##### 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 3,
    2010ORo

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
  þ o
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. þ
    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 3, 2010
   
 PagePART IItem 1.


Business


3Item 1A.


Risk Factors


8Item 1B.


Unresolved Staff Comments


22Item 2.


Properties


22Item 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


23Item 6.


Selected Consolidated Financial Data


25Item 7.


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


27Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


36Item 8.


Financial Statements and Supplementary Data


37Item 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-10.18EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   2




---



##### 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




---



##### 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




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



1-800-SEC-0330. 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.
  and/or
  Form 10-K,
     8




---



##### Table of Contents



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 quality diamonds and precious metals;
    our ability to attract visitors to our websites and convert
    those visitors into customers;
    general economic conditions, both domestically and globally;
    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 and restricted stock units
    granted, the underlying assumptions used in valuing stock
    options, the estimated rate of stock option and restricted stock
    unit 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




---



##### Table of Contents



We may
    not accurately forecast net sales and appropriately plan our
    expenses.
    Our
    failure to acquire quality diamonds and fine jewelry at
    commercially reasonable prices and lead times would result in
    higher costs and damage our operating results and competitive
    position.
       10




---



##### Table of Contents



Our
    failure to meet customer expectations with respect to price
    would adversely affect our business and results of
    operations.
    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




---



##### Table of Contents



We
    face significant competition and may be unsuccessful in
    competing against current and future competitors.
  and/or
  
    independent jewelry stores;
    retail jewelry store chains, such as Tiffany & Co.;
    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;
    discount superstores and wholesale clubs, such as Wal-Mart and
    Costco Wholesale; and
    Internet shopping clubs, such as Gilt Groupe and Rue La La.        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.
   12




---



##### Table of Contents



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 small, specialized workforce and key
    personnel, many 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.
    Our
    systems are vulnerable to cyber attacks.
   13




---



##### Table of Contents



and/or
  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.
    Our
    net sales consist exclusively of diamonds and fine jewelry, and
    demand for these products could decline.
       14




---



##### Table of Contents



System
    interruptions that impair customer access to our websites would
    damage our reputation and brand and substantially harm our
    business and results of operations.
    We may
    be unsuccessful in further expanding our operations
    internationally.
      
    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; 15




---



##### Table of Contents




    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;
    geopolitical events, including war and terrorism; and
    the need to conduct business in foreign languages on both the
    website and in our customer service calls.    In
    order to increase net sales and to sustain or increase
    profitability, we must attract customers in a
    cost-effective
    manner.
  e-commerce
  If we
    are unable to accurately manage our inventory of fine jewelry,
    our reputation and results of operations could
    suffer.
   16




---



##### Table of Contents



Our
    stock price has been volatile historically, and may continue to
    be volatile. Further, the sale of our common stock by
    significant stockholders may cause the price of our common stock
    to decrease.
      Repurchases
    of our common stock may not prove to be the best use of our cash
    resources.
  24-month
  We
    have foreign exchange risk.
      Our
    cash, cash equivalents and short-term investments are subject to
    a risk of loss based upon the solvency of the financial
    institutions in which they are maintained.
    Failure
    to adequately protect or enforce our intellectual property
    rights could substantially harm our business and results of
    operations.
   17




---



##### Table of Contents



The
    success of our business may depend on our ability to
    successfully expand our product offerings.
    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
 18




---



##### Table of Contents



Purchasers
    of diamonds and fine jewelry may not choose to shop online,
    which would prevent us from growing our business.
    
    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 and results of operations will be harmed.
      
