Bluefly Reports Second Quarter 2011 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 increase of over 17% in net sales for the second quarter of 2011.

Melissa Payner, Bluefly’s Chief Executive Officer stated: “Our second quarter results included double digit sales growth driven by our ability to excite consumers with compelling luxury brands at great value in an online easy to shop environment and, excluding our investment in Eyefly, positive adjusted EBITDA results. While our gross profit margin declined in the quarter, going forward we believe our strategies position us to drive sales and therefore increase gross profit dollars.”

Results for the second quarter of 2011 included the following highlights:
  • Net sales increased by approximately 17.0% to $24.0 million, from $20.5 million in the second quarter of 2010, as a result of an 11% increase in new customers acquired during the second quarter of 2011 and an increase in average order size to $315.45, compared to $310.39 in the second quarter of 2010. In addition, net sales for the quarter included an opportunistic sale of inventory to a third-party for $1.3 million.
  • Gross profit margin decreased to 31.2%, from 38.8% in the second quarter of 2010 as a result of both a decrease in product margins related to the increase in sales of luxury designer merchandise, which historically have lower gross margins compared to contemporary merchandise, and an increase in promotional incentives during the quarter. Furthermore, gross profit margin was also negatively impacted by currency fluctuations between the U.S. dollar and the Euro.
  • Total operating expenses remained relatively unchanged at approximately $8.6 million in the second quarter of 2011. As a percentage of sales, total operating expenses decreased to 35.9%, compared to 42.1% in the second quarter of 2010. Excluding $358,000 of costs related to the Eyefly Web site, which was launched in June 2011, total operating expenses decreased by over 4% compared to the second quarter of 2010.
  • Operating loss was $1.1 million, as compared to $669,000 in the second quarter of 2010. Excluding the operating loss related to Eyefly of $341,000, total operating loss increased by approximately 20% compared to the second quarter of 2010.
  • Adjusted EBITDA decreased to negative $33,000, from an adjusted EBITDA of $143,000 in the second quarter of 2010. Excluding Eyefly’s net loss of $342,000 for the quarter, the Company’s adjusted EBITDA decreased to positive $141,000.
  • Net loss attributable to stockholders was $1.0 million, as compared to net loss of $724,000 in the second quarter of 2010. Loss per share attributable to stockholders increased to $0.04 per share, from a net loss of $0.03 per share in the second quarter of 2010.
  • Cash and cash equivalents decreased to $3.5 million at June 30, 2011, compared to $10.4 million at December 31, 2010.
  • Inventory increased to $30.6 million at June 30, 2011, compared to $25.1 million at December 31, 2010. The increase in inventory includes $1.6 million of goods in transit, and reflects an increase in the receipt of designer goods in part to meet the increased demand for luxury.

To supplement the consolidated financial results for the second quarter of 2011, of which Eyefly represents less than 1% of total consolidated net sales, 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 39 th Street in New York City, in the heart of the Fashion District. 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 and growth of the business; the Company’s ability to realize benefits from new initiatives such as its Eyefly subsidiary; risks associated with the continuing difficulties in 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 one supplier 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,
2011       2010
 
Net sales $ 24,037,000 $ 20,545,000
Cost of sales   16,544,000     12,567,000  
Gross profit   7,493,000     7,978,000  
 
Gross profit margin

31.2%

 

38.8%

 
 
Selling and fulfillment expenses 4,609,000 3,926,000
Marketing expenses 2,098,000 2,855,000
General and administrative expenses   1,927,000     1,866,000  
Total operating expenses   8,634,000     8,647,000  
 
Operating loss (1,141,000 ) (669,000 )
 
Other interest expense, net   (55,000 )   (55,000 )
 
Net loss (1,196,000 ) (724,000 )
 
Less: net loss attributable to non-controlling interest in subsidiary   (164,000 )   --  
 
Net loss attributable to Bluefly, Inc. stockholders $ (1,032,000 ) $ (724,000 )
 

Basic and diluted net loss per common share attributable to Bluefly, Inc. stockholders
$ (0.04 ) $ (0.03 )
 

Weighted average common shares outstanding (basic and diluted)
  24,611,736     24,597,254  
 
 
SELECTED CONSOLIDATED BALANCE SHEET
DATA & KEY METRICS – UNAUDITED
                 
June 30, December 31,
2011 2010
Cash and cash equivalents $ 3,529,000 $ 10,429,000
 
Inventories, net 30,604,000 25,128,000
 
Prepaid expenses and other current assets 5,211,000 3,304,000
 
Property and equipment, net 3,269,000 3,150,000
 
Current liabilities 14,660,000 12,320,000
 
Stockholders’ equity (including non-controlling interest in subsidiary) 27,884,000 29,641,000
 
Three Months Ended
June 30,
2011 2010
Average order size (including shipping & handling)* $ 315.45 $ 310.39
New customers added during the period* 40,983 36,794
 
*Excludes Eyefly
 
 
 
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION – UNAUDITED
           
Three Months Ended
June 30,
2011       2010
 
Net loss attributable to Bluefly, Inc. stockholders $ (1,032,000 ) $ (724,000 )
 
Interest income (4,000 ) (13,000 )
Interest expense 58,000 68,000
Depreciation and amortization expenses 721,000 611,000
Non-cash stock-based compensation expenses   224,000     201,000  
 
Adjusted EBITDA

$

(33,000

)
$ 143,000  
 

Copyright Business Wire 2010

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