Bluefly.com Reports Quarterly Net Profit; Record Fourth Quarter and Full Year 2003 Results.Business Editors NEW YORK--(BUSINESS WIRE)--Feb. 19, 2004 Bluefly Bluefly, Inc.. (NASDAQ: bfly) is an American electronic commerce company based in New York, New York. As one of the leading fashion and lifestyle e-commerce website, Bluefly Inc, has grown rapidly since it’s inception. , Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on SmallCap: BFLY BFLY Bluefly Inc. (stock symbol) ), a leading Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the retailer of designer brands at discount prices (www.bluefly.com), announced today that it had achieved its first ever quarterly net profit. For the fourth quarter of 2003, Bluefly had net income of $111,000 as compared to a net loss of $1,660,000 in the fourth quarter of 2002. The significant swing from a quarterly net loss to profitability was primarily the result of: (i) a 42% increase in net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight to $13,993,000 in the fourth quarter of 2003 from $9,856,000 in the fourth quarter of 2002; (ii) a 760 basis point increase in gross margin to a record high 38.6% in the fourth quarter of 2003 from 31.0% in the fourth quarter of 2002; and (iii) more efficient marketing which allowed the company to increase the number of new customers acquired by 38% while reducing advertising expenses by 23%. Other financial results for the fourth quarter of 2003 were as follows (all comparisons are to the fourth quarter of 2002): -- Gross profit increased nearly 77% to $5,405,000 from $3,055,000; -- Selling, marketing and fulfillment ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. expenses as a percentage of net sales decreased to 27.3% from 35.5 %; -- General and administrative expenses as a percentage of net sales decreased to 9.5% from 11.6%; -- Net loss per share (which includes preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. dividends) decreased 68% to $0.07 per share (based on 11,613,721 weighted average shares outstanding), from $0.22 per share (based on 10,391,904 weighted average shares outstanding); -- The cost to acquire a new customer decreased by 44% to $10.53 from $18.79; -- The number of new customers acquired increased by 38% to 45,114 from 32,740; -- Gross average order size increased 5.75% to $189.26 from $178.97; and -- Net sales attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the company's Manhattan Manhattan, indigenous people of North America Manhattan (mănhăt`ən), indigenous people of North America of the Algonquian-Wakashan linguistic stock (see Native American languages). holiday clearance CLEARANCE, com. law. The name of a certificate given by the collector of a port, in which is stated the master or commander (naming him) of a ship or vessel named and described, bound for a port, named, and having on board goods described, has entered and cleared his ship or vessel store, which opened in late November November: see month. , were approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $465,000. For the year, Bluefly announced that its net sales increased 24% to $37,928,000 in 2003 from $30,606,000 in 2002 and that its net loss decreased by 1.7% to $6,369,000 in 2003 from $6,479,000 in 2002. Other financial results for the year 2003 were as follows (all comparisons are to the year 2002): -- Gross profit increased nearly 13% to $11,325,000 from $10,035,000; -- Selling, marketing and fulfillment expenses as a percentage of net sales decreased to 32.2% from 37.7 %; -- General and administrative expenses as a percentage of net sales improved to 13.5% from 15.3%; -- Net loss per share (which includes preferred stock dividends) decreased 64% to $0.88 per share (based on 11,171,018 weighted average shares outstanding), from $2.44 per share (based on 9,927,027 weighted average shares outstanding); -- The cost to acquire a new customer decreased 40% to $10.22 from $17.04; -- The number of new customers acquired increased by 23% to 124,248 from 101,063; and -- Gross average order size increased 4.66% to $174.99 from $167.20; "This was an excellent quarter for the company, most significantly because we were profitable," said Ken Seiff, Chief Executive Officer of Bluefly, Inc. "Achieving our first ever quarterly profit was the result of tremendous effort from our team and an important milestone “Milemarker” redirects here. For the American indie rock band, see Milemarker (band). A milestone or kilometre sign is one of a series of numbered markers placed along a road at regular intervals, typically at the side of the road or in a median. for the business. The broader results of the quarter surpassed our own expectations. The 42% growth in net sales coupled with record high gross margin of 38.6% reflect the value we bring to our customers. In addition, operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: at our Manhattan holiday clearance store, which we opened on a short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. basis to test the use of a brick and mortar See bricks and mortar. strategy to liquidate To pay and settle the amount of a debt; to convert assets to cash; to aggregate the assets of an insolvent enterprise and calculate its liabilities in order to settle with the debtors and the creditors