##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  FORM 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    January 4, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number
    000-50763
  Blue Nile, Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

91-1963165(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)   705 Fifth
    Avenue South, Suite 900
    Seattle, Washington 98104(206) 336-6700
 (Address and telephone number,
    including area code, of principal executive offices)
    Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $.001 Par Value

The NASDAQ Stock Market LLC    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large accelerated
    filer þ

Accelerated
    filer oNon-accelerated
    filer o

Smaller reporting
    company o(do not check if a smaller reporting company)   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




---



##### 





BLUE
    NILE, INC.
  ANNUAL
    REPORT ON
    FORM 10-K
    FOR THE FISCAL YEAR ENDED JANUARY 4, 2009
   
 PagePART IItem 1.


Business


3Item 1A.


Risk Factors


8Item 1B.


Unresolved Staff Comments


21Item 2.


Properties


21Item 3.


Legal Proceedings


22Item 4.


Submission of Matters to a Vote of Security
    Holders


22PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


22Item 6.


Selected Consolidated Financial Data


24Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


26Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


34Item 8.


Financial Statements and Supplementary Data


36Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


60Item 9A.


Controls and Procedures


60Item 9B.


Other Information


62PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


62Item 11.


Executive Compensation


62Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


62Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


62Item 14.


Principal Accounting Fees and Services


62PART IVItem 15.


Exhibits and Financial Statement Schedules


63SIGNATURES


64EXHIBIT INDEX


66EX-10.4.4EX-10.12EX-10.16EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   2




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##### Table of Contents



PART I  Item 1.
    Business  This Annual Report on
    Form 10-K
    contains forward-looking statements that involve many risks and
    uncertainties. These statements, which relate to future events
    and our future performance, are based on current expectations,
    estimates, forecasts and projections about the industries in
    which we operate and the beliefs and assumptions of our
    management as of the date of this filing. In some cases, you can
    identify forward-looking statements by terms such as
    would, could, may,
    will, should, expect,
    intend, plan, anticipate,
    believe, estimate, predict,
    potential, target, seek, or
    continue, the negative of these terms or other
    variations of such terms. In addition, any statements that refer
    to projections of our future financial performance, our
    anticipated growth and trends in our business and other
    characterizations of future events or circumstances are
    forward-looking statements. These statements are only
    predictions based upon assumptions made that are believed to be
    reasonable at the time, and are subject to risk and
    uncertainties. Therefore, actual events or results may differ
    materially and adversely from those expressed in any
    forward-looking statement. In evaluating these statements, you
    should specifically consider the risks described under the
    caption Item 1A Risk Factors and elsewhere in
    this
    Form 10-K.
    These factors, and other factors, may cause our actual results
    to differ materially from any forward-looking statements. Except
    as required by law, we undertake no obligation to publicly
    update or revise any forward-looking statements, whether as a
    result of new information, future events or otherwise.
  Overview
        mark-ups
   3




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##### Table of Contents



Business
    Strategies
    Innovate
    and Enhance the Blue Nile Customer Experience
    Expand
    International Markets
  Form 10-K.
  Optimize
    Profitability and Cash Flow
   4




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Enhance
    Product Assortment
    Blue
    Niles Product Offerings and Supplier
    Relationships
          Marketing
   5




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Customer
    Service and Support
    Fulfillment
    Operations
    Technology
    and Systems
    Seasonality
    Competition
    
    independent jewelry stores, 6




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##### Table of Contents




    retail jewelry store chains,
    other online retailers that sell jewelry,
    department stores, chain stores and mass retailers,
    online auction sites,
    catalog and television shopping retailers, and
    discount superstores and wholesale clubs.      Intellectual
    Property
    Employees
    Available
    Information
  Form 10-K, Form 10-Q, Form 8-K 1-800-SEC-0330.
 7




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##### Table of Contents



Regulation S-K Form 8-K.
  Item 1A.
    Risk
    Factors    General
    economic factors may materially and adversely affect our
    financial performance and results of operations.
      Our
    cash and cash equivalents are concentrated in a few financial
    institutions.
    Our
    limited operating history makes it difficult for us to
    accurately forecast net sales and appropriately plan our
    expenses.
   8




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We
    expect our quarterly financial results to fluctuate, which may
    lead to volatility in our stock price.
    
    demand for our products;
    the costs to acquire diamonds and precious metals;
    our ability to attract visitors to our websites and convert
    those visitors into customers;
    general economic conditions, both domestically and
    internationally;
    our ability to retain existing customers or encourage repeat
    purchases;
    our ability to manage our product mix and inventory;
    wholesale diamond prices;
    consumer tastes and preferences for diamonds and fine jewelry;
    our ability to manage our operations;
    the extent to which we provide for and pay taxes;
    stock-based compensation expense as a result of the nature,
    timing and amount of stock options granted, the underlying
    assumptions used in valuing these options, the estimated rate of
    stock option forfeitures and other factors;
    advertising and other marketing costs;
    our, or our competitors, pricing and marketing strategies;
    the introduction of competitive websites, products, price
    decreases or improvements;
    conditions or trends in the diamond and fine jewelry industry;
    conditions or trends in the Internet and
    e-commerce
    industry;
    the success of our geographic, service and product line
    expansions;
    foreign exchange rates;
    interest rates; and
    costs of expanding or enhancing our technology or websites.    As a
    result of seasonal fluctuations in our net sales, our quarterly
    results may fluctuate and could be below
    expectations.
   9




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Our
    failure to acquire quality diamonds and fine jewelry at
    commercially reasonable prices would result in higher costs and
    damage our operating results and competitive
    position.
        Our
    failure to meet customer expectations with respect to price
    would adversely affect our business and results of
    operations.
   10




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Our
    net sales may be negatively affected if we are required to
    collect taxes on purchases.
      We may
    not succeed in continuing to establish the Blue Nile brand,
    which would prevent us from acquiring customers and increasing
    our net sales.
     11




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In
    order to increase net sales and to sustain or increase
    profitability, we must attract customers in a
    cost-effective
    manner.
  e-commerce
  We
    face significant competition and may be unsuccessful in
    competing against current and future competitors.
    
    independent jewelry stores;
    retail jewelry store chains, such as Tiffany & Co. and
    Bailey Banks & Biddle;
    other online retailers that sell jewelry, such as Amazon.com;
    department stores, chain stores and mass retailers, such as
    Nordstrom and Neiman Marcus;
    online auction sites, such as eBay;
    catalog and television shopping retailers, such as Home Shopping
    Network and QVC; and
    discount superstores and wholesale clubs, such as Wal-Mart and
    Costco Wholesale.     12