    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.   19




---



##### Table of Contents



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 relationship with a third-party consumer credit
    company 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.
    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.
   20




---



##### Table of Contents



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.
      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.
   21




---



##### Table of Contents




    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  sub-lease
  Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   22




---



##### Table of Contents



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 2009:First Quarter

$
36.61


$
18.34Second Quarter

$
51.23


$
32.03Third Quarter

$
63.00


$
36.00Fourth Quarter

$
67.16


$
55.03Fiscal year 2008:First Quarter

$
70.80


$
38.35Second Quarter

$
55.95


$
41.73Third Quarter

$
52.50


$
33.76Fourth Quarter

$
44.98


$
20.09    23




---



##### Table of Contents



Performance
    Measurement Comparison(1)
    COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN(2)
 Among Blue Nile, Inc., The NASDAQ Composite Index
 And The RDG Internet Composite Index
  
  PLOT POINT TO COME
    (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 January 2, 2005 at the closing
    price on this day, 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. 24




---



##### Table of Contents



Item 6.
    Selected
    Consolidated Financial Data    Form 10-K.
 25




---



##### Table of Contents



BLUE
    NILE, INC.
  SELECTED
    CONSOLIDATED FINANCIAL DATA
  Year Ended


Year Ended


Year Ended


Year Ended


Year EndedJanuary 3,


January 4,


December 30,


December 31,


January 1,2010


2009(2)


2007


2006


2006(In thousands, except per share data)Consolidated Statements of Operations Data:Net sales

$
302,134


$
295,329


$
319,264


$
251,587


$
203,169Gross profit


65,344



59,996



65,204



50,853



45,042Selling, general and administrative expenses


45,997



44,005



42,792



34,296



26,993Operating income


19,347



15,991



22,412



16,557



18,049Income before income taxes


19,678



17,856



26,587



19,980



20,553Income tax expense


6,878



6,226



9,128



6,916



7,400Net income

$
12,800


$
11,630


$
17,459


$
13,064


$
13,153Basic net income per share

$
0.88


$
0.78


$
1.10


$
0.79


$
0.75Diluted net income per share

$
0.84


$
0.75


$
1.04


$
0.76


$
0.71Shares used in computing basic net income per share


14,534



14,925



15,919



16,563



17,550Shares used in computing diluted net income per share


15,216



15,505



16,814



17,278



18,597Additional Operating Data:Net cash provided by (used in) operating activities

$
39,018


$
(2,927
)

$
41,455


$
40,518


$
31,272Gross profit margin


21.6
%


20.3
%


20.4
%


20.2
%


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


15.2
%


14.9
%


13.4
%


13.6
%


13.3
%   As of


As of


As of


As of


As ofJanuary 3,


January 4,


December 30,


December 31,


January 1,2010


2009(2)


2007


2006


2006(In thousands)Consolidated Balance Sheet Data:Cash and cash equivalents

$
78,149


$
54,451


$
122,793


$
78,540


$
71,921Marketable securities














19,767



42,748Short-term investments


15,000















Accounts receivable


1,835



1,709



3,576



1,640



1,877Inventories


19,434



18,834



20,906



14,616



11,764Accounts payable


76,128



62,291



85,866



66,625



50,157Working capital(1)


29,662



7,589



53,455



41,881



76,869Total assets


130,415



89,665



160,586



122,106



138,005Total long-term obligations


964



1,213



1,418



666



863Total stockholders equity


43,269



19,308



63,477



47,303



81,515     (1)
    
    Working capital consists of total current assets, including
    cash, cash equivalents and short-term investments, less total
    current liabilities.(2)
    
    Fiscal year 2008 consists of 53 weeks, which is one week
    longer than the other fiscal years presented. 26




---



##### Table of Contents



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
  step-by-step
    Differentiating
    Factors and Value Proposition
  60-90 day
      1
 27




---



##### Table of Contents



year-over-year
  Seasonality
    Future
    Growth Opportunities
        Trends
   28




---



##### Table of Contents



Critical
    Accounting Policies
    Revenue
    Recognition
    Stock-based
    Compensation
      Increase


DecreaseExpected term(1)


5.5
%


(6.0
)%Expected volatility(1)


7.6
%


(7.8
)%     (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
    December 31, 2009, expected term of 4.0 years,
    expected volatility of 55.12%, expected dividend yield of 0.0%
    and a risk-free interest rate of 1.37%.   29




