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Bluefly Reports Second Quarter 2012 Results

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.

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