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We may
    be unsuccessful in further expanding our operations
    internationally.
  Asia-Pacific
    
    the need to develop new supplier and jeweler relationships;
    international regulatory requirements, tariffs and duties;
    difficulties in staffing and managing foreign operations;
    longer payment cycles from credit card companies;
    greater difficulty in accounts receivable collection;
    our reliance on third-party carriers for product shipments to
    our customers;
    risk of theft of our products during shipment;
    limited shipping and insurance options for us and our customers;
    potential adverse tax consequences;
    foreign currency exchange risk;
    lack of infrastructure to adequately conduct electronic commerce
    transactions or fulfillment operations;
    unclear foreign intellectual property protection laws;
    laws and regulations related to corporate governance and
    employee/employer relationships;
    price controls or other restrictions on foreign currency;
    difficulties in obtaining export, import or other business
    licensing requirements;
    increased payment risk and greater difficulty addressing credit
    card fraud;
    consumer and data protection laws;
    lower levels of adoption or use of the Internet; and
    geopolitical events, including war and terrorism.   13




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We
    rely on our suppliers, third-party carriers and third-party
    jewelers as part of our fulfillment process, and these
    third parties may fail to adequately serve our
    customers.
    If our
    fulfillment operations are interrupted for any significant
    period of time, our business and results of operations would be
    substantially harmed.
    We
    rely on the services of our key personnel, any of whom would be
    difficult to replace.
    We
    face the risk of theft of our products from inventory or during
    shipment.
    If the
    single facility where substantially all of our computer and
    communications hardware is located fails, our business, results
    of operations and financial condition would be
    harmed.
   14




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Our
    failure to protect confidential information of our customers and
    our network against security breaches could damage our
    reputation and brand and substantially harm our business and
    results of operations.
    We
    rely exclusively on the sale of diamonds and fine jewelry for
    our net sales, and demand for these products could
    decline.
       15




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Interruptions
    to our systems that impair customer access to our websites would
    damage our reputation and brand and substantially harm our
    business and results of operations.
    If we
    are unable to accurately manage our inventory of fine jewelry,
    our reputation and results of operations could
    suffer.
    Repurchases
    of our common stock may not prove to be the best use of our cash
    resources.
  24-month 24-month 24-month
  We
    have foreign exchange risk.
   16




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We
    have incurred significant operating losses in the past and may
    not be able to sustain profitability in the
    future.
    Failure
    to adequately protect or enforce our intellectual property
    rights could substantially harm our business and results of
    operations.
        The
    success of our business may depend on our ability to
    successfully expand our product offerings.
   17




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Assertions
    by third parties of infringement by us of their intellectual
    property rights could result in significant costs and
    substantially harm our business and results of
    operations.
    Increased
    product returns and the failure to accurately predict product
    returns could substantially harm our business and results of
    operations.
  30-day
  Purchasers
    of diamonds and fine jewelry may not choose to shop online,
    which would prevent us from increasing net sales.
    
    concerns about buying luxury products such as diamonds and fine
    jewelry without a physical storefront, face-to-face interaction
    with sales personnel and the ability to physically handle and
    examine products;
    delivery time associated with Internet orders;
    product offerings that do not reflect consumer tastes and
    preferences;
    pricing that does not meet consumer expectations;
    concerns about the security of online transactions and the
    privacy of personal information;
    delayed shipments or shipments of incorrect or damaged products;
    inconvenience associated with returning or exchanging Internet
    purchased items; and
    usability, functions and features of our websites.  If use
    of the Internet, particularly with respect to online commerce,
    does not continue to increase as rapidly as we anticipate, our
    business will be harmed.
   18




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
    actual or perceived lack of security of information or privacy
    protection;
    possible disruptions, computer viruses, spyware, phishing,
    attacks or other damage to the Internet servers, service
    providers, network carriers and Internet companies or to
    users computers; and
    excessive governmental regulation.    Our
    failure to address risks associated with payment methods, credit
    card fraud and other consumer fraud could damage our reputation
    and brand and may cause our business and results of operations
    to suffer.
    We
    rely on our relationships with third-party consumer credit
    companies to offer financing for the purchase of our
    products.
    We may
    undertake acquisitions to expand our business, which may pose
    risks to our business and dilute the ownership of our existing
    stockholders.
   19




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Our
    failure to rapidly respond to technological change could result
    in our services or systems becoming obsolete and substantially
    harm our business and results of operations.
    We may
    have exposure to greater than anticipated tax
    liabilities.
    Government
    regulation of the Internet and
    e-commerce
    is evolving and unfavorable changes could substantially harm our
    business and results of operations.
     20




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We may
    need to implement additional finance and accounting systems,
    procedures and controls as we grow our business and organization
    and to satisfy new reporting requirements.
    Our
    failure to effectively manage the growth in our operations may
    prevent us from successfully expanding our
    business.
    
    transaction-processing and fulfillment;
    inventory management;
    customer support;
    management of multiple supplier relationships;
    operational, financial and managerial controls;
    reporting procedures;
    management of our facilities;
    recruitment, training, supervision, retention and management of
    our employees; and
    technology operations.    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties   21




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Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    Information and Dividend Policy
      High


LowFiscal year 2008:First Quarter

$
70.80


$
38.35Second Quarter

$
55.95


$
41.73Third Quarter

$
52.50


$
33.76Fourth Quarter

$
44.98


$
20.09Fiscal year 2007:First Quarter

$
42.45


$
36.54Second Quarter

$
62.30


$
40.53Third Quarter

$
106.16


$
60.69Fourth Quarter

$
103.69


$
64.20    22




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Performance
    Measurement Comparison(1)
    COMPARISON
    OF 55 MONTH CUMULATIVE TOTAL RETURN(2)
    Among Blue Nile, Inc., The NASDAQ Composite Index
    And The RDG Internet Composite Index
   
     (1)
    
    This Section is not soliciting material, is not
    deemed filed with the SEC and is not to be
    incorporated by reference in any of our filings under the
    1933 Act or the 1934 Act whether made before or after
    the date hereof and irrespective of any general incorporation
    language in any such filing.(2)
    
    Assumes $100 was invested on May 20, 2004, at the closing
    price on the date of Blue Niles initial public offering,
    in Blue Niles common stock and each index, and all
    dividends have been reinvested. No cash dividends have been
    declared on Blue Niles common stock. Stockholder returns
    over the indicated period should not be considered indicative of
    future stockholder returns.  Issuer
    Purchases of Equity Securities
  24-month 24-month 24-month Rule 10b5-1
 23