---



##### Table of Contents



Results
    of Operations
    Year Ended


Year Ended


Year EndedJanuary 3,


January 4,


December 30,2010


2009


2007Net sales


100.0
%


100.0
%


100.0
%Gross profit


21.6



20.3



20.4Selling, general and administrative expenses


15.2



14.9



13.4Operating income


6.4



5.4



7.0Other income, net


0.1



0.6



1.3Income before income taxes


6.5



6.0



8.3Income tax expense


2.3



2.1



2.8Net income


4.2
%


3.9
%


5.5
%     Net Sales.
  Gross Profit.
  Selling, General and Administrative
    Expenses.
  Fiscal Year.
 30




---



##### Table of Contents



Comparison of


Comparison ofYear Ended


Year EndedJanuary 3, 2010 to


January 4, 2009 toYear Ended


Year Ended


Year Ended


Year Ended


Year EndedJanuary 3,


January 4,


December 30,


January 4, 2009


December 30, 20072010


2009(1)


2007


$ Change


% Change


$ Change


% ChangeNet sales

$
302,134


$
295,329


$
319,264


$
6,805



2.3
%

$
(23,935
)


(7.5
)%Cost of sales


236,790



235,333



254,060



1,457



0.6
%


(18,727
)


(7.4
)%Gross profit


65,344



59,996



65,204



5,348



8.9
%


(5,208
)


(8.0
)%Selling, general and administrative expenses


45,997



44,005



42,792



1,992



4.5
%


1,213



2.8
%Operating income


19,347



15,991



22,412



3,356



21.0
%


(6,421
)


(28.6
)%Other income, net:Interest income, net


122



1,420



3,760



(1,298
)


(91.4
)%


(2,340
)


(62.2
)%Other income, net


209



445



415



(236
)


(53.0
)%


30



7.2
%331



1,865



4,175



(1,534
)


(82.3
)%


(2,310
)


(55.3
)%Income before income taxes


19,678



17,856



26,587



1,822



10.2
%


(8,731
)


(32.8
)%Income tax expense


6,878



6,226



9,128



652



10.5
%


(2,902
)


(31.8
)%Net income

$
12,800


$
11,630


$
17,459


$
1,170



10.1
%

$
(5,829
)


(33.4
)%Basic net income per share

$
0.88


$
0.78


$
1.10


$
0.10



12.8
%

$
(0.32
)


(29.1
)%Diluted net income per share

$
0.84


$
0.75


$
1.04


$
0.09



12.0
%

$
(0.29
)


(27.9
)%     (1)
    
    Fiscal year 2008 consists of 53 weeks, which is one week
    longer than the other fiscal years presented  Comparison
    of Year Ended January 3, 2010 to Year Ended January 4,
    2009
  Net
    Sales
       31




---



##### Table of Contents



Gross
    Profit
      Selling,
    General and Administrative Expenses
    Other
    Income, Net
    Income
    Taxes
    Comparison
    of Year Ended January 4, 2009 to Year Ended
    December 30, 2007
  Net
    Sales
   32




---



##### Table of Contents



Gross
    Profit
    Selling,
    General and Administrative Expenses
    Other
    Income, Net
   33




---



##### Table of Contents



Income
    Taxes
    Liquidity
    and Capital Resources
             34




---



##### Table of Contents



and/or
    Rule 10b5-1
      Less Than








Over 5Contractual Obligations

Total


1 Year


1-3 Years


3-5 Years


YearsOperating leases

$
1,245


$
474


$
479


$
292


$
Financing obligation


310



59



129



122



Purchase obligations(1)


8,841



8,841











Purchase obligations(2)


344



325



19







$
10,740


$
9,699


$
627


$
414


$
     (1)
    
    Includes open merchandise purchase orders at January 3,
    2010.(2)
    
    Includes commitments for advertising and marketing and other
    services at January 3, 2010.   35




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
    Impact of
    Inflation
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest
    Rate Risk
      Foreign
    Currency Exchange Risk
     36




