection.

Russell Shor is senior industry analyst at GIA in Carlsbad.