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##### Table of Contents



Total Number of


Approximate DollarShares Purchased as


Value of SharesTotal Number


Average


Part of Publicly


that May Yet Beof Shares


Price Paid


Announced Plans or


Purchased Under thePurchased


per Share


Programs


Plans or Programs(In thousands)September 29, 2008 through
    October 26, 2008


31,400


$
37.47



31,400


$
83,550October 27, 2008 through
    November 23, 2008





$







$
83,550November 24, 2008 through
    January 4, 2009





$







$
83,550Total shares purchased


31,400







31,400   Item 6.
    Selected
    Consolidated Financial Data    Form 10-K.
 24




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BLUE
    NILE, INC.
  SELECTED
    CONSOLIDATED FINANCIAL DATA
  Year Ended


Year Ended


Year Ended


Year Ended


Year EndedJanuary 4,


December 30,


December 31,


January 1,


January 2,2009 (2)


2007


2006


2006


2005(In thousands, except per share data)Consolidated Statements of Operations Data:Net sales

$
295,329


$
319,264


$
251,587


$
203,169


$
169,242Gross profit


59,996



65,204



50,853



45,042



37,584Selling, general and administrative expenses


44,005



42,792



34,296



26,993



22,727Operating income


15,991



22,412



16,557



18,049



14,857Income before income taxes


17,856



26,587



19,980



20,553



15,629Income tax expense


6,226



9,128



6,916



7,400



5,642Net income

$
11,630


$
17,459


$
13,064


$
13,153


$
9,987Basic net income per share

$
0.78


$
1.10


$
0.79


$
0.75


$
0.80Diluted net income per share

$
0.75


$
1.04


$
0.76


$
0.71


$
0.56Shares used in computing basic net income per share


14,925



15,919



16,563



17,550



12,450Shares used in computing diluted net income per share


15,505



16,814



17,278



18,597



17,885Additional Operating Data:Net cash (used in) provided by operating activities

$
(2,927
)

$
41,455


$
40,518


$
31,272


$
29,751Gross profit margin


20.3
%


20.4
%


20.2
%


22.2
%


22.2
%Selling, general and administrative expenses as a percentage of
    net sales


14.9
%


13.4
%


13.6
%


13.3
%


13.5
%   As of


As of


As of


As of


As ofJanuary 4,


December 30,


December 31,


January 1,


January 2,2009 (2)


2007


2006


2006


2005(In thousands)Consolidated Balance Sheet Data:Cash and cash equivalents

$
54,451


$
122,793


$
78,540


$
71,921


$
59,499Marketable securities










19,767



42,748



41,868Accounts receivable


1,709



3,576



1,640



1,877



1,028Inventories


18,834



20,906



14,616



11,764



9,914Accounts payable


62,291



85,866



66,625



50,157



37,775Working capital(1)


7,589



53,455



41,881



76,869



77,838Total assets


89,665



160,586



122,106



138,005



128,382Total long-term obligations


1,213



1,418



666



863



1,071Total stockholders equity


19,308



63,477



47,303



81,515



83,620     (1)
    
    Working capital consists of total current assets, including cash
    and cash equivalents, less total current liabilities.(2)
    
    Fiscal year 2008 consists of 53 weeks, which is one week
    longer than prior fiscal years. 25




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion should be read in conjunction with
    the consolidated financial statements and related notes which
    appear elsewhere in this report. This discussion contains
    forward-looking statements that involve risks and uncertainties.
    Our actual results could differ materially from those
    anticipated in these forward-looking statements as a result of
    various factors, including those discussed below and elsewhere
    in this report, particularly under the heading
    Item 1A. Risk Factors.
  Management
    Overview
  About
    Blue Nile
    1
  Differentiating
    Factors and Value Proposition
      60-90 day
  step-by-step
      1
 26




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Seasonality
    Future
    Growth Opportunities
      Trends
    Critical
    Accounting Policies
    Revenue
    Recognition
   27




---



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Stock-based
    Compensation
      Increase

DecreaseExpected term(1)


5.8
%


(6.3
)%Expected volatility(1)


8.3
%


(8.5
)%     (1)
    
    Sensitivity to change in assumptions was determined using the
    Black-Scholes-Merton valuation model compared to the following
    original assumptions: stock price and exercise price equal to
    the closing market price of Blue Nile, Inc. common stock on
    January 2, 2009, expected term of 4.0 years, expected
    volatility of 48.1%, expected dividend yield of 0.0% and a risk
    free interest rate of 2.5%.  Results
    of Operations
    Year Ended


Year Ended


Year EndedJanuary 4,


December 30,


December 31,2009


2007


2006Net sales


100.0
%


100.0
%


100.0
%Gross profit


20.3



20.4



20.2Selling, general and administrative expenses


14.9



13.4



13.6Operating income


5.4



7.0



6.6Other income (expense), net


0.6



1.3



1.3Income before income taxes


6.0



8.3



7.9Income tax expense


2.1



2.8



2.7Net income


3.9
%


5.5
%


5.2
%     Net Sales.
  Gross Profit.
 28




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Selling, General and Administrative
    Expenses.
  Fiscal Year.
    Comparison of


Comparison ofYear Ended


Year EndedJanuary 4, 2009 to


December 30, 2007 toYear Ended


Year Ended


Year Ended


Year Ended


Year EndedJanuary 4,


December 30,


December 31,


December 30, 2007


December 31, 20062009(2)


2007


2006


$ Change


% Change


$ Change


% ChangeNet sales

$
295,329


$
319,264


$
251,587


$
(23,935
)


(7.5
)%

$
67,677



26.9
%Cost of sales


235,333



254,060



200,734



(18,727
)


(7.4
)%


53,326



26.6
%Gross profit


59,996



65,204



50,853



(5,208
)


(8.0
)%


14,351



28.2
%Selling, general and administrative expenses


44,005



42,792



34,296



1,213



2.8
%


8,496



24.8
%Operating income


15,991



22,412



16,557



(6,421
)


(28.6
)%


5,855



35.4
%Other income, net:Interest income, net


1,420



3,760



3,323



(2,340
)


(62.2
)%


437



13.2
%Other income, net


445



415



100



30



7.2
%


315



nm
(1)1,865



4,175



3,423



(2,310
)


(55.3
)%


752



22.0
%Income before income taxes


17,856



26,587



19,980



(8,731
)


(32.8
)%


6,607



33.1
%Income tax expense


6,226



9,128



6,916



(2,902
)


(31.8
)%


2,212



32.0
%Net income

$
11,630


$
17,459


$
13,064


$
(5,829
)