---



##### 



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


38Consolidated Balance Sheets, as of
    January 3, 2010 and January 4, 2009


39Consolidated Statements of Operations, for the
    fiscal years ended January 3, 2010, January 4, 2009
    and December 30, 2007


40Consolidated Statements of Changes in
    Stockholders Equity, for the fiscal years ended
    January 3, 2010, January 4, 2009 and December 30,
    2007


41Consolidated Statements of Cash Flows, for the
    fiscal years ended January 3, 2010, January 4, 2009
    and December 30, 2007


42Notes to Consolidated Financial Statements


44Selected 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.   37




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM             Internal Control  Integrated Framework
       38




---



##### Table of Contents



BLUE
    NILE, INC.
  Consolidated Balance Sheets
 (In
    thousands, except par value)
   January 3,


January 4,2010


2009ASSETSCurrent assets:Cash and cash equivalents

$
78,149


$
54,451Short-term investments


15,000



Trade accounts receivable


1,594



984Other accounts receivable


241



725Inventories


19,434



18,834Deferred income taxes


449



670Prepaids and other current assets


977



1,069Total current assets


115,844



76,733Property and equipment, net


7,332



7,558Intangible assets, net


325



271Deferred income taxes


6,769



5,014Other assets


145



89Total assets

$
130,415


$
89,665LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
76,128


$
62,291Accrued liabilities


9,805



6,607Current portion of long-term financing obligation


44



41Current portion of deferred rent


205



205Total current liabilities


86,182



69,144Long-term financing obligation, less current portion


796



839Deferred rent, less current portion


168



374Stockholders 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; 19,810 shares and 19,659 shares issued,
    respectively; 14,644 shares and 14,493 shares
    outstanding, respectively


20



20Additional paid-in capital


156,030



144,913Accumulated other comprehensive income


61



17Retained earnings


48,999



36,199Treasury stock, at cost; 5,166 shares outstanding


(161,841
)


(161,841
)Total stockholders equity


43,269



19,308Total liabilities and stockholders equity

$
130,415


$
89,665    39




---



##### Table of Contents



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


Year Ended


Year EndedJanuary 3,


January 4,


December 30,2010


2009


2007Net sales

$
302,134


$
295,329


$
319,264Cost of sales


236,790



235,333



254,060Gross profit


65,344



59,996



65,204Selling, general and administrative expenses


45,997



44,005



42,792Operating income


19,347



15,991



22,412Other income, net:Interest income, net


122



1,420



3,760Other income, net


209



445



415Total other income, net


331



1,865



4,175Income before income taxes


19,678



17,856



26,587Income tax expense


6,878



6,226



9,128Net income

$
12,800


$
11,630


$
17,459Basic net income per share

$
0.88


$
0.78


$
1.10Diluted net income per share

$
0.84


$
0.75


$
1.04    40




---



##### Table of Contents



BLUE
    NILE, INC.



Consolidated
    Statements of Changes in Stockholders Equity

(In
    thousands)  AccumulatedAdditional








Other








TotalCommon Stock


Paid-in


Deferred Stock





Comprehensive


Treasury Stock


StockholdersShares


Amount


Capital


Compensation


Retained Earnings


Income (Loss)


Shares


Amount


EquityBalance, 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 canceled 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
)


19,308Net income


















12,800















12,800Other comprehensive income (loss):Foreign currency translation adjustment






















44











44Total comprehensive income


































12,844Tax benefit from exercise of stock options










1,793























1,793Exercise of common stock options


147







1,903























1,903Issuance of common stock to directors


4







160























160Stock-based compensation










7,261























7,261Balance, January 3, 2010


19,810


$
20


$
156,030


$



$
48,999


$
61



(5,166
)

$
(161,841
)

$
43,269    41




---



##### Table of Contents



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


Year Ended


Year EndedJanuary 3,


January 4,


December 30,2010


2009


2007Operating activities:Net income

$
12,800


$
11,630


$
17,459Adjustments to reconcile net income to net cashprovided by (used in) operating activities:Depreciation and amortization


