Bluefly.com Reports Record Full Year Results as Net Sales Grow 33%; 2002 Gross Profit Increased By More Than 43% And Operating Loss Decreased By Nearly 48%.Business Editors NEW YORK--(BUSINESS WIRE)--Feb. 25, 2003 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 its 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 for 2002 increased 33% to $30,606,000 in 2002 from $22,950,000 in 2001, gross profit for 2002 increased by more than 43% to $10,035,000 from $6,996,000 in 2001, and that its operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for 2002 decreased by nearly 48% to $6,198,000 from $11,867,000 in 2001. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Bluefly, the significant improvement in gross profit was primarily the result of: (i) the 33% increase in net sales; and (ii) the Company's ability to obtain better pricing from its suppliers, which resulted in a 230 basis point increase in the gross margin to 32.8% in 2002 from 30.5% in 2001. The Company attributes its 48% decline in operating loss to the increase in gross profit and to the Company's successful reduction of: (i) 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, which decreased more than 16% to $11,493,000 in 2002 from $13,765,000 in 2001; and (ii) general and administrative expenses, which decreased 7% to $4,740,000 in 2002 from $5,098,000 in 2001. Other financial results for the year 2002 were as follows (all comparisons are to the year 2001): - Net loss decreased 74% to $6,479,000, or $2.44 per share (based on 9,927,027 weighted average shares outstanding), from $25,006,000, or $3.41 per share (based on 8,185,065 weighted average shares outstanding)1; - On an advertising budget that was approximately 57% smaller than that of 2001, Bluefly acquired over 101,000 new customers in 2002, or only approximately 1% less than the total number of new customers acquired in 2001; - The average cost to acquire a new customer decreased nearly 57% to $17.04 from $39.32; - Gross revenues from repeat customers as a percentage of total revenue increased to 67% from 60%. For the fourth quarter of 2002, as announced on February February: see month. 4, net sales increased by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 25% to $9,856,000 from $7,906,000 in the fourth quarter of 2001. Bluefly also posted a 21% jump in gross profit, which grew to $3,055,000 in the fourth quarter of 2002 from $2,530,000 in the fourth quarter of 2001. Operating loss in the fourth quarter of 2002 rose approximately 18% to $1,585,000 from $1,348,000 in the fourth quarter of 2001. Net loss increased approximately 20% in the fourth quarter of 2002 to $1,660,000, or $0.22 per share (based on 10,391,904 weighted average shares outstanding) from $1,379,000, or $0.22 per share (based on 9,205,331 weighted average shares outstanding) in the fourth quarter of 2001. The increase in net and operating losses for the fourth quarter of 2002 was principally driven by: the amortization of the investment in the Company's new Web site, which launched on September September: see month. 15th 2002; certain technology and operational expenses incurred in connection with resolving the post-launch problems the Web site encountered in September and October October: see month. of 2002; increased customer service costs associated with the Company's desire to minimize the impact of the post-launch Web site problems on its customers; and the addition of 16 employees during 2002, four of whom joined in the fourth quarter of 2002. The Company also believes that some of the increase in net and operating losses for the fourth quarter of 2002 was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to lost sales related to the post-launch Web site problems. While the Company believes that many of the post-launch Web site problems were resolved in the second half of October, the Company believes that the problems that customers faced in September and October had a lingering lin·ger v. lin·gered, lin·ger·ing, lin·gers v.intr. 1. To be slow in leaving, especially out of reluctance; tarry. See Synonyms at stay1. 