Bluefly, Inc. (NASDAQ Capital Market: BFLY), a leading online
retailer of designer brands, fashion trends and superior value
(www.bluefly.com), today announced an 8% decrease in net sales and
an improvement in inventory turns by approximately 32%.
“During this year, we embarked upon a new strategy that focuses
on lowering our customer acquisition costs, increasing the lifetime
value of our customers while improving our use of capital.” Joseph
C. Park, Bluefly’s Chief Executive Officer stated. “We have focused
on improving our inventory turns by being more competitive
with our pricing. As we move forward we plan to shift the inventory
mix toward higher inventory margin product and we plan to add more
revenue streams that require minimal working capital. Our top line
performance fell short of our expectations and gross margins were
negatively impacted by our transition into this strategy as we were
promotional and deliberately reduced our inventory receipts. We
believe that these initiatives will take time to materialize, but
we expect gross margins to improve over time as these initiatives
take effect.”
“We also expect to lower our customer acquisition costs as we
sign up more visitors to both bluefly.com and Belle & Clive to
become subscribers to our email marketing program. This in turn
will enable us to more cost effectively market to our customers
without spending significantly more marketing dollars, which will
lower our customer acquisition costs and increase the lifetime
value of our customers. While our total marketing spend increased,
we’ve already seen improvements in our per member acquisition costs
as we acquired more members at a lower price for the three months
ended June 30, 2012, compared to the three months ended June 30,
2011.”
Concurrently with the release of the second quarter results, the
Company also announced the completion of a $3.0 million secured
debt financing, with two of its largest existing stockholders --
Rho Ventures VI, L.P. and Prentice Consumer Partners, LP -- each
providing $1.5 million. The Rho debt is convertible into equity at
Rho's option. A detailed description of the terms of the financing
is included in the Company's quarterly report on form 10-Q.
Results for the second quarter of 2012 included the following
highlights:
- Net sales decreased by approximately 8%
to $22.2 million, from $24.0 million in the second quarter of 2011,
primarily as a result of a 10% decrease in average order size,
related to more promotional activity, which was partially offset by
an increase in customer orders, and, in part, a planned decrease in
inventory purchases since the beginning of the year. In addition,
included in net sales for the second quarter of 2011 was an
opportunistic sale of inventory to a third-party in the amount of
$1.3 million.
- Gross profit margin decreased to 19.9%,
from 31.2% in the second quarter of 2011 primarily attributable to
the deliberate shift in our strategy as we increase inventory turns
by selling merchandise at lower gross margin percentages. While our
gross profit margin decreased during the quarter, our inventory
turns have improved by 32% for the three months ended June 30, 2012
compared to the three months ended June 30, 2011. Total operating
expenses increased by approximately 8% to $9.3 million, from $8.6
million in the second quarter of 2011. The increase in total
operating expenses was primarily attributable to an increase in
selling and fulfillment expenses of $0.5 million and an increase in
marketing expenses of $0.1 million compared to the second quarter
of 2011.
- Operating loss increased to $4.9
million, from $1.1 million in the second quarter of 2011.
- Net loss attributable to stockholders
was $4.9 million, or $0.17 per share (based on 28.6 million
weighted average shares outstanding), compared to a net loss
attributable to stockholders of $1.0 million, or $0.04 per share
(based on 24.6 million weighted average shares outstanding), in the
second quarter of 2011.
- Adjusted negative EBITDA increased to
$3.8 million, from an adjusted negative EBITDA of $0.03 million in
the second quarter of 2011.
- Cash and cash equivalents decreased to
$1.7 million at June 30, 2012, compared to $4.4 million at December
31, 2011.
- Inventory decreased to $25.2 million at
June 30, 2012, compared to $32.1 million at December 31, 2011.
To supplement the consolidated financial results for the second
quarter of 2012 presented in accordance with generally accepted
accounting principles (GAAP), the Company is also reporting
adjusted EBITDA as a non-GAAP financial measure that the Company
believes allows for a better understanding of its operating
performance. The Company defines adjusted EBITDA as net loss
attributable to Bluefly, Inc. stockholders excluding interest
income, interest expense, income tax provision, depreciation and
amortization expenses adjusted for non-cash stock-based
compensation expenses. The Company believes that this non-GAAP
financial measure, when shown in conjunction with the corresponding
GAAP measures, enhances the investor’s and management’s overall
understanding of the Company’s current operating performance and
provides greater transparency with respect to key operating metrics
used by management in its financial and operational decision making
process. The Company considers this non-GAAP financial measure to
be useful because it excludes certain non-cash and non-operating
charges, which enables investors and management to analyze trends
in the Company’s operations. The presentation of this non-GAAP
financial measure is not intended to be considered in isolation, as
a substitute for, or superior to, the financial information
prepared and presented in accordance with GAAP. For more
information, please see the table captioned “Reconciliation of
Non-GAAP Financial Information,” which provides a full
reconciliation of actual results to the non-GAAP financial
measures.
About Bluefly, Inc.
Founded in 1998, Bluefly, Inc. (NASDAQ Capital Market: BFLY) is
a leading online retailer of designer brands, fashion trends and
superior value. Bluefly is headquartered at 42 West 39th Street in
New York City, in the heart of the Fashion District. In 2011,
Bluefly expanded its portfolio, launching Belle & Clive, a
Members-only shopping destination that presents highly-curated
selections of important brands via limited-time sale events; and
Eyefly, an online portal for fashionable prescription eyeglasses
starting at $99. For more information, please call 212-944-8000 or
visit www.bluefly.com.