2,593



2,110



1,772Loss (gain) on disposal of property and equipment


63



20



(8
)Stock-based compensation


7,325



7,114



5,832Deferred income taxes


(1,534
)


(1,396
)


(1,407
)Tax benefit from exercise of stock options


1,793



510



6,848Excess tax benefit from exercise of stock options


(118
)


(142
)


(1,847
)Changes in assets and liabilities:Receivables


(126
)


1,867



(1,935
)Inventories


(600
)


2,072



(6,291
)Prepaid expenses and other assets


36



(21
)


(306
)Accounts payable


13,794



(23,575
)


19,241Accrued liabilities


3,196



(2,967
)


2,234Deferred rent and other


(204
)


(149
)


(137
)Net cash provided by (used in) operating activities


39,018



(2,927
)


41,455Investing activities:Purchases of property and equipment


(2,345
)


(2,010
)


(4,897
)Proceeds from the sale of property and equipment






10



23Purchases of marketable securities










(20,230
)Proceeds from the sale of marketable securities










40,000Purchase of short-term investments


(15,000
)






Transfers of restricted cash










120Net cash (used in) provided by investing activities


(17,345
)


(2,000
)


15,016Financing activities:Repurchase of common stock






(66,450
)


(19,996
)Proceeds from stock option exercises


1,903



2,989



5,875Excess tax benefit from exercise of stock options


118



142



1,847Principal payments under long-term financing obligation


(40
)


(38
)


(22
)Net cash provided by (used in) financing activities


1,981



(63,357
)


(12,296
)Effect of exchange rate changes on cash and cash equivalents


44



(58
)


78Net increase (decrease) in cash and cash equivalents


23,698



(68,342
)


44,253Cash and cash equivalents, beginning of period


54,451



122,793



78,540Cash and cash equivalents, end of period

$
78,149


$
54,451


$
122,793    42




---



##### Table of Contents



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

Year Ended

Year EndedJanuary 3,

January 4,

December 30,2010

2009

2007Supplemental disclosure of cash flow information:Cash paid for income taxes

$
6,777


$
7,342


$
3,894Cash paid for interest relating to long-term financing obligation


19



21



15Non-cash investing and financing activities:Property additions financed by long-term financing obligation

$



$



$
940    43




---



##### 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
    Principles
    of Consolidation
    Use of
    Estimates
    Foreign
    Currency
     44




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Recent
    Accounting Pronouncements
          No. 2009-05 2009-05),
  No. 2010-06 2010-06), 2010-06
 45




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2010-06
  ASU 2010-09
  Concentration
    of Risk
      Year EndedJanuary 3,


January 4,


December 30,2010


2009


2007Payments


Payments


PaymentsVendor A


10
%


9
%


9
%Vendor B


7
%


7
%


7
%Vendor C


7
%


6
%


6
%24
%


22
%


22
%   Cash
    and Cash Equivalents
    Short-term
    Investments
   46




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  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
    Impairment
    of Long-Lived Assets
    Intangible
    Assets
     47




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Fair
    Value of Financial Instruments
    Treasury
    Stock
    Income
    Taxes
      Revenue
    Recognition
       48




---



##### 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
   49




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 2.
    Inventories    January 3,


January 4,2010


2009Loose diamonds

$
297


$
695Fine jewelry, watches and other


19,137



18,139$
19,434


$
18,834   Note 3.
    Property
    and Equipment    January 3,


January 4,2010


2009Computers and equipment

$
3,902


$
3,823Software and website development


8,343



7,040Leasehold improvements


5,467



5,443Furniture and fixtures


679



774Building


940



94019,331



18,020Less: accumulated depreciation and amortization


(11,999
)


(10,462
)Property and equipment, net

$
7,332


$
7,558       Note 4.
    Commitments
    and Contingencies  Leases
   50




---



##### Table of Contents



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


Leases2010

$
59


$
4742011


61



3172012


68



1622013


68



1592014


54



133Total minimum lease payments


310


$
1,245Less: amounts representing interest


(46
)Present value of minimum lease payments


264Residual value


575Less: current maturities


(43
)Total long-term financing obligation less current maturities

$
796     Litigation
    Note 5.
    Preferred
    Stock    Note 6.
    Stock-Based
    Compensation  Stock
    Option Plans
   51