and apportion the remaining assets, if any, among the stockholders or owners of the aged and damaged inventory, were very strong," Mr. Seiff added. Melissa melissa: see bee balm. Payner, President of Bluefly, Inc., said, "The fact that we acquired more new customers in the fourth quarter than in any prior quarter, while having reduced our advertising expenses, suggests to me that Bluefly may have reached an inflection point Inflection Point An event that changes the way we think and act. -Andy Grove, Founder of Intel. Notes: For example, the fall of the Berlin Wall was an inflection point in global politics and the commercialization of the Internet was an inflection point in technology. in its development. We begin 2004 with what I believe is a vastly improved merchandise MERCHANDISE. By this term is understood all those things which merchants sell either wholesale or retail, as dry goods, hardware, groceries, drugs, &c. It is usually applied to personal chattels only, and to those which are not required for food or immediate support, but such as remain mix and stronger supply relationships than ever before. In addition, our balance sheet, which ended the year with $7.7 million in cash was fortified fortified (fôrt  ´fīd),adj containing additives more potent than the principal ingredient. in January January: see month. by $5 million of new investment. We look forward to achieving even greater success in 2004." About Bluefly, Inc. Bluefly, Inc. (NASDAQ SmallCap: BFLY) operates the world's first full service outlet store An outlet store or factory outlet is a retail store in which manufacturers sell their stock directly to the public through their own branded stores. The stores can be can be brick and mortar or online. for designer fashion, offering products from more than 350 designers at discounts of up to 75% off. With 24/7 access, a 90-day money back guarantee, and technology that displays real-time 1. real-time - Describes an application which requires a program to respond to stimuli within some small upper limit of response time (typically milli- or microseconds). Process control at a chemical plant is the classic example. inventory, Bluefly makes off-price off-price adj. 1. Of, relating to, or being a retail store that sells merchandise at prices lower than usual. 2. For sale at prices lower than usual: off-price assortments of women's clothing. shopping easy and convenient. Bluefly is headquartered at 42 West 39th Street in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. , 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 for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. " statements, usually containing the words "believe", "project", "expect", or similar expressions. These statements are made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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-A, 8-K, 10-Q, and 10-K. These risks and uncertainties include, but are not limited to, the following: potential adverse effects on gross margin and gross profit resulting from mark downs and allowances for returns and credit card chargebacks; the risk that favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. trends in sales, gross margin and customer acquisition costs will not continue; risks that the Company will be unable to reduce the levels of losses; recent losses and anticipated future losses; the competitive nature of the business and the potential for competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. with greater resources to enter such business; adverse trends in the retail apparel market; risks and uncertainties associated with the Company's continuous efforts to upgrade the performance of its Web site; the Company's limited working capital, need for additional capital and potential inability to raise such capital; the successful hiring and retaining of personnel; risks of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. for sale of unauthentic or damaged goods DAMAGED GOODS. In the language of the customs, are goods subject to duties, which have received some injury either in the voyage home, or while bonded in warehouses. See Abatement, merc. law. and litigation risks related to sales in foreign countries; the dependence on third parties and certain relationships for certain services, including the Company's dependence on U.P.S. (and the risks of a mail slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. due to terrorist activity) and the Company's dependence on its third-party web hosting Making a Web site available on the Internet. Many ISPs host a few personal Web pages for an individual at no additional cost above the monthly service fee, but the address is subordinate to the ISP; for example, www.friendlyisp.com/pat_smith. and fulfillment centers; risks related to consumer acceptance of the Internet as a medium for purchasing designer apparel and accessories; the dependence on continued growth of online commerce; rapid technological change; online commerce security risks; the startup (STARTing UP) "At startup" means when the computer is first turned on or when a program is first loaded. See Startup folder. nature of the Internet business; governmental regulation and legal uncertainties; management of potential growth; and unexpected changes in fashion trends.
