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Blue Nile Announces Financial Results for the Third Quarter and Nine Months Ended October 3, 2004; Provides Guidance for the Fourth Quarter and Full Year of 2004

October 26, 2004 - Blue Nile, Inc. reported financial results for the third quarter of 2004, which ended October 3, 2004. For the third quarter, net sales of $33.9 million, compared to net sales of $27.5 million in the third quarter of 2003, an increase of 23.4%. Income before income taxes in the third quarter increased 18.5% to $2.6 million, compared to $2.2 million in the third quarter of 2003. Net income in the third quarter was $1.7 million, or $0.09 per diluted share, and was fully subject to income tax. In the third quarter of 2003, net income and net income per diluted share were $2.2 million and $0.13, respectively, with no income tax expense reflected as a result of a valuation allowance that was recorded against deferred tax assets. Net sales for the year-to-date ended October 3, 2004 were $104.7 million, an increase of 32.0% from $79.3 million in the nine months ended September 30, 2003. Income before income taxes was $8.5 million for the year-to-date ended October 3, 2004, compared to $6.1 million in the nine months ended September 30, 2003. Year-to-date net income and net income per diluted share for the period ended October 3, 2004 were $5.4 million and $0.31, respectively, compared to $6.1 million and $0.38 per diluted share in the nine months ended September 30, 2003. For the fourth quarter of 2004, net sales are expected to be between $58.0 million and $62.0 million. Net income is expected to be between $0.20 and $0.23 per diluted share. For full year 2004, net sales are expected to be between $162.5 million and $166.5 million. Net income is expected to be in a range of $0.51 to $0.54 per diluted share.