2. effect throughout the fourth quarter of 2002. The Company does not believe that those problems will have a material adverse effect on the Company's results in 2003. "Our 2002 results show that Bluefly continues to make substantial progress," said Ken Seiff, Chief Executive Officer of Bluefly, Inc. "In addition, the fact that Bluefly saw a significant increase in net sales during what was a depressed fourth quarter for many retailers is very encouraging to us. Many factors contributed to these results, including our ability to efficiently increase our total customer base and average order size, and a strong company effort to overcome the temporary setbacks we encountered late in the third quarter and early in the fourth quarter related to the launch of our new Website. We are now moving forward with our effort to maximize that investment in new technology, as we develop new features and services that will enable us to provide an even more compelling shopping experience for our customers in the coming year," Seiff added. 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: the Company's limited working capital, need for additional capital and potential inability to raise such capital; potential dilution potential dilution The decrease in the proportional equity position of a share of stock that will occur eventually if additional authorized shares are actually issued. arising from future equity financings Equity Financing The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. , including potential dilution as a result of the anti-dilution provisions Anti-Dilution Provision A provision in an option or a convertible security. It protects an investor from dilution resulting from later issues of stock at a lower price than the investor originally paid. contained in the Company's Series B 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. and the Series C Preferred Stock; the competitive nature of the business and the potential for competitors with greater resources to enter such business; adverse trends in the retail apparel market; recent losses and anticipated future losses; risks and uncertainties associated with the Company's recent launch of a new version of its web site, including new internal procedures that need to be developed to operate the new web site, site instability instability /in·sta·bil·i·ty/ (-stah-bil´i-te) lack of steadiness or stability. detrusor instability and download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. performance issues; the risk that favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. trends in sales, repeat customer sales, gross profit, gross margin and reduced selling, marketing and fulfillment expenses and reductions in operating losses will not continue; risks that the Company will be unable to reduce the levels of losses; potential adverse effects on gross margin resulting from mark downs and allowances; 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 United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Postal Service postal service, arrangements made by a government for the transmission of letters, packages, and periodicals, and for related services. Early courier systems for government use were organized in the Persian Empire under Cyrus, in the Roman Empire, and in medieval and 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 apparel; the successful hiring and retaining of personnel; 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. (1)Of the $25,006,000 net loss in 2001, $13,007,000 was a non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. related to the conversion of debt and redeemable Redeemable Eligible for redemption under the terms of an indenture. preferred equity into permanent equity. The loss per share figure for 2002 includes a non-cash charge of $15,295,000 related to the deemed dividend related to the beneficial conversion of Series B Preferred Stock.
Bluefly, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
Three Months Ended
December 31,
------------
2002 2001 2000
---- ---- ----
Net sales $9,856,000 $7,906,000 $5,761,000
Cost of sales 6,801,000 5,376,000 4,338,000
------------ ---------- -----------
Gross profit (loss) 3,055,000 2,530,000 1,423,000
Gross margin 31.0% 32.0% 24.7%
Selling, marketing and
fulfillment expenses 3,490,000 2,958,000 4,884,000
General and administrative
expenses 1,150,000 920,000 1,560,000
------------ ---------- -----------
Operating loss from continuing
operations (1,585,000) (1,348,000) (5,021,000)
Interest (expense) and other
income (75,000) (31,000) (339,000)
Net loss $(1,660,000) $(1,379,000) $(5,360,000)
============ =========== ============
Deemed dividend related to
beneficial conversion feature
