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Bluefly, Inc. (NASDAQ Capital Market: BFLY), a leading online retailer of designer brands, fashion trends and superior value (
www.bluefly.com), today announced results for the fourth quarter and fiscal year ended December 31, 2011.
Joseph Park, Bluefly’s Chief Executive Officer stated: “Fiscal 2011 was a pivotal period for our Company. We implemented key strategies to position our Company for future growth. To this end, we expanded our category reach with the launch of Eyefly.com in June 2011 and just prior to year end introduced Belle & Clive to consumers enabling us to leverage the 20 million unique visitors to Bluefly.com and our more than 350 brand relationships to offer the most important brands with limited time offers at members only pricing. We are very excited by the opportunities that Belle & Clive bring to our Company and have already seen a significant increase in subscriber growth in the two quarters since we implemented this new strategy. We begin 2012 with the foundation in place to advance our long term sales and profitability goals.”
Results for the full year of 2011 included the following highlights:
Net sales increased by approximately 9% to $96.3 million, from $88.6 million in 2010, as a result of continued demand for our luxury designer merchandise and an increase in customer orders in 2011.
Gross profit margin percentage was 29.4% compared to 37.5% in 2010, primarily as a result of an increase in inventory reserves of approximately $2.2 million, a write-off of $1.0 million related to merchandise credits from suppliers that the Company now believes may not be collected, as well as higher promotional activity and currency fluctuations between the U.S. dollar and the Euro. The increase in inventory reserves was primarily the result of a shift in Company strategy with a view to accelerating inventory turns.
Total operating expenses increased by approximately 6% to $39.4 million, from approximately $37.0 million for 2010. As a percentage of net sales, total operating expenses decreased to 40.9%, compared to 41.8% for 2010. The increase in total operating expenses was primarily attributable to an increase in selling and fulfillment expenses and general and administrative expenses, offset partially by a reduction in marketing expenses. Included in general and administrative expenses are a write-off and reserve of $1.2 million in connection with a trade receivable that we now believe may not be collected in its entirety. As a percentage of net sales, total marketing expenses decreased to 11.3%, compared to 14.2% for 2010.
Operating loss was $11.1 million, as compared to $3.8 million in 2010.
Adjusted EBITDA was negative $7.3 million, as compared to an adjusted negative EBITDA of $716,000 in 2010.
Net loss attributable to stockholders was $11.0 million, as compared to net loss of $4.0 million in 2010. Loss per share attributable to stockholders increased to $0.43 per share, from a net loss of $0.17 per share in 2010.
Subscribers to the Company’s websites, excluding eyefly.com, increased approximately 254% to 1,015,000 subscribers, from 287,000 subscribers in 2010.
Cash and cash equivalents decreased to $4.4 million at December 31, 2011, compared to $10.4 million at December 31, 2010.
Inventory increased to $32.1 million at December 31, 2011, compared to $25.1 million at December 31, 2010.
Separately, the company expects to incur approximately $1.2 million in non-recurring compensation expenses, including $0.6 million related to non-cash equity compensation, in the first quarter of fiscal 2012 related to the resignation of the Company’s prior Chief Executive Officer, which was announced on February 2, 2012.
Results for the fourth quarter of 2011 included the following highlights:
Net sales increased by approximately 3% to $29.4 million, from $28.6 million in the fourth quarter of 2010, as a result of a reduction in the company’s reserve for returns and credit card chargebacks. The company’s reserve for returns and credit card chargebacks, as a percentage of gross sales, decreased by 1.6% for the fourth quarter of 2011, compared to the fourth quarter of 2010. The decrease was primarily caused by a reduction in overall return rate, however, there can be no assurance that this trend will continue.
Gross profit margin was 21.9% compared to 34.9% in the fourth quarter of 2010. The decrease in gross profit margin percentage was primarily attributable to an increase in inventory reserves of $2.4 million and a write-off of $1.0 million related to merchandise credits from suppliers that the Company believes may not be collected. The increase in inventory reserves was primarily the result of a shift in Company strategy with a view to accelerating inventory turns.
Total operating expenses increased by approximately 30% to $12.6 million, from approximately $9.6 million for the fourth quarter of 2010. The increase in total operating expenses was attributable to an increase in e-commerce expenses (which are included in selling and fulfillment expenses) of $0.9 million related to the launching of the Belle & Clive web site, an increase in additional marketing expenses of $0.5 million related to customer acquisitions and an increase of general and administrative expenses of $1.5 million. As a percentage of net sales, total operating expenses increased to 42.8%, compared to 33.8% for the fourth quarter of 2010. Included in general and administrative expenses is a write-off and a reserve of $1.2 million in connection with a trade receivable that we now believe may not be collected in its entirety.
Operating loss was $6.2 million, as compared to an operating income of $0.3 million in the fourth quarter of 2010.
Adjusted EBITDA was negative $5.3 million, as compared to an adjusted positive EBITDA of $1.1 million in the fourth quarter of 2010.
Net loss attributable to stockholders was approximately $6.2 million, as compared to net income of $0.3 million in the fourth quarter of 2010. The Company incurred a loss per share attributable to stockholders of $0.22 per share, compared to a net income of $0.01 per share, on a basic and diluted basis, in the fourth quarter of 2010.
To supplement the consolidated financial results for the full year and fourth 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 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.