Bluefly.com Reports Second Quarter 2002 Results; Operating Loss Narrows by 65%, Net Sales Increase by 29%, and Gross Profit Increases by 40%; Soros Invests Additional Capital.Business Editors NEW YORK--(BUSINESS WIRE)--Aug. 13, 2002 Bluefly, 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 retailer of designer fashions at 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. prices (www.bluefly.com), announced today 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. narrowed for the seventh consecutive quarter (based on year-over-year comparisons) to $1,459,000 in the second quarter of 2002 from $4,198,000 in the second quarter of 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 65% improvement in operating loss was primarily the result of: (i) a 29% 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 , which grew to $6,799,000 in the second quarter of 2002 from $5,285,000 in the second quarter of 2001; (ii) a 40% increase in gross profit, which grew to $2,407,000 in the second quarter of 2002 from $1,724,000 in the second quarter of 2001; and (iii) a 42% reduction in 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 fell to $2,645,000 in the second quarter of 2002 from $4,535,000 in the second quarter of 2001. Other financial results for the second quarter of 2002 announced by Bluefly were as follows (all comparisons are to the second quarter of 2001): - Gross margin increased to its highest level ever, 35.4%, from 32.6%; - New customer acquisition cost decreased by over 77% to $16.92 from $75.40; - Despite spending 82% less on advertising, Bluefly acquired 21,057 new customers, which was 4,931 less than the number of new customers it acquired in the second quarter of 2001; - Repeat customers contributed a record share of revenues, accounting for 70% of gross sales, up from about 56%; - Average order size increased 15% to $161.65 from $140.29; - Cash flow from operations (i.e. excluding any financing or investing activities) improved to negative $2,612,000 from negative $3,408,000; and - Net loss decreased to $1,519,000 from $4,168,000. The loss per share figure for the second quarter of 2002 includes a one-time, non-cash charge of $10,226,000 related to the deemed dividend related to the beneficial conversion of Series B Preferred Stock. Accordingly, loss per share increased to $1.27 per share (based on 9,700,823 weighted average shares outstanding after preferred stock dividends) from $0.52 per share (based on 9,205,331 weighted average shares outstanding after preferred stock dividends) despite the fact that net loss decreased. Soros Financing Bluefly also announced that affiliates of Soros Private Equity Partners have invested an additional $2.1 million in the company through the purchase of Series 2002 Convertible Preferred Stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". . The Series 2002 Convertible Preferred Stock has a liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy preference equal to its purchase price and is convertible in whole or in part, at Soros' option, into the type of equity securities sold in any subsequent round of equity financing 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. , at the same price, and upon the same terms and conditions, as the securities sold in such subsequent financing. Of course, there can be no assurance as to when, or, if, such subsequent round of financing will occur. The Series 2002 Convertible Preferred Stock does not have any fixed dividend rate, and does not provide Soros with any additional voting rights Voting rights The right to vote on matters that are put to a vote of security holders. For example the right to vote for directors. voting rights The type of voting and the amount of control held by the owners of a class of stock. , other than with respect to transactions or actions that would adversely affect the rights, preference, powers and privileges of the Series 2002 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. . This $2.1 million invested by Soros follows a $1.9 million investment made by Soros in June 2002 and thereby completes Soros' obligation under the $4 million standby commitment Standby commitment An agreement between a corporation and investment firm that the firm will purchase whatever part of a stock issue that is offered in a rights offering that is not subscribed to in the two- to four- week standby period. established in March 2002. "I am extremely pleased by our results this past quarter as well as the continued support we have received from the Soros organization," said Ken Seiff, Chief Executive Officer of Bluefly, Inc. "Achieving a record gross margin of 35.4% is particularly satisfying, especially in light of the fact that many retailers have been forced to reduce their gross margin in an effort to maintain sales revenue. The fact that we were able to grow our net sales by 29% and raise our gross margin by 280 basis points is, in and of itself, noteworthy but the fact that we saw these increases at a time when we reduced selling, marketing and fulfillment expenses by 42% makes for what I believe was an outstanding quarter," Seiff added. About Bluefly, Inc. Bluefly is headquartered 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. Distinguishing itself with discounts of up to 75%, products from over 400 designers and a 90-day money back guarantee, Bluefly.com aims to be the world's first full service outlet store for designer fashions. Its innovative Web site is designed to eliminate the "hit-or-miss" aspect of off-price shopping by allowing shoppers to see only those products that are available for sale and match their interests. For more information, 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 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, 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; 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; 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; consumer acceptance of the Internet as a medium for purchasing apparel; recent losses and anticipated future losses; 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; the capital intensive nature of such business (taking into account the need for advertising to promote such business); 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; the successful hiring and retaining of personnel; the dependence on continued growth of online commerce; rapid technological change; online commerce security risks; the startup nature of the Internet business; governmental regulation and legal uncertainties; management of potential growth; and unexpected changes in fashion trends.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
Three Months Ended
June 30, 2002 June 30, 2001
-------------- ---------------
Net sales $ 6,799,000 $ 5,285,000
Cost of sales 4,392,000 3,561,000
-------------- ---------------
Gross profit 2,407,000 1,724,000
Gross profit percentage 35.4% 32.6%
Selling, marketing and
fulfillment expenses 2,645,000 4,535,000
General and administrative
expenses 1,221,000 1,387,000
-------------- ---------------
Operating loss (1,459,000) (4,198,000)
Interest (expense) income, net (60,000) 30,000
-------------- ---------------
Net loss $(1,519,000) $(4,168,000)
-------------- ---------------
Deemed dividend related to
beneficial conversion feature
on Series B Preferred Stock (10,226,000) --
Preferred stock dividends (615,000) (615,000)
Net loss applicable to common
shareholders $(12,360,000) $(4,783,000)
-------------- ---------------
Basic and diluted net loss per
share
$ (1.27) $ (0.52)
============== ===============
Weighted average common shares
outstanding (basic and diluted) 9,700,823 9,205,331
============== ===============
SELECTED BALANCE SHEET DATA & KEY METRICS-
UNAUDITED
June 30, December 31,
2002 2001
-------------- ---------------
Cash and cash equivalents $2,017,000 $5,419,000
Inventories, net 8,138,000 6,388,000
Other Current Assets 1,832,000 1,726,000
Property & Equipment, net 2,633,000 1,155,000
Current Liabilities 6,499,000 6,297,000
Shareholders' Equity 7,978,000 8,402,000
Three Months Three Months
Ended Ended
June 30, 2002 June 30, 2001
-------------- ---------------
Average Order Size (including
shipping & handling revenue) $161.65 $140.29
Average Order Per New Customer
(including shipping & handling
revenue) $149.01 $125.92
Average Order per Repeat Customer
(including shipping & handling
revenue) $167.80 $154.02
Registered Users 1,269,948 1,001,534
Registered Users Added During
Period 76,060 138,271
Total Customers 333,567 235,485
Customers Added During Period 21,057 25,988
Revenue from Repeat Customers as
% of Total Revenue(a) 70% 56%
Customer Acquisition Cost (b) $16.92 $75.40
(a) Repeat customer is defined as a person who has bought more than
once from Bluefly during their lifetime.
(b) Customer Acquisition Cost is calculated by dividing total
advertising expenditures (excluding staff and related costs) by
total new customers added. Customer numbers are based on unique
email addresses.
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