Bluefly, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
Three Months Ended
December 31,
--------------------------------------------
2003 2002 2001
-------------- -------------- --------------
Net sales $13,993,000 $9,856,000 $7,906,000
Cost of sales 8,588,000 6,801,000 5,376,000
-------------- -------------- --------------
Gross profit 5,405,000 3,055,000 2,530,000
Gross margin 38.6% 31.0% 32.0%
Selling, marketing and
fulfillment expenses 3,815,000 3,500,000 2,958,000
General and
administrative expenses 1,325,000 1,140,000 920,000
-------------- -------------- --------------
Operating income (loss) 265,000 (1,585,000) (1,348,000)
Interest (expense) and
other income (154,000) (75,000) (31,000)
Net income (loss) $111,000 $(1,660,000) $(1,379,000)
============== ============== ==============
Deemed dividend related
to beneficial conversion
feature on Series B and
C Preferred Stock -- -- --
Preferred Stock Dividends (871,000) (643,000) (622,000)
============== ============== ==============
Basic and diluted net
loss per share (which
includes preferred stock
dividends)
Net loss per share $(0.07) $(0.22) $(0.22)
============== ============== ==============
Weighted average shares
outstanding 11,613,721 10,391,904 9,205,331
============== ============== ==============
Year Ended
December 31,
--------------------------------------------
2003 2002 2001
-------------- -------------- --------------
Net sales $37,928,000 $30,606,000 $22,950,000
Cost of sales 26,603,000 20,571,000 15,954,000
-------------- -------------- --------------
Gross profit 11,325,000 10,035,000 6,996,000
Gross margin 29.9% 32.8% 30.5%
Selling, marketing and
fulfillment expenses 12,197,000 11,547,000 13,765,000
General and
administrative expenses 5,103,000 4,686,000 5,098,000
-------------- -------------- --------------
Operating income (loss) (5,975,000) (6,198,000) (11,867,000)
Interest (expense) and
other income (394,000) (281,000) (13,139,000)
Net income (loss) $(6,369,000) $(6,479,000) $(25,006,000)
============== ============== ==============
Deemed dividend related
to beneficial conversion
feature on Series B and
C Preferred Stock (225,000) (15,295,000) --
Preferred Stock Dividends (3,225,000) (2,489,000) (2,926,000)
============== ============== ==============
Basic and diluted net
loss per share (which
includes preferred stock
dividends)
Net loss per share $(0.88) $(2.44) $(3.41)
============== ============== ==============
Weighted average shares
outstanding 11,171,018 9,927,027 8,185,065
============== ============== ==============
SELECTED BALANCE SHEET DATA & KEY METRICS (Unaudited)
Dec. 31, Dec. 31, Dec. 31,
2003 2002 2001
Cash $7,721,000 $1,749,000 $5,419,000
Inventories, net 11,340,000 10,868,000 6,388,000
Other Current Assets 1,863,000 1,159,000 1,671,000
Property & Equipment, net 1,659,000 2,604,000 1,155,000
Current Liabilities 8,459,000 7,072,000 6,242,000
Short Term Convertible
Notes Payable to
Shareholders, net -- 2,000,000 --
Long Term Notes Payable
to Shareholders 4,000,000 182,000 182,000
Shareholders' Equity 10,279,000 7,084,000 8,402,000
Three Three
Months Months Year Year
Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2003 2002 2003 2002
Gross Average Order Size
(including shipping &
handling) $189.26 $178.97 $174.99 $167.20
Gross Average Order Per
New Customer (including
shipping & handling) $167.16 $157.91 $158.38 $149.74
Gross Average Order per
Repeat Customer
(including shipping &
handling)* $204.93 $193.35 $184.95 $177.31
Customers Added During
Period 45,114 32,740 124,248 101,063
Revenue from Repeat
Customers as % of Total
Revenue 63% 64% 66% 67%
Customer Acquisition
Cost ** $10.53 $18.79 $10.22 $17.04
* Repeat customer is defined as a person who has bought more than
once from Bluefly during their lifetime.
** Customer Acquisition Cost is calculated by dividing total
advertising expenditures (excluding staff related costs) by total
new customers added. New customer number is based on unique email
addresses.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Three Months
Ended Ended
December 31, December 31,
2003 2002
Cash flows from operating activities:
Net income (loss) from operations $111,000 $(1,660,000)
Adjustments to reconcile income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 353,000 381,000
Provisions for inventory reserves (75,000) 110,000
Issuance of warrants for services
rendered -- 17,000
Provisions for returns 814,000 634,000
Bad debt expense 26,000 64,000
Changes in operating assets and
liabilities:
(Increase) decrease in:
Inventories 1,199,000 (65,000)
Accounts receivable 188,000 (373,000)
Other current assets (17,000) 96,000
Prepaid expenses (56,000) 667,000
Other assets -- 40,000
(Decrease) increase in:
Accounts payable (2,503,000) (1,862,000)
Accrued expenses 435,000 269,000
Deferred revenue (160,000) 276,000
Long term interest payable
on notes to shareholders 110,000
-------------- --------------
Net cash provided by (used in) operating
activities 425,000 (1,406,000)
Cash flows from investing activities:
Purchase of property and equipment (89,000) (146,000)
-------------- --------------
Net cash (used in) investing activities (89,000) (146,000)
-------------- --------------
Cash flows from financing activities:
Net proceeds from exercise of stock
options 2,889,000 --
Proceeds from issuance of notes payable
to shareholders 2,000,000 --
Payment of capital lease obligation (71,000) (71,000)
-------------- --------------
Net cash provided by (used in) financing
activities 4,818,000 (71,000)
-------------- --------------
Net increase in cash and cash
equivalents 5,154,000 (1,623,000)
Cash and cash equivalents - beginning of
period 2,567,000 3,372,000
-------------- --------------
Cash and cash equivalents - end of
period $7,721,000 $1,749,000
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