(33.4
)%

$
4,395



33.6
%Basic net income per share

$
0.78


$
1.10


$
0.79


$
(0.32
)


(29.1
)%

$
0.31



39.2
%Diluted net income per share

$
0.75


$
1.04


$
0.76


$
(0.29
)


(27.9
)%

$
0.28



36.8
%     (1)
    
    nm  not meaningful(2)
    
    Fiscal year consists of 53 weeks  Comparison
    of Year Ended January 4, 2009 to Year Ended
    December 30, 2007
  Net
    Sales
   29




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Gross
    Profit
      Selling,
    General and Administrative Expenses
   30




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Other
    Income, Net
    Income
    Taxes
    Comparison
    of Year Ended December 30, 2007 to Year Ended
    December 31, 2006
  Net
    Sales
    Gross
    Profit
    Selling,
    General and Administrative Expenses
   31




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Other
    Income, Net
    Income
    Taxes
    Liquidity
    and Capital Resources
           32




---



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and/or
  24-month 24-month Rule 10b5-1
   33




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Less Than








Over 5Contractual Obligations

Total


1 Year


1-3 Years


3-5 Years


YearsOperating leases

$
1,799


$
514


$
831


$
321


$
132Financing obligation


369



59



120



136



54Purchase obligations(1)


4,152



4,152











Purchase obligations(2)


132



132











$
6,452


$
4,857


$
951


$
457


$
186     (1)
    
    Includes open merchandise purchase orders at January 4,
    2009.(2)
    
    Includes commitments for advertising and marketing services at
    January 4, 2009.    Off-Balance
    Sheet Arrangements
    Impact of
    Inflation
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest
    Rate Risk
     34




---



##### Table of Contents



Foreign
    Currency Exchange Risk
     35




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data  Index to
    Consolidated Financial Statements
   
 PageFinancial StatementsReport of Independent Registered Public
    Accounting Firm


37Consolidated Balance Sheets, as of
    January 4, 2009 and December 30, 2007


38Consolidated Statements of Operations, for the
    fiscal years ended January 4, 2009, December 30, 2007
    and December 31, 2006


39Consolidated Statements of Changes in
    Stockholders Equity, for the fiscal years ended
    January 4, 2009, December 30, 2007 and
    December 31, 2006


40Consolidated Statements of Cash Flows, for the
    fiscal years ended January 4, 2009, December 30, 2007
    and December 31, 2006


41Notes to Consolidated Financial Statements


43Selected Quarterly Financial Information
    (unaudited)


58Financial Statement ScheduleSchedule II, Valuation and Qualifying
    Accounts


59All other schedules are omitted because they are not applicable
    or the required information is shown in the financial statements
    or notes thereto.   36




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            Considering the Effects of Prior
    Year Misstatements when Quantifying Misstatements in the Current
    Year Financial Statements
  Internal Control  Integrated Framework
       37




---



##### Table of Contents



BLUE
    NILE, INC.
  Consolidated Balance Sheets
 (In thousands, except par value)
  January 4,


December 30,2009


2007ASSETSCurrent assets:Cash and cash equivalents

$
54,451


$
122,793Trade accounts receivable


984



2,452Other accounts receivable


725



1,124Inventories


18,834



20,906Deferred income taxes


670



799Prepaids and other current assets


1,069



1,072Total current assets


76,733



149,146Property and equipment, net


7,558



7,601Intangible assets, net


271



286Deferred income taxes


5,014



3,489Other assets


89



64Total assets

$
89,665


$
160,586LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
62,291


$
85,866Accrued liabilities


6,607



9,549Current portion of long-term financing obligation


41



38Current portion of deferred rent


205



238Total current liabilities


69,144



95,691Long-term financing obligation, less current portion


839



880Deferred rent, less current portion


374



538Stockholders equity:Preferred stock, $0.001 par value; 5,000 shares
    authorized, none issued and outstanding






Common stock, $0.001 par value; 300,000 shares
    authorized; 19,659 shares and 19,513 shares issued,
    respectively; 14,493 shares and 15,973 shares
    outstanding, respectively


20



20Additional paid-in capital


144,913



134,207Deferred compensation






(3
)Accumulated other comprehensive income


17



75Retained earnings


36,199



24,569Treasury stock, at cost; 5,166 shares and 3,540 shares
    outstanding, respectively


(161,841
)


(95,391
)Total stockholders equity


19,308



63,477Total liabilities and stockholders equity

$
89,665


$
160,586    38




---



##### Table of Contents



BLUE
    NILE, INC.
  Consolidated Statements of Operations
 (In thousands, except per share data)
  Year Ended


Year Ended


Year EndedJanuary 4,


December 30,


December 31,2009


2007


2006Net sales

$
295,329


$
319,264


$
251,587Cost of sales


235,333



254,060



200,734Gross profit


59,996



65,204



50,853Selling, general and administrative expenses


44,005



42,792



34,296Operating income


15,991



22,412



16,557Other income, net:Interest income, net


1,420



3,760



3,323Other income, net


445



415



100Total other income, net


1,865



4,175



3,423Income before income taxes


17,856



26,587



19,980Income tax expense


6,226



9,128



6,916Net income

$
11,630


$
17,459


$
13,064Basic net income per share

$
0.78


$
1.10


$
0.79Diluted net income per share

$
0.75


$
1.04


$
0.76    39




---



##### Table of Contents



BLUE
    NILE, INC.
  Consolidated Statements of Changes in
    Stockholders Equity
 (In thousands)
  AccumulatedAdditional





Retained Earnings


Other








TotalCommon Stock


Paid-in


Deferred Stock


(Accumulated


Comprehensive


Treasury Stock


StockholdersShares


Amount


Capital


Compensation


Deficit)


Income (Loss)


Shares


Amount


EquityBalance, January 1, 2006


18,646


$
19


$
106,341


$
(480
)

$
(6,362
)

$
5



(1,315
)

$
(18,008
)

$
81,515Adjustment to beginning accumulated deficit (Note 1)


















408















408Net income


















13,064















13,064Other comprehensive income (loss):Unrealized loss on marketable securities, net of tax






















(7
)










(7
)Total comprehensive income


































13,057Tax benefit from exercise of stock options










2,961























2,961Amortization of deferred stock compensation














269



















269Reversal of deferred compensation relating to cancelled options










(31
)


31



















Exercise of common stock options


425







2,251























2,251Issuance of common stock to directors


2







94























94Stock-based compensation










4,135























4,135Repurchase of common stock


























(1,786
)


(57,387
)


(57,387
)Balance, December 31, 2006


19,073



19



115,751



(180
)