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            Employee
    Stock Purchase Plans
    Option
    Grants to Non-Employees
    Stock-Based
    Compensation Expense
   52




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year EndedJanuary 3,


January 4,


December 30,2010


2009


2007Expected term


4.0 years



4.0 years



4.5 yearsExpected volatility


55.1
%


48.1
%


37.1
%Expected dividend yield


0.0
%


0.0
%


0.0
%Risk-free interest rate


1.4
%


2.5
%


4.3
%Estimated weighted average fair value per option granted

$
11.32


$
17.23


$
29.26   
    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.        Year EndedJanuary 3,


January 4,


December 30,2010


2009


2007Stock-based compensation expense in selling, general and
    administrative expenses

$
7,088


$
6,905


$
5,621Stock-based compensation expense in cost of sales


77



79



114Total stock-based compensation expense in the consolidated
    statements of operations

$
7,165


$
6,984


$
5,735Total related tax benefit

$
2,508


$
2,437


$
1,967Stock-based compensation capitalized

$
96


$
96


$
79    53




---



##### 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)








(In thousands)Balance, 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



34.38Granted


562



25.88Exercised


(147
)


12.92Canceled


(69
)


46.80Balance, January 3, 2010


2,636


$
33.44



6.68


$
83,265Vested and expected to vest at January 3, 2010


2,527


$
33.36



6.59


$
80,024Exercisable at January 3, 2010


1,683


$
31.86



5.57


$
55,584     OutstandingWeighted AverageRemaining





ExercisableContractual


Exercise





Weighted AverageOptions


Life


Price


Options


Exercise PriceRange of Exercise Price

(In thousands)


(In years)





(In thousands)$0.25 - $21.22


799



6.53


$
14.52



348


$
5.98$21.54 - $31.26


762



5.75



30.46



693



30.57$31.43 - $44.44


690



7.16



38.70



456



36.64$44.45 - $99.98


385



7.98



69.09



186



73.252,636



6.68



33.44



1,683



31.86  54




---



##### Table of Contents



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


Weighted AverageGrant Date Fair


Remaining


AggregateRSUs


Value


Contractural Term


Intrinsic Value(In thousands)





(In years)


(In thousands)Balance, January 4, 2009





$
Granted


12



21.22Vested






Canceled






Balance, January 3, 2010


12


$
21.22



0.64


$
779Expected to vest at January 3, 2010


12


$
21.22



0.61


$
729       Note 7.
    Common
    Stock  24-month 24-month 24-month
  Note 8.
    Employee
    Benefit Plan   55




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 9.
    Income
    Taxes    Year EndedJanuary 3,


January 4,


December 30,2010


2009


2007Current income tax expense

$
6,619


$
7,112


$
3,685Tax benefit from stock option exercises recorded in equity


1,793



510



6,848Deferred income tax (benefit) expense:Other, net


(1,534
)


(1,396
)


(1,405
)Total income tax expense

$
6,878


$
6,226


$
9,128A 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


0.0
%


(0.1
)%


(0.7
)%Effective tax rate


35.0
%


34.9
%


34.3
%     Year EndedJanuary 3,


January 4,2010


2009Deferred tax assets:Current:Reserves and allowances

$
453


$
388Deferred rent


72



72Other


203



210Noncurrent:Stock options


7,156



4,962Deferred rent


59



131Financing obligation


279



294Other


38



43Gross deferred tax assets


8,260



6,100Deferred tax liabilities:Current:Prepaid expenses


(279
)


Noncurrent:Leased building


(287
)


(304
)Excess of book over tax depreciation and amortization


(476
)


(112
)Gross deferred tax liabilities


(1,042
)


(416
)Net deferred tax assets

$
7,218


$
5,684  56




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Note 10.
    Income
    Per Share      Year EndedJanuary 3,


