BLUEFLY, INC. (BFLY) filed Quarterly Report for the period ended 2009-09-30.
Bluefly, Inc. is a leading Internet retailer of designer fashion brands atdiscounted prices. They sell over 450 brands of designer apparel, fashionaccessories and home products at discounts that typically range between 25% and 75% off comparable retail prices. Bluefly, Inc. has a market cap of $31.6 million; its shares were traded at around $2.2801 with and P/S ratio of 0.3.
Highlight of Business Operations:
Our net sales decreased by approximately 14% to $17,108,000 for the three months ended September 30, 2009 from $19,802,000 for the three months ended September 30, 2008. Our gross margin percentage increased to 40.0% for the three months ended September 30, 2009 from 36.9% for the three months ended September 30, 2008. Our gross profit dollars decreased by 6% to $6,839,000 for the three months ended September 30, 2009 from $7,307,000 for the three months ended September 30, 2008. We incurred an operating loss of $465,000 for the three months ended September 30, 2009 as compared to an operating loss of $4,819,000 for the three months ended September 30, 2008. The improvement in operating loss was primarily a result of a reduction in our marketing expenses and general and administrative expenses and a decrease in variable operating fulfillment expenses. We believe that the decrease in net sales was primarily attributable to our planned decrease in inventory purchases in response to the overall decline in consumer spending. We anticipate that this planned decrease in inventory purchases will continue to adversely impact revenues for future quarters unless we are successful in our efforts to raise additional capital for the business.
Marketing expenses (excluding staff related costs) decreased to $1,319,000 for the third quarter of 2009 from $3,949,000 for the third quarter of 2008, primarily as a result of a reduction in our national print and advertising campaign expenses of approximately $1,922,000 and a reduction in online marketing program expenses of approximately $607,000. Marketing expenses (including staff related costs) as a percentage of net sales decreased to 8.5% for the three months ended September 30, 2009 compared to 21.1% for the three months ended September 30, 2008. As offline advertising expenses decrease, the mix of marketing expenditures will continue to shift toward online media as we believe that online marketing programs are more efficient because they are more easily measurable and can be optimized to achieve certain sales goals. General and administrative expenses decreased to $2,095,000 from $3,021,000 for the third quarter of 2008, primarily as a result of a reduction in salary and salary related expenses as well as a decrease in overall professional and consulting fees.
Net sales: Gross sales for the three months ended September 30, 2009 decreased by approximately 16% to $27,555,000 from $32,649,000 for the three months ended September 30, 2008. For the three months ended September 30, 2009, we recorded a provision for returns and credit card chargebacks and other discounts of $10,447,000 or approximately 37.9% of gross sales. For the three months ended September 30, 2008, the provision for returns and credit card chargebacks and other discounts was $12,847,000, or approximately 39.4% of gross sales. The decrease in this provision as a percentage of gross sales resulted from a reduction in the return rate, which was, in part, caused by a shift in our merchandise mix. Historically, our merchandise mix had been shifting towards higher end products which tend to have higher return rates. As part of our streamlined business plan, we refined our merchandising mix to shift to more contemporary merchandise. Accordingly, we believe we experienced a corresponding decrease in the return rate. In addition, we believe that the reduction in return rate was partially caused by customers making fewer impulse purchases, which are generally more likely to be returned.
After the necessary provisions for returns, credit card chargebacks and adjustments for sales taxes, our net sales for the three months ended September 30, 2009 was $17,108,000. This represents a decrease of approximately 14% compared to the three months ended September 30, 2008, in which net sales totaled $19,802,000. The decrease in net sales resulted primarily from an 11% decrease in the number of new customers acquired as well as a 6.0% decrease in average order size. We believe that the decrease in both of these measures was primarily attributable to our planned decrease in inventory purchases in response to the overall decline in consumer spending. For the three months ended September 30, 2009, revenue from shipping and handling (which is included in net sales) decreased approximately 13% to $961,000 from $1,104,000 for the three months ended September 30, 2008. Shipping and handling revenue decreased at a smaller percentage than revenue as a whole as a result of a decrease in the average order size, which is based on orders placed by the customer, as compared to the decrease in overall product sales, which is based on quantity of merchandise purchased by the customer.
Technology expenses consist primarily of staff related costs, amortization of capitalized costs and Web site hosting. For the three months ended September 30, 2009, technology expenses decreased by approximately 28.5% compared to the three months ended September 30, 2008. This decrease was attributable to a decrease in salary and salary related expenses of approximately $255,000, a decrease in consulting fees of approximately $124,000 and decrease in web hosting and software support expenses of approximately $116,000, which were partially offset by an increase in depreciation expenses, included in technology expenses, of approximately $25,000 as compared to the three months ended September 30, 2008 related to the development of our new Website, which was placed into service in August 2008.
primarily the result of a decrease in equity based compensation of approximately $387,000, a decrease in salary and salary related expenses of approximately $304,000 and a decrease in overall professional fees of approximately $105,000.
BFLY is in the portfolios of George Soros of Soros Fund Management LLC, Lee Ainslie of Maverick Capital.
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