7,110



(2
)


(3,101
)


(75,395
)


47,303Net income


















17,459















17,459Other comprehensive income (loss):Reclassification of unrealized loss, net of tax






















2











2Foreign currency translation adjustment






















75











75Total comprehensive income


































17,536Tax benefit from exercise of stock options










6,848























6,848Amortization of deferred stock compensation














172



















172Reversal of deferred compensation relating to cancelled options










(5
)


5



















Exercise of common stock options


438



1



5,874























5,875Issuance of common stock to directors


2







97























97Stock-based compensation










5,642























5,642Repurchase of common stock


























(439
)


(19,996
)


(19,996
)Balance, December 30, 2007


19,513



20



134,207



(3
)


24,569



75



(3,540
)


(95,391
)


63,477Net income


















11,630















11,630Other comprehensive income (loss):Foreign currency translation adjustment






















(58
)










(58
)Total comprehensive income


































11,572Tax benefit from exercise of stock options










510























510Amortization of deferred stock compensation














3



















3Exercise of common stock options


142







2,989























2,989Issuance of common stock to directors


4







130























130Stock-based compensation










7,077























7,077Repurchase of common stock


























(1,626
)


(66,450
)


(66,450
)Balance, January 4, 2009


19,659


$
20


$
144,913


$



$
36,199


$
17



(5,166
)

$
(161,841
)

$
19,308    40




---



##### Table of Contents



BLUE
    NILE, INC.
  Consolidated Statements of Cash Flows
 (In thousands)
  Year Ended


Year Ended


Year EndedJanuary 4,


December 30,


December 31,2009


2007


2006Operating activities:Net income

$
11,630


$
17,459


$
13,064Adjustments to reconcile net income to net cash(used in) provided by operating activities:Depreciation and amortization


2,110



1,772



1,868(Gain) loss on disposal of property and equipment


20



(8
)


5Stock-based compensation


7,114



5,832



4,434Deferred income taxes


(1,396
)


(1,407
)


2,654Tax benefit from exercise of stock options


510



6,848



2,739Excess tax benefit from exercise of stock options


(142
)


(1,847
)


(172
)Changes in assets and liabilities:Receivables


1,867



(1,935
)


236Inventories


2,072



(6,291
)


(2,852
)Prepaid expenses and other assets


(21
)


(306
)


88Accounts payable


(23,575
)


19,241



16,468Accrued liabilities


(2,967
)


2,234



2,194Deferred rent and other


(149
)


(137
)


(208
)Net cash (used in) provided by operating activities


(2,927
)


41,455



40,518Investing activities:Purchases of property and equipment


(2,010
)


(4,897
)


(1,908
)Proceeds from the sale of property and equipment


10



23



1Purchases of marketable securities






(20,230
)


(75,030
)Proceeds from the sale of marketable securities






40,000



98,000Transfers of restricted cash






120



2Net cash (used in) provided by investing activities


(2,000
)


15,016



21,065Financing activities:Repurchase of common stock


(66,450
)


(19,996
)


(57,387
)Proceeds from stock option exercises


2,989



5,875



2,251Excess tax benefit from exercise of stock options


142



1,847



172Principal payments under long-term financing obligation


(38
)


(22
)


Net cash used in financing activities


(63,357
)


(12,296
)


(54,964
)Effect of exchange rate changes on cash and cash equivalents


(58
)


78



Net (decrease) increase in cash and cash equivalents


(68,342
)


44,253



6,619Cash and cash equivalents, beginning of period


122,793



78,540



71,921Cash and cash equivalents, end of period

$
54,451


$
122,793


$
78,540    41




---



##### Table of Contents



BLUE
    NILE, INC.
  Consolidated Statements of Cash Flows
 (In thousands)
  Year Ended


Year Ended


Year EndedJanuary 4,


December 30,


December 31,2009


2007


2006Supplemental disclosure of cash flow information:Cash paid for income taxes

$
7,342


$
3,894


$
325Cash paid for interest relating to long-term financing obligation

$
21


$
15


$
Non-cash investing and financing activities:Property additions financed by long-term financing obligation

$



$
940


$
    42




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  Note 1.
    Description
    of the Company and Summary of Significant Accounting
    Policies  The
    Company
    Fiscal
    Year
    Basis
    of Presentation
    Use of
    Estimates
    Concentration
    of Risk
     43




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year EndedJanuary 4,


December 30,


December 31,2009


2007


2006Payments


Payments


PaymentsVendor A


9
%


8
%


9
%Vendor B


6
%


7
%


6
%Vendor C


6
%


6
%


6
%21
%


21
%


21
%   Cash
    and Cash Equivalents
    Inventories
    Property
    and Equipment
    Asset

Life (in years)Software

2-5Computers and equipment

3-5Leasehold improvements

Shorter of lease term or asset lifeBuilding

Shorter of lease term or asset lifeFurniture and fixtures

5-7   Capitalized
    Software
  98-1, No. 00-2,
 44




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Impairment
    of Long-Lived Assets
    Intangible
    Assets
      Fair
    Value of Financial Instruments
    Treasury
    Stock
    Income
    Taxes
    Revenue
    Recognition
  No. 99-19,
   45




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Shipping
    and Handling Costs
    Cost
    of Sales
    Selling,
    General and Administrative Expenses
        Marketing
    Stock-Based
    Compensation
   46




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Initial
    Adoption of Staff Accounting
    Bulletin No. 108
    Accumulated deficit, January 2, 2006, as reported

$
(6,362
)Cumulative effect adjustment


408Accumulated deficit, January 2, 2006, as restated

$
(5,954
)   Foreign
    Currency Translation
    Recent
    Accounting Pronouncements
  FAS 157-2 FAS 157-2),
  FAS 157-2,
   47




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  FAS 142-3, FAS 142-3). FAS 142-3 FAS 142-3 FAS 142-3
  Note 2.
    Inventories    January 4,


December 30,2009


2007Loose diamonds

$
695


$
690Fine jewelry, watches and other


18,139



20,216$
18,834


$
20,906   Note 3.
    Property
    and Equipment    January 4,


December 30,2009


2007Computers and equipment

$
3,823


$
4,770Software and website development


7,040



6,225Leasehold improvements


5,443



5,312Furniture and fixtures


774



753Building


940



94018,020



18,000Less: accumulated depreciation


(10,462
)


(10,399
)Property and equipment, net

$
7,558


$
7,601     Note 4.
    Commitments
    and Contingencies  Leases
   48




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    No. 97-10,
    Financing


