Stecyk

Blue Nile: A Classic Underpromise, Overdeliver Company

You're right, ZLC has only $965M market cap today. It was much larger back in March. And nearly double that amount in July 2006.

With regard to my $2-5 billion, while it is true that Zales value alone won't provide all the value, other jewelry retailers might. According to ZLC's last 10K (July 31), their revenue was $2.4 billion. That would seem to imply, at least to me, that jewelry is a highly fragmented market. So an effective online retail jewelry might sell that amount and much more in a short period. And remember, NILE is serving Europe too, not just North America.

I can almost see your reply now suggesting that the NILE's growth rates don't seem to support that assertion. After all, NILE, a small upstart, already has anticipated annual revenues of $320 million. My reply is that we are still in the early innings. We really don't know how well internet commerce will play out. I remain confident, however, that NILE's best days are ahead.

I recall when traditional bookstores were plentiful. I still remember going to specialty bookstores for specialty books. Now, I just use Amazon and my prior bookstores have disappeared. Poof, gone.

Will that happen to jewelry retailers? I don't think it will to the same extent. But I do think traditional retailers will need to adapt in order to survive.

I remain bullish and you remain bearish on NILE. That's what makes markets, no?