This press release may include statements that constitute
“forward-looking statements,” usually containing the words
“believe,” “project,” “expect” or similar expressions. These
statements are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements inherently involve risks and uncertainties that could
cause actual results to differ materially from the forward-looking
statements. The risks and uncertainties are detailed from time to
time in reports filed by the Company with the Securities and
Exchange Commission, including Forms 8-K, 10-Q and 10-K. These
risks and uncertainties include, but are not limited to, the
following: the Company’s history of losses and anticipated future
losses; the risk of availability of additional capital, if
required, to satisfy the Company’s needs for cash flow, inventory
supply and growth of the business; the Company’s ability to realize
benefits from new initiatives such as its members-only web site
Belle and Clive; risks related to the Company’s shift in strategy
to emphasize inventory turns over product margin; the risks that
our reduction in spending on offline marketing in favor of online
methods will continue to be successful; risks associated with the
new Belle & Clive initiative; risks associated with the slow
recovery from the unfavorable general economic environment; risks
associated with affiliates of Rho Ventures, LP, affiliates of Soros
Fund Management, private funds associated with Maverick Capital
Ltd. and affiliates of Prentice Capital Management, LP each owning
a significant portion of our stock; the potential failure to
forecast revenues and/or to make adjustments to our operating plans
necessary as a result of any failure to forecast accurately;
unexpected changes in fashion trends; cyclical variations in the
apparel and e-commerce markets; risks associated with our
dependence on certain concentrations of suppliers for a material
portion of our inventory; the risk of default by us under our
credit facility and the consequences that might arise from us
having granted a lien on substantially all of our assets under that
agreement; risks of litigation related to the sale of unauthentic
or damaged goods and litigation risks related to sales in foreign
countries; our potential exposure to product liability claims in
the event that products sold by us are defective; the dependence on
third parties and certain relationships for certain services,
including our dependence on UPS and USPS (and the risks of a mail
slowdown due to terrorist activity) and our dependence on our
third-party web hosting, fulfillment and customer service centers;
online commerce security risks; our ability to raise additional
capital, if needed, to support the growth of our business; risks
related to brand owners’ efforts to limit our ability to purchase
products indirectly; management of potential growth; the
competitive nature of our business and the potential for
competitors with greater resources to enter the business; the
availability of merchandise; the need to further establish brand
name recognition; risks associated with our ability to handle
increased traffic and/or continued improvements to our Web Site;
rising return rates; dependence upon executive personnel who do not
have long-term employment agreements; the successful hiring and
retaining of new personnel; risks associated with expanding our
operations; risks associated with potential infringement of other’s
intellectual property; the potential inability to protect our
intellectual property; government regulation and legal
uncertainties; uncertainties relating to the imposition of sales
tax on Internet sales and our ability to utilize our net operating
losses.
CONSOLIDATED STATEMENTS OF
OPERATIONS - UNAUDITED Three Months Ended June
30, 2012 2011 Net sales $ 22,215,000 $
24,037,000 Cost of sales 17,786,000 16,544,000
Gross profit 4,429,000 7,493,000
Gross margin 19.9% 31.2% Selling and fulfillment
expenses 5,150,000 4,609,000 Marketing expenses 2,231,000 2,098,000
General and administrative expenses 1,955,000
1,927,000 Total operating expenses 9,336,000
8,634,000 Operating loss (4,907,000 )
(1,141,000 ) Other interest expense, net (113,000 )
(55,000 ) Net loss (5,020,000 ) (1,196,000 )
Less: net loss attributable to non-controlling interest in Eyefly
LLC (71,000 ) (164,000 ) Net loss attributable
to Bluefly, Inc. stockholders $ (4,949,000 ) $ (1,032,000 )
Basic and diluted net loss per common share attributable to
Bluefly, Inc. stockholders $ (0.17 ) $ (0.04 ) Weighted
average common shares outstanding (basic and diluted)
28,576,612 24,611,736
SELECTED CONSOLIDATED BALANCE SHEET DATA
& KEY METRICS – UNAUDITED June 30,
December 31, 2012 2011 Cash and cash
equivalents $ 1,686,000 $ 4,413,000 Inventories, net
25,243,000 32,083,000 Prepaid expenses and other current
assets 3,448,000 6,240,000 Property and equipment, net
6,512,000 5,705,000 Current liabilities 21,801,000
21,997,000 Stockholders’ equity (including non-controlling
interest in Eyefly LLC) 15,394,000 26,256,000
Three Months Ended June 30, 2012 2011
Average order size (including shipping &
handling)* $ 282.99 $ 315.45 New members added during the period*
417,593 79,376 *Excludes Eyefly
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION – UNAUDITED
Three Months Ended June 30,
2012 2011 Net loss attributable to
Bluefly, Inc. stockholders $ (4,949,000 ) $ (1,032,000 )
Interest income -- (4,000 ) Interest expense 113,000 58,000
Depreciation and amortization expenses 744,000 721,000 Non-cash
stock-based compensation expenses 287,000
224,000 Adjusted EBITDA $ (3,805,000 ) $ (33,000 )
Bluefly, Inc. (MM) (NASDAQ:BFLY)
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