OperatingObligation


Leases2009

$
59


$
5142010


59



5142011


61



3172012


68



1622013


68



159Thereafter


54



133Total minimum lease payments

$
369


$
1,799Less: amounts representing interest


(64
)Present value of minimum lease payments


305Residual value


575Less: current maturities


(41
)Total long-term financing obligation less current maturities

$
839     Litigation
     49




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 5.
    Preferred
    Stock    Note 6.
    Stock-Based
    Compensation  Stock
    Option Plans
          Employee
    Stock Purchase Plans
   50




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Option
    Grants to Non-Employees
  No. 96-18, (EITF 96-18). EITF 96-18
  Stock-Based
    Compensation Expense
    No. 00-15,
   51




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Year EndedJanuary 4,


December 30,


December 31,2009


2007


2006Stock option expense in selling, general and administrative
    expenses

$
6,905


$
5,621


$
4,257Stock option expense in cost of sales


79



114



82Total stock option expense on the consolidated statement of
    operations

$
6,984


$
5,735


$
4,339Total related tax benefit

$
2,437


$
1,967


$
1,501Stock-based compensation capitalized

$
96


$
79


$
64       Year EndedJanuary 4,


December 30,


December 31,2009


2007


2006Expected term


4.0 years



4.5 years



4.5 yearsExpected volatility


48.1
%


37.1
%


36.0
%Expected dividend yield


0.0
%


0.0
%


0.0
%Risk-free interest rate


2.5
%


4.3
%


5.0
%Estimated weighted average fair value per option granted

$
17.23


$
29.26


$
11.86   
    Expected Term  This is the estimated period of time
    until exercise and is based primarily on historical experience
    for options with similar terms and conditions, giving
    consideration to future expectations. The Company also considers
    the expected terms of other companies that have similar
    contractual terms, expected stock volatility and employee
    demographics.
    Expected Volatility  This is based on the
    Companys historical stock price volatility, and prior to
    2008, in combination with the implied volatility of its exchange
    traded options.
    Expected Dividend Yield  The Company has not paid
    dividends in the past and does not expect to pay dividends in
    the near future.
    Risk-Free Interest Rate  This is the rate on nominal
    U.S. Government Treasury Bills with lives commensurate with
    the expected term of the options on the date of grant. 52




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Weighted AverageWeighted Average


Remaining


TotalOptions


Exercise Price


Contractual Term


Intrinsic Value(In thousands)Balance, January 1, 2006


2,095


$
15.84Granted


585



31.49Exercised


(425
)


5.30Canceled


(69
)


26.94Balance, December 31, 2006


2,186



21.73Granted


349



78.27Exercised


(439
)


13.40Canceled


(59
)


33.85Balance, December 30, 2007


2,037



32.84Granted


520



43.11Exercised


(142
)


21.01Canceled


(125
)


60.79Balance, January 4, 2009


2,290


$
34.38



6.88


$
8,772Vested and expected to vest at January 4, 2009


2,084


$
33.14



6.73


$
8,772Exercisable at January 4, 2009


1,406


$
26.37



5.78


$
8,770    53




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    OutstandingWeighted AverageRemaining





ExercisableContractual


Exercise





Weighted AverageRange of Exercise Price

Options


Life


Price


Options


Exercise Price(In thousands)


(In years)





(In thousands)$0.25 - $26.02


463



4.25


$
5.97



438


$
4.84$26.32 - $31.26


762



6.60



30.65



600



30.51$31.43 - $41.13


502



7.53



35.93



268



33.27$41.63 - $83.81


562



8.81



61.31



100



77.18$84.42 - $99.98


1



8.72



90.07







2,290



6.88



34.38



1,406



26.37   Note 7.
    Common
    Stock  24-month 24-month 24-month
    Note 8.
    Employee
    Benefit Plan   54




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 9.
    Income
    Taxes    Year EndedJanuary 4,


December 30,


December 31,2009


2007


2006Current income tax expense


7,112



3,685



1,389Tax benefit from stock option exercises recorded in equity


510



6,848



2,961Deferred income tax (benefit) expense:Utilization of net operating loss










3,008Other, net


(1,396
)


(1,405
)


(442
)Total income tax expense


6,226



9,128



6,916A reconciliation of the statutory Federal income tax rate to the
    effective tax rate is as follows:Statutory Federal income tax rate


35.0
%


35.0
%


35.0
%Other, net


(0.1
)%


(0.7
)%


(0.4
)%Effective tax rate


34.9
%


34.3
%


34.6
%     Year EndedJanuary 4,


December 30,2009


2007Deferred tax assets:Current:Reserves and allowances

$
388


$
544Deferred rent


72



78Other


210



177Noncurrent:Stock options


4,962



2,800Excess of book over tax depreciation and amortization






439Deferred rent


131



188Financing obligation


294



308Other


43



59Gross deferred tax assets


6,100



4,593Noncurrent deferred tax liabilities:Leased building


(304
)


(305
)Excess of book over tax depreciation and amortization


(112
)


Gross deferred tax liabilities


(416
)


(305
)Net deferred tax assets

$
5,684


$
4,288    55




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            Note 10.
    Income
    Per Share      Year EndedJanuary 4,


December 30,


December 31,2009


2007


2006Net income

$
11,630


$
17,459


$
13,064Weighted average common shares outstanding


14,925



15,919



16,563Basic net income per share

$
0.78


$
1.10


$
0.79Dilutive effect of stock options


580



895



715Common stock and common stock equivalents


15,505



16,814



17,278Diluted net income per share

$
0.75


$
1.04


$
0.76  56




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year EndedJanuary 4,


December 30,


December 31,2009


2007


2006Stock options


606



112



1,159   Note 11.
    Segment
    Information      Year EndedJanuary 4,


December 30,


December 31,2009


2007


2006Net sales to external customersUnited States

$
267,670


$
302,230


$
243,270Other countries


27,659



17,034



8,317Total

$
295,329


$
319,264


$
251,587   Year EndedJanuary 4,


December 30,


December 31,2009


2007


2006Long-lived assetsUnited States

$
7,148


$
7,075


$
3,391Other countries


410



526



Total

$
7,558


$
7,601


$
3,391  57




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 12.
    Selected
    Quarterly Financial Information (unaudited)    Q1


