Bluefly, Inc. (NASDAQ Capital Market: BFLY), a leading online
retailer of designer brands, fashion trends and superior value
(www.bluefly.com), today announced its results for the third
quarter of 2012 as well as a new working capital credit facility.
“We continue to execute on our new strategy, and while our net
sales were only slightly up for the quarter, that we were able to
achieve sales of over $21 million with 25% less average inventory
is a testament to the efficiency of the new model we are building,”
said Joseph Park, the Company’s Chief Executive Officer. “Our new
strategy optimizes return on invested capital and we increased
inventory turns by more than 80% this quarter. Furthermore, healthy
increases in free traffic, the continued growth in our overall
member file, and the cross over between Bluefly and Belle &
Clive member files position us well to leverage these drivers,
which we believe will enable us to improve operating performance
going forward. Product margins for the quarter were higher than the
first quarter, however our overall gross margins were negatively
impacted by a 26% increase in first-time customers and the
associated acquisition costs from promotional shipping and daily
deal offers. We continue to see strong growth both from Belle and
Clive overall, as well as our international markets, where we
experienced over 44% growth in orders. As we move into the fourth
quarter, we will continue to optimize and refine our new strategy
to maximize operating results and increase shareholder value.”
Results for the third quarter of 2012 included the following
highlights:
- Net sales increased by approximately 3%
to $21.7 million, from $21.2 million in the third quarter of 2011,
primarily as a result of a reduction in return rates, which were
partially offset by a decrease in average order size, and a
decrease in shipping and handling revenue related to increased
promotional activity.
- Gross profit margin decreased to 13.6%,
from 29.1% in the third quarter of 2011, primarily attributable to
(i) the deliberate shift in our strategy as we increase inventory
turns by selling merchandise at lower gross margin percentages (ii)
an increase in freight costs due to free shipping and (iii) daily
deal promotions that we offered to first-time customers during the
quarter. While our gross profit margin decreased during the
quarter, our inventory turns have improved by more than 80% for the
three months ended September 30, 2012 compared to the three months
ended September 30, 2011.
- Total operating expenses increased by
2% to $8.9 million, from $8.7 million in the third quarter of 2011.
As a percentage of total net sales, total operating expenses
remained relatively unchanged at 41% compared to the third quarter
of 2011. The increase in total operating expenses was primarily
attributable to an increase in total selling and fulfillment
expenses of $0.6 million, which was partially offset by decreases
in total marketing expenses of $0.3 million and total general and
administrative expenses of $0.1 million, compared to the third
quarter of 2011.
- Operating loss increased to $6.0
million, from $2.5 million in the third quarter of 2011. Net loss
attributable to stockholders was $6.3 million, or $0.22 per share
(based on 28.6 million weighted average shares outstanding),
compared to a net loss attributable to stockholders of $2.5
million, or $0.10 per share (based on 25.5 million weighted average
shares outstanding), in the third quarter of 2011.
- Adjusted negative EBITDA increased to
$4.8 million, from an adjusted negative EBITDA of $1.7 million in
the third quarter of 2011.
- Cash and cash equivalents decreased to
$1.3 million at September 30, 2012, compared to $4.4 million at
December 31, 2011.
- Inventory decreased to $23.4 million at
September 30, 2012, compared to $32.1 million at December 31,
2011.
On November 13, 2012, the Company secured a new $10 million
senior-secured working capital credit facility with Salus Capital
Partners LLC (“Salus”). The Salus facility replaces the Company’s
$7.5 million credit facility with Wells Fargo Retail Finance,
LLC.
“We believe that Salus is a great complement to the Company’s
new strategy and we look forward to a mutually beneficial working
relationship for many years to come. Salus is well-positioned to
assist us in our future plans.” said Joseph Park, the Company’s
Chief Executive Officer.
To supplement the consolidated financial results for the third
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 to related party stockholders, 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. 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 September 30,
2012 2011 Net sales $ 21,743,000 $ 21,194,000
Cost of sales 18,781,000 15,016,000
Gross profit 2,962,000 6,178,000
Gross margin 13.6% 29.1% Selling and fulfillment expenses
5,154,000 4,525,000 Marketing expenses 1,848,000 2,123,000 General
and administrative expenses 1,922,000
2,061,000 Total operating expenses 8,924,000
8,709,000 Operating loss (5,962,000 )
(2,531,000 ) Interest expense to related party stockholders
(270,000 ) -- Other interest expense, net (88,000 )
(65,000 ) Net loss (6,320,000 ) (2,596,000 ) Less:
net loss attributable to non-controlling interest in Eyefly LLC
(43,000 ) (102,000 ) Net loss attributable to
Bluefly, Inc. stockholders $ (6,277,000 ) $ (2,494,000 )
Basic and diluted net loss per common
share attributable to Bluefly, Inc.stockholders
$ (0.22 ) $ (0.10 )
Weighted average common shares outstanding
(basic and diluted)
28,576,612 25,530,899
SELECTED CONSOLIDATED BALANCE SHEET
DATA & KEY METRICS –
UNAUDITED
September 30, December 31, 2012 2011
Cash and cash equivalents $ 1,254,000 $ 4,413,000
Inventories, net 23,443,000 32,083,000 Prepaid expenses and
other current assets 5,249,000 6,240,000 Property and
equipment, net 6,489,000 5,705,000 Current
liabilities 26,722,000 21,997,000 Stockholders’ equity
(including non-controlling interest in Eyefly LLC) 9,932,000
26,256,000
Three Months Ended September 30,
2012 2011 Average order size (including
shipping & handling)* $ 226.33 $ 312.49 New members added
during the period* 198,562 315,815 *Excludes Eyefly
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION – UNAUDITED
Three Months Ended September 30, 2012
2011 Net loss attributable to Bluefly, Inc.
stockholders $ (6,277,000 ) $ (2,494,000 ) Interest income
-- -- Interest expense to related party stockholders 270,000 --
Interest expense 88,000 66,000 Depreciation and amortization
expenses 838,000 462,000 Non-cash stock-based compensation expenses
284,000 295,000 Adjusted EBITDA
$ (4,797,000 ) $ (1,671,000 )
Bluefly, Inc. (MM) (NASDAQ:BFLY)
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