Blue Nile's second-quarter sales rose nearly 10 percent to $76.6 million and cost of sales rose 10.1 percent to $60.4 million, leaving the online diamond retailer with gross profit of $16.2 million. Net income though was basically flat at $2.8 million, or a penny lower per share from one year ago.  The news sent Blue Nile shares tumbling after hours by 12 percent to $41.70 as of 5 p.m. in New York.

Blue Nile grew international sales by 28.2 percent to $9.1 million, and excluding the impact from foreign exchange rates that increase was 21 percent. Based upon Rapaport calculations, Blue Nile's U.S. sales in second quarter rose 7.4 percent to $67.5 million.

Total orders increased approximately 3.5 percent to 39,407, which would result in an average ticket of $1,944, an increase of 6 percent from second quarter 2009.  Blue Nile reported that  sales growth during the quarter was strongest for  non-engagement jewelry, including diamond bands, earrings and necklaces.

At the end of the second quarter, cash and cash equivalents totaled $47.1 million. Blue Nile repurchased 213,001 shares of its common stock for $10 million.

"We delivered record second quarter sales and non-GAAP adjusted EBITDA in what remains a challenging consumer environment," said Diane Irvine, Blue Nile's chief executive. "While we experienced high growth throughout most of the quarter, we saw a slowdown in consumer demand in the month of June. Consumers overall began to pull back on high ticket purchases, unlike earlier in the year, based on economic concerns such as high unemployment levels and market volatility.

"Despite this, we are confident that our competitive position remains stronger than ever based upon our differentiated business model and unique consumer proposition, which allows us to provide the highest quality diamonds and fine jewelry to our customers at tremendous values. This positions us well to continue to gain market share in the industry, regardless of overall consumer trends," Irvine said.