Q2


Q3


Q42008 quarter:Net sales

$
70,460


$
73,706


$
65,376


$
85,787Gross profit


13,924



15,123



13,262



17,687Net income


2,571



3,205



2,335



3,519Basic net income per share


0.16



0.21



0.16



0.24Diluted net income per share


0.16



0.20



0.15



0.24Q1


Q2


Q3


Q42007 quarter:Net sales

$
67,910


$
72,093


$
67,355


$
111,906Gross profit


13,249



14,943



13,357



23,655Net income


3,163



3,781



2,972



7,543Basic net income per share


0.20



0.24



0.19



0.47Diluted net income per share


0.19



0.23



0.18



0.45  58




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##### Table of Contents



BLUE
    NILE, INC.
 SCHEDULE II
    VALUATION AND QUALIFYING ACCOUNTS  ChargedBalance at


to Revenue,





Balance atBeginning


Costs or





End ofDescription

of Period


Expenses


Deductions(A)


Period(In thousands)Year ended January 4, 2009Reserve for sales returns

$
1,281


$
28,383


$
(28,836
)

$
828Reserve for fraud

$
130


$
20


$
(50
)

$
100Year ended December 30, 2007Reserve for sales returns

$
1,179


$
26,743


$
(26,641
)

$
1,281Reserve for fraud

$
105


$
118


$
(93
)

$
130Year ended December 31, 2006Reserve for sales returns

$
976


$
19,893


$
(19,690
)

$
1,179Reserve for fraud

$
151


$
(22
)

$
(24
)

$
105     (A)
    
    Deductions for sales returns and fraud consist of actual sales
    returns and credit card chargebacks in each period. 59




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
        Report of
    Management on Internal Control over Financial
    Reporting
  Rule 13a-15(f)
        Changes
    in Internal Control Over Financial Reporting
    /s/  Diane
    M. Irvine

/s/  Marc
    D. StolzmanChief Executive Officer and President

Chief Financial Officer  60




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control  Integrated Framework
        Internal Control  Integrated Framework
  Considering the Effects of Prior Year
    Misstatements When Quantifying Misstatements in the Current Year
    Financial Statements
      61




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##### Table of Contents



Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence  Proposal 1-Election
  Item 14.
    Principal
    Accounting Fees and Services   62




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##### Table of Contents



PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules      Page1.

Financial Statements:Report of Independent Registered Public
    Accounting Firm


37Consolidated Balance Sheets, as of
    January 4, 2009 and December 30, 2007


38Consolidated Statements of Operations, for the
    fiscal years ended January 4, 2009, December 30, 2007 and
    December 31, 2006


39Consolidated Statements of Changes in
    Stockholders Equity, for the fiscal years ended
    January 4, 2009, December 30, 2007 and
    December 31, 2006


40Consolidated Statements of Cash Flows, for the
    fiscal years ended January 4, 2009, December 30, 2007
    and December 31, 2006


41Notes to Consolidated Financial Statements


432.

Financial Statement Schedule:Schedule II, Valuation and Qualifying
    Accounts


59All other schedules are omitted because they are not applicable
    or the required information is shown in the financial statements
    or notes thereto.3.

Exhibits:The exhibits listed in the Index
    to Exhibits, which appears immediately following the signature
    page and is incorporated herein by reference, are filed as part
    of this Annual Report on
    Form 10-K.  63




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##### Table of Contents



SIGNATURES         By
    /s/  Marc
    D. Stolzman   Chief Financial Officer
 (Principal Accounting and Financial Officer)
  POWER OF
    ATTORNEY
      By

/s/  Diane
    M. IrvineDiane
    M. Irvine, Chief Executive Officer,
    President and Director(Principal Executive Officer)

March 3, 2009By

/s/  Marc
    D. StolzmanMarc
    D. Stolzman, Chief Financial Officer(Principal Accounting and Financial Officer)

March 4, 2009By

/s/  Mark
    C. VadonMark
    C. Vadon, Executive Chairman and Director

March 3, 2009By

/s/  W.
    Eric CarlborgW.
    Eric Carlborg, Director

March 2, 2009By

/s/  Leslie
    LaneLeslie
    Lane, Director

March 2, 2009By

/s/  Ned
    MansourNed
    Mansour, Director

February 26, 2009 64




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##### Table of Contents



By

/s/  Michael
    PotterMichael
    Potter, Director

March 2, 2009By

/s/  Steve
    ScheidSteve
    Scheid, Director

March 2, 2009By

/s/  Mary
    Alice TaylorMary
    Alice Taylor, Director

March 4, 2009  65




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##### Table of Contents



EXHIBIT INDEX  Form 10-K
  ExhibitNumber

Description3.1(1)

Amended and Restated Certificate of Incorporation of Blue Nile,
    Inc.3.2(2)

Amended and Restated Bylaws of Blue Nile, Inc.3.3(3)

Amendment to the Bylaws of Blue Nile, Inc.4.1

Reference is made to Exhibits 3.1, and 3.2 and 3.3.4.2(4)

Specimen Stock Certificate.4.3(2)

Amended and Restated Investor Rights Agreement dated June 29,
    2001 by and between Blue Nile, Inc. and certain holders of Blue
    Nile, Inc.s preferred stock.10.1.1(2)*

Blue Nile, Inc. Amended and Restated 1999 Equity Incentive Plan.10.1.2(2)*

Form of Stock Option Agreement pursuant to the Blue Nile, Inc.
    1999 Equity Incentive Plan.10.2.1(12)*

Third Amended and Restated 2004 Non-Employee Directors
    Stock Option Plan.10.2.2(7)*

Form of Stock Option Agreement pursuant to the Blue Nile, Inc.
    2004 Non-Employee Directors Stock Option Plan.10.2.3(13)*

Third Amended and Restated 2004 Non-Employee Directors
    Stock Option Plan.10.3(2)*

Blue Nile, Inc. 2004 Employee Stock Purchase Plan.10.4.1(5)*

Blue Nile, Inc. 2004 Equity Incentive Plan.10.4.2(7)*

Form of Stock Option Agreement pursuant to the 2004 Equity
    Incentive Plan.10.4.3(6)*

Blue Nile, Inc. Stock Grant Notice pursuant to the 2004 Equity
    Incentive Plan.10.4.4(14)*

Form of Restricted Stock Unit Grant Notice and Form of Award
    Agreement under the Blue Nile, Inc. 2004 Equity Incentive Plan.10.5.1(5)

Sublease Agreement, dated May 22, 2003, between Amazon.com
    Holdings, Inc. and the registrant.10.5.2(5)

First Amendment to Sublease Agreement, dated July 3, 2003,
    between Amazon.com Holdings, Inc. and the registrant.10.6.1(5)

Lease, dated June 28, 2001, between Gull Industries, Inc. and
    the registrant.10.6.2(5)

First Amendment to Lease, dated December 11, 2002 between Gull
    Industries, Inc. and the registrant.10.6.3(5)

