Bluefly Reports Fourth Quarter and Full Year 2007 Results and Announces Financing Commitment from Affiliates of Major Shareholders.

NEW YORK -- Bluefly, Inc. (NASDAQ SmallCap:BFLY), a leading online retailer of designer brands, fashion trends and superior value (www.bluefly.com), today announced strong growth in revenue for the fourth quarter and full year 2007.

Highlights for the fourth quarter included:

* Revenue increased by approximately 10% to $29.7 million from $27.1 million in fourth quarter 2006;

* Gross margin decreased by 600 basis points to 34.3% from 40.3% in fourth quarter 2006 primarily as a result of a $1.5 million inventory charge related to the Company's decision to liquidate certain inventory and remove it from the Company's Web Site, in order to enhance customer experience. This resulted in a decrease in gross margin percentage of 520 basis points.

* Gross profit decreased by 7% as a result of the inventory write-off;

* Operating loss increased to $5.5 million compared to $3.7 million primarily as a result of the inventory write off and year-over-year incremental increase of $2.0 million in spending related to marketing and advertising.

* Average order size increased slightly to $274.38 in 2007 compared to $271.98 in 2006.

* Net loss increased to nearly $5.6 million from $3.5 million. Loss per share increased to $0.04 per share from $0.03 per share (based on 132.1 million weighted average shares outstanding after preferred stock dividends in 2007 and 129.8 million weighted average shares outstanding after preferred stock dividends in 2006).

Highlights for the full year 2007 included:

* Revenue increased by approximately 19% to $91.5 million from $77.1 million in 2006;

* Gross margin decreased by 430 basis points to 35.8% from 40.1% in 2006; 170 basis points of this decrease is attributed to the inventory write off described above.

* Gross profit increased by approximately 6%;

* Average order size increased by over 7% to $276.58 from $257.64 in 2006.

* Operating loss increased to approximately $16.0 million compared to an operating loss of $12.1 million for 2006 primarily as a result of the inventory write off, an incremental $1.7 million of stock-based compensation expense on a year-over-year basis, an incremental increase of $721,000 of expenses related to costs associated with the Company's move to a new distribution center, and $1.9 million in spending related to marketing and advertising.

* Net loss increased to $15.8 million from $12.2 million. Loss per share decreased to $0.12 per share (based on 130.9 million weighted average shares outstanding after preferred stock dividends) from $0.23 per share (based on 80.2 million weighted average shares outstanding after preferred stock dividends).

In addition, the Company today announced that Bluefly entered into a one year commitment with affiliates of Soros Fund Management LLC and private funds associated with Maverick Capital, Ltd. pursuant to which they agreed to provide up to $3 million of debt financing to the Company during the next year, provided that the commitment amount will be reduced by the gross proceeds of any equity financing consummated during the year. Draw downs will be evidenced by subordinated convertible notes that have a term expiring on June 30, 2011 and bear interest at the rate of 8% per annum, compounded annually.

"The operational issues that we experienced as a result of our move to our new third party distribution center coupled with the overall slow down in the retail environment led to disappointing fourth quarter results, especially after the strong first half we had in 2007," said Melissa Payner, Bluefly's CEO. "While the inventory write-off had a negative impact on gross margin during the fourth quarter and for the full year, we believe that it better positions our business for 2008. We are pleased to have the support and financial backing of two of our largest shareholders. In the coming months, we will continue to evaluate the results of our existing strategy to maximize the growth of the business."

The company will host a conference call webcast to discuss its fourth quarter and full year results today at 5:00 p.m. EDT. Investors can access the webcast at www.investor.bluefly.com.

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