January 4,


December 30,2010


2009


2007Net income

$
12,800


$
11,630


$
17,459Weighted average common shares outstanding


14,534



14,925



15,919Basic net income per share

$
0.88


$
0.78


$
1.10Dilutive effect of stock options and restricted stock units


682



580



895Common stock and common stock equivalents


15,216



15,505



16,814Diluted net income per share

$
0.84


$
0.75


$
1.04     Year EndedJanuary 3,


January 4,


December 30,2010


2009


2007Stock options


757



606



112   Note 11.
    Segment
    Information   57




---



##### Table of Contents



BLUE
    NILE, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Year EndedJanuary 3,


January 4,


December 30,2010


2009


2007Net sales to external customers:United States

$
268,898


$
267,670


$
302,230Other countries


33,236



27,659



17,034Total

$
302,134


$
295,329


$
319,264   Year EndedJanuary 3,


January 4,


December 30,2010


2009


2007Long-lived assets:United States

$
7,044


$
7,148


$
7,075Other countries


288



410



526Total

$
7,332


$
7,558


$
7,601   Note 12.
    Selected
    Quarterly Financial Information (unaudited)    Q1


Q2


Q3


Q42009 quarter:Net sales

$
62,403


$
69,852


$
66,943


$
102,936Gross profit


13,203



15,030



14,797



22,314Net income


1,940



2,844



2,575



5,441Basic net income per share


0.13



0.20



0.18



0.37Diluted net income per share


0.13



0.19



0.17



0.35   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



0.24   Note 13.
    Subsequent
    Events  Rule 10b5-1
 58




---



##### 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)Reserve for sales returns:Year ended:January 3, 2010

$
828


$
25,896


$
(25,834
)

$
890January 4, 2009


1,281



28,383



(28,836
)


828December 30, 2007


1,179



26,743



(26,641
)


1,281Reserve for fraud:Year ended:January 3, 2010

$
100


$
63


$
(70
)

$
93January 4, 2009


130



20



(50
)


100December 30, 2007


105



118



(93
)


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




---



##### 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




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control  Integrated Framework
        Internal Control  Integrated Framework
        61




---



##### 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




---



##### Table of Contents



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

Financial Statements:Report of Independent Registered Public Accounting Firm


38Consolidated Balance Sheets, as of January 3, 2010 and
    January 4, 2009


39Consolidated Statements of Operations, for the fiscal years
    ended January 3, 2010, January 4, 2009 and
    December 30, 2007


40Consolidated Statements of Changes in Stockholders Equity,
    for the fiscal years ended January 3, 2010, January 4,
    2009 and December 30, 2007


41Consolidated Statements of Cash Flows, for the fiscal years
    ended January 3, 2010, January 4, 2009 and
    December 30, 2007


42Notes to Consolidated Financial Statements


442.

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




---



##### 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)

February 23, 2010By

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

February 25, 2010By

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

February 23, 2010By

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

February 23, 2010By

/s/  Leslie
    LaneLeslie
    Lane, Director

February 22, 2010By

/s/  Ned
    MansourNed
    Mansour, Director

February 22, 2010 64




---



##### Table of Contents



By

/s/  Michael
    PotterMichael
    Potter, Director

February 22, 2010By

/s/  Steve
    ScheidSteve
    Scheid, Director

February 22, 2010By

/s/  Mary
    Alice TaylorMary
    Alice Taylor, Director

February 22, 2010  65




---



##### 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.4.1

Reference is made to Exhibits 3.1, and 3.2.4.2(3)

Specimen Stock Certificate.4.3(19)

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(19)*

Blue Nile, Inc. Amended and Restated 1999 Equity Incentive Plan.10.1.2(19)*

Form of Stock Option Agreement pursuant to the Blue Nile, Inc.
    1999 Equity Incentive Plan.10.2.1(11)*

Third Amended and Restated 2004 Non-Employee Directors
    Stock Option Plan.10.2.2(6)*