on Series B Preferred Stock -- -- --
Preferred Stock Dividends (643,000) (622,000) (199,000)
========= ========= =========
Basic and diluted net (loss)
income per share
(after preferred stock
dividends)
Net loss per share $(0.22) $(0.22) $(1.13)
======= ======= =======
Weighted average shares
outstanding 10,391,904 9,205,331 4,924,906
========== ========= ==========
Year Ended
December 31,
------------
2002 2001 2000
---- ---- ----
Net sales $30,606,000 $22,950,000 $17,512,000
Cost of sales 20,571,000 15,954,000 14,018,000
------------ ----------- ------------
Gross profit (loss) 10,035,000 6,996,000 3,494,000
Gross margin 32.8% 30.5% 20.0%
Selling, marketing and
fulfillment expenses 11,493,000 13,765,000 18,797,000
General and administrative
expenses 4,740,000 5,098,000 5,296,000
---------- ---------- -----------
Operating loss from
continuing operations (6,198,000) (11,867,000) (20,599,000)
Interest (expense) and other
income (281,000) (13,139,000) (510,000)
Net loss $(6,479,000) $(25,006,000) $(21,109,000)
============ ============= =============
Deemed dividend related to
beneficial conversion
feature on Series B
Preferred Stock (15,295,000) -- --
Preferred Stock Dividends (2,489,000) (2,926,000) (802,000)
============ =========== =========
Basic and diluted net
(loss) income per share
(after preferred stock
dividends)
Net loss per share $(2.44) $(3.41) $(4.45)
======= ======= =======
Weighted average shares
outstanding 9,927,027 8,185,065 4,924,906
========= ========= ==========
SELECTED BALANCE SHEET DATA & KEY METRICS (Unaudited)
December December December
31, 2002 31, 2001 31, 2000
Cash $1,749,000 $5,419,000 $5,350,000
Inventories, net 10,868,000 6,388,000 7,294,000
Other Current Assets 1,473,000 1,671,000 1,614,000
Property & Equipment, net 2,604,000 1,155,000 1,326,000
Current Liabilities 9,386,000 6,242,000 6,041,000
Short Term Convertible Notes
Payable, net 2,000,000 -- 19,698,000
Redeemable Preferred Stock
and Shareholders' Equity
(Deficit) 7,084,000 8,402,000 (9,961,000)
Three Three
Months Months Year
Ended Ended Year Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2002 2001 2002 2001
Average Order Size (including
shipping & handling) $178.97 $155.54 $167.20 $143.71
Average Order Per New
Customer (including
shipping & handling) $157.91 $138.96 $149.74 $127.41
Average Order per Repeat
Customer (including shipping
& handling)(1) $193.35 $167.11 $177.31 $156.85
Customers Added During Period 32,740 31,039 101,063 102,397
Revenue from Repeat Customers
as % of Total Revenue 64% 63% 67% 60%
Customer Acquisition Cost (2) $18.79 $18.53 $17.04 $39.32
(1) Repeat customer is defined as a person who has bought more
than once from Bluefly during their lifetime.
(2) 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,
2002 2001
Cash flows from operating activities:
Loss from operations $(1,660,000)$(1,379,000)
Adjustments to reconcile loss from
operations to net cash used in operating
activities:
Depreciation and amortization 381,000 167,000
Write-off/(Pick Up) of inventory 110,000 (100,000)
Issuance of warrants for services rendered 17,000 --
Provisions for returns 4,828,000 4,015,000
Bad debt expense 64,000 71,000
Changes in operating assets and
liabilities:
(Increase) decrease in:
Inventories (65,000) 1,373,000
Accounts receivable (624,000) (332,000)
Other current assets 96,000 (31,000)
Prepaid expenses 667,000 86,000
Other assets 40,000 (40,000)
(Decrease) increase in:
Accounts payable (1,610,000) 444,000
Accrued expenses (3,926,000) (3,163,000)
Deferred revenue 276,000 189,000
------------- -----------
Net cash provided by (used in)
operating activities (1,406,000) 1,300,000
Cash flows from investing activities:
Purchase of property and equipment (146,000) (176,000)
------------- -----------
Net cash (used in) investing activities (146,000) (176,000)
------------- -----------
Cash flows from financing activities:
Repayment of capital lease obligation (71,000) --
Net proceeds from note payable to
shareholder -- 182,000
------------- -----------
Net cash provided by financing activities (71,000) 182,000
------------- -----------
Net increase in cash and cash equivalents (1,623,000) 1,306,000
Cash and cash equivalents - beginning of
period 3,372,000 4,113,000
------------- -----------
Cash and cash equivalents - end of period $1,749,000 $5,419,000
------------- -----------
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