Second Amendment to Lease, dated November 15, 2003, between Gull
    Industries, Inc. and the registrant.10.7(9)

Commercial lease, dated July 21, 2006, between Gull Industries,
    Inc. and the registrant.10.8(11)*

Offer Letter with Diane M. Irvine, dated December 1, 1999.10.9(2)*

Offer Letter with Dwight Gaston, dated May 14, 1999.10.10(2)*

Offer Letter with Susan S. Bell, dated August 22, 2001.10.11(10)*

Offer Letter with Marc Stolzman, dated May 2, 2008.10.12(14)*

Offer Letter with Marianne Marck, dated January 9, 2009.10.13(5)*

Form of Indemnity Agreement entered into between Blue Nile, Inc.
    and each of its directors and executive officers.10.14.1(8)*

Blue Nile, Inc. 2008 Executive Officer Cash Incentive Program.10.14.2(13)*

Amendment to the Blue Nile, Inc. 2008 Executive Officer Cash
    Incentive Plan.10.15(15)*

Compensation Arrangements with the registrants Chief
    Executive Officer and Executive Chairman10.16(14)*

Director Compensation 66




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##### Table of Contents



ExhibitNumber

Description10.17(16)*

Severance Agreement with Robin Easton, dated March 18, 200821.1(14)

Subsidiaries of the Registrant.23.1(14)

Consent of Deloitte & Touche LLP.24.1

Powers of Attorney of Officers and Directors signing this report
    (see page 64).31.1(14)

Certification of Principal Chief Executive Officer Required
    Under Rule 13a-14(a) or Rule 15d-14(a) of the Securities
    Exchange Act of 1934, as amended.31.2(14)

Certification of Principal Financial Officer Required Under Rule
    13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of
    1934, as amended.32.1(17)

Certification of Principal Chief Executive Officer Required
    Under Rule 13a-14(b) or Rule 15d-14(b) of the Securities
    Exchange Act of 1934, as amended, and 18 U.S.C. Section
    1350.32.2(17)

Certification of Principal Financial Officer Required Under Rule
    13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of
    1934, as amended, and 18 U.S.C. Section 1350.     *
    
    Denotes a management contract or compensatory plan, contract or
    agreement, in which the Companys directors or executive
    officers may participate.(1)
    
    Previously filed as Exhibit 3.1 to Blue Nile, Inc.s
    Quarterly Report on
    Form 10-Q
    for the quarterly period ended July 4, 2004 (No.
    000-50763),
    as filed with the Securities and Exchange Commission on
    August 6, 2004, and incorporated by reference herein.(2)
    
    Previously filed as the like numbered exhibit to Blue Nile,
    Inc.s Registration Statement on
    Form S-1
    (No. 333-113494),
    as filed with the Securities and Exchange Commission on
    March 11, 2004, as amended, and incorporated by reference
    herein.(3)
    
    Previously filed as Exhibit 3.2 to Blue Nile, Inc.s
    Current Report on
    Form 8-K
    (No. 000-50763),
    as filed with the Securities and Exchange Commission on
    February 7, 2008, and incorporated by reference herein.(4)
    
    Previously filed as Exhibit 4.2 to Blue Nile, Inc.s
    Registration Statement on
    Form S-1/A
    (No. 333-113494),
    as filed with the Securities and Exchange Commission on
    May 4, 2004, as amended, and incorporated by reference
    herein.(5)
    
    Previously filed as the like numbered exhibit to Blue Nile,
    Inc.s Registration Statement on
    Form S-1/A
    (No. 333-113494),
    as filed with the Securities and Exchange Commission on
    April 19, 2004, as amended, and incorporated by reference
    herein.(6)
    
    Previously filed as Exhibit 10.1 to Blue Nile, Inc.s
    Current Report on
    Form 8-K
    (No. 000-50763),
    as filed with the Securities and Exchange Commission on
    December 13, 2004, and incorporated by reference herein.(7)
    
    Previously filed as the like numbered exhibit to Blue Nile,
    Inc.s Annual Report on
    Form 10-K
    (No. 000-50763),
    as filed with the Securities and Exchange Commission on
    March 25, 2005, and incorporated by reference herein.(8)
    
    Previously filed as Item 5.02 to Blue Nile, Inc.s
    Current Report on
    Form 8-K
    (No. 000-50763),
    as filed with the Securities and Exchange Commission on
    May 19, 2008, and incorporated by reference herein.(9)
    
    Previously filed as Exhibit 10.1 to Blue Nile, Inc.s
    Current Report on
    Form 8-K
    (No. 000-50763),
    as filed with the Securities and Exchange Commission on
    July 27, 2006, and incorporated by reference herein.(10)
    
    Previously filed as Exhibit 10.1 to Blue Nile, Inc.s
    Current Report on
    Form 8-K
    (No. 000-50763),
    as filed with the Securities and Exchange Commission on
    May 6, 2008, and incorporated by reference herein.(11)
    
    Previously filed as Exhibit 10.7 to Blue Nile, Inc.s
    Registration Statement on
    Form S-1
    (No. 333-113494),
    as filed with the Securities and Exchange Commission on
    March 11, 2004, as amended, and incorporated by reference
    herein. 67




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##### Table of Contents



(12)
    
    Previously filed as Exhibit 10.1 to Blue Nile, Inc.s
    Quarterly Report on
    Form 10-Q
    (No. 000-50763)
    as filed with the Securities and Exchange Commission on
    November 7, 2008, and incorporated by reference herein.(13)
    
    Previously filed as Exhibit 10.2 to Blue Nile, Inc.s
    Quarterly Report on
    Form 10-Q
    (No. 000-05763)
    as filed with the Securities and Exchange Commission on
    November 7, 2008 and incorporated by reference herein.(14)
    
    Filed herewith.(15)
    
    Previously filed as Item 5.02 to Blue Nile, Inc.s
    Current Report on
    Form 8-K
    (No. 000-50763),
    as filed with the Securities and Exchange Commission on
    March 5, 2008, and incorporated by reference herein.(16)
    
    Previously filed as Exhibit 10.1 to Blue Nile, Inc.s
    Current Report on
    Form 8-K
    (No. 000-50763),
    as filed with the Securities and Exchange Commission on
    March 24, 2008, and incorporated by reference herein.(17)
    
    Filed herewith. The certifications attached as
    Exhibits 32.1 and 32.2 accompany this Annual Report on
    Form 10-K
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    and shall not be deemed filed by Blue Nile, Inc. for
    purposes of Section 18 of the Securities Exchange Act of
    1934, as amended. 68