Form of Stock Option Agreement pursuant to the Blue Nile, Inc.
    2004 Non-Employee Directors Stock Option Plan.10.3(19)*

Blue Nile, Inc. 2004 Employee Stock Purchase Plan.10.4.1(4)*

Blue Nile, Inc. 2004 Equity Incentive Plan.10.4.2(6)*

Form of Stock Option Agreement pursuant to the 2004 Equity
    Incentive Plan.10.4.3(5)*

Blue Nile, Inc. Stock Grant Notice pursuant to the 2004 Equity
    Incentive Plan.10.4.4(13)*

Form of Restricted Stock Unit Grant Notice and Form of Award
    Agreement under the Blue Nile, Inc. 2004 Equity Incentive Plan.10.5.1(4)

Sublease Agreement, dated May 22, 2003, between Amazon.com
    Holdings, Inc. and the registrant.10.5.2(4)

First Amendment to Sublease Agreement, dated July 3, 2003,
    between Amazon.com Holdings, Inc. and the registrant.10.6.1(4)

Lease, dated June 28, 2001, between Gull Industries, Inc.
    and the registrant.10.6.2(4)

First Amendment to Lease, dated December 11, 2002 between
    Gull Industries, Inc. and the registrant.10.6.3(4)

Second Amendment to Lease, dated November 15, 2003, between
    Gull Industries, Inc. and the registrant.10.7(8)

Commercial lease, dated July 21, 2006, between Gull
    Industries, Inc. and the registrant.10.8(10)*

Offer Letter with Diane M. Irvine, dated December 1, 1999.10.9(19)*

Offer Letter with Dwight Gaston, dated May 14, 1999.10.10(19)*

Offer Letter with Susan S. Bell, dated August 22, 2001.10.11(9)*

Offer Letter with Marc D. Stolzman, dated May 2, 2008.10.12(13)*

Offer Letter with Marianne Marck, dated January 9, 2009.10.13(12)*

Offer Letter with Kevin Frisch, dated March 31, 2009.10.14(4)*

Form of Indemnity Agreement entered into between Blue Nile, Inc.
    and each of its directors and executive officers.10.15.1(7)*

Blue Nile, Inc. 2009 Executive Officer Cash Incentive Plan.10.16(15)*

Compensation Arrangements with the registrants Chief
    Executive Officer and Executive Chairman10.17(13)*

Director Compensation10.18(14)*

Severance Agreement with Kevin Frisch, dated October 7, 200910.19(17)*

Executive Bonus Plan 66




---



##### Table of Contents



ExhibitNumber

Description10.20(18)*

Change of Control Severance Plan21.1(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(16)

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(16)

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 Current Report on
    Form 8-K
    (No. 000-50763),
    as filed with the Securities and Exchange Commission on
    November 9, 2009, and incorporated by reference herein.(3)
    
    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.(4)
    
    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.(5)
    
    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.(6)
    
    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.(7)
    
    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, 2009, and incorporated by reference herein.(8)
    
    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.(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
    May 6, 2008, and incorporated by reference herein.(10)
    
    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




---



##### Table of Contents



(11)
    
    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.(12)
    
    Previously filed as Exhibit 10.2 to Blue Nile, Inc.s
    Quarterly Report on
    Form 10-Q
    (No. 000-50763)
    as filed with the Securities and Exchange Commission on
    May 13, 2009 and incorporated by reference herein.(13)
    
    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 5, 2009, 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)
    
    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.(17)
    
    Previously filed as Exhibit 10.3 to Blue Nile, Inc.s
    Quarterly Report on
    Form 10-Q
    (No. 000-50763)
    as filed with the Securities and Exchange Commission on
    May 13, 2009, and incorporated by reference herein.(18)
    
    Previously filed as Exhibit 10.2 to Blue Nile, Inc.s
    Quarterly Report on
    Form 10-Q
    (No. 000-50763)
    as filed with the Securities and Exchange Commission on
    May 13, 2009, and incorporated by reference herein.(19)
    
    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, and incorporated by reference herein. 68