Bluefly, Inc. (NASDAQ Capital Market: BFLY), a leading online retailer of designer brands, fashion trends and superior value (
), today announced a double digit increase in net sales and a reduction in total operating expenses for the third quarter of 2011.
Melissa Payner, Bluefly’s Chief Executive Officer stated: “Our third quarter results were highlighted by double digit sales growth and reduced operating expenses. During the quarter, we significantly reduced offline marketing versus third quarter of last year choosing to focus on new customer acquisition from online methods. This led to our strong sales increase and generated record growth in subscribers. We believe this achievement demonstrates an increasing awareness of, and loyalty to, the Bluefly.com brand. While increased promotional activity related to this strategy contributed to a decline in our gross margin in the quarter, we expect this initiative to further accelerate sales and increase gross profit dollars in the future. As we begin the fourth quarter, we believe we are making solid progress towards achieving our long-term goals and expect that Bluefly’s strong luxury assortment across brands and categories combined with our value proposition positions us as an important destination for luxury consumers this holiday season. Additionally, we are excited to unveil our newest initiative, Belle and Clive, later this year, which will present members with highly curated events featuring the most coveted designer and contemporary brands at members-only pricing.”
Results for the third quarter of 2011 included the following highlights:
- Net sales increased by over 10% to $21.2 million, from $19.2 million in the third quarter of 2010, as a result of an increase in customer orders placed and new customers acquired during the third quarter of 2011. Our reserve for returns and credit card chargebacks decreased by 1.3% of gross sales for the third quarter of 2011, compared to the third quarter of 2010. The decrease was primarily caused by a reduction in our overall return rate, however, there can be no assurance that this trend will continue.
- Gross profit margin was 29.1% compared to 36.1% in the third quarter of 2010 as a result of an increase in promotional activity during the quarter and a shift in product mix between the sales of luxury designer and contemporary merchandise. Gross profit margin was also negatively impacted by currency fluctuations between the U.S. dollar and the Euro.
- Total operating expenses decreased by over 2% to $8.7 million, from approximately $9.0 million for the third quarter of 2010. As a percentage of sales, total operating expenses decreased to 41.0%, compared to 46.6% for the third quarter of 2010. The decrease in total operating expenses was primarily attributable to a 27.9% decrease in total marketing expenses, which was partially offset by increases in selling and fulfillment expenses and general and administrative expenses.
As a percentage of sales, total marketing expenses decreased to 10.0%, compared to 15.3% for the third quarter of 2010. Excluding $250,000 of costs related to the Eyefly web site, total operating expenses decreased by over 5% compared to the third quarter of 2010.
- Operating loss was $2.5 million, as compared to $2.0 million in the third quarter of 2010.
- Adjusted EBITDA was negative $1.7 million, as compared to an adjusted negative EBITDA of $1.3 million in the third quarter of 2010.
- Net loss attributable to stockholders was $2.5 million, as compared to net loss of $2.1 million in the third quarter of 2010. Loss per share attributable to stockholders increased to $0.10 per share, from a net loss of $0.08 per share in the third quarter of 2010.
- Cash and cash equivalents decreased to $4.1 million at September 30, 2011, compared to $10.4 million at December 31, 2010.
- Inventory increased to $35.0 million at September 30, 2011, compared to $25.1 million at December 31, 2010. The increase in inventory was driven to support the Company’s expansion of limited time luxury designer sales merchandise.
To supplement the consolidated financial results for the third quarter of 2011, 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.