Online apparel retailer Bluefly posts 3% sales rise in Q3

“We continue to execute on our new strategy, and while our net sales were only slightly up for the quarter, that we were able to achieve sales of over $21 million with 25% less average inventory is a testament to the efficiency of the new model we are building,” said Joseph Park, the Company’s Chief Executive Officer.

“Our new strategy optimizes return on invested capital and we increased inventory turns by more than 80% this quarter. Furthermore, healthy increases in free traffic, the continued growth in our overall member file, and the cross over between Bluefly and Belle & Clive member files position us well to leverage these drivers, which we believe will enable us to improve operating performance going forward.

“Product margins for the quarter were higher than the first quarter, however our overall gross margins were negatively impacted by a 26% increase in first-time customers and the associated acquisition costs from promotional shipping and daily deal offers.

“We continue to see strong growth both from Belle and Clive overall, as well as our international markets, where we experienced over 44% growth in orders. As we move into the fourth quarter, we will continue to optimize and refine our new strategy to maximize operating results and increase shareholder value.”

Results for the third quarter of 2012 included the following highlights:

Net sales increased by approximately 3% to $21.7 million, from $21.2 million in the third quarter of 2011, primarily as a result of a reduction in return rates, which were partially offset by a decrease in average order size, and a decrease in shipping and handling revenue related to increased promotional activity.

Gross profit margin decreased to 13.6%, from 29.1% in the third quarter of 2011, primarily attributable to (i) the deliberate shift in our strategy as we increase inventory turns by selling merchandise at lower gross margin percentages (ii) an increase in freight costs due to free shipping and (iii) daily deal promotions that we offered to first-time customers during the quarter. While our gross profit margin decreased during the quarter, our inventory turns have improved by more than 80% for the three months ended September 30, 2012 compared to the three months ended September 30, 2011.

Total operating expenses increased by 2% to $8.9 million, from $8.7 million in the third quarter of 2011. As a percentage of total net sales, total operating expenses remained relatively unchanged at 41% compared to the third quarter of 2011. The increase in total operating expenses was primarily attributable to an increase in total selling and fulfillment expenses of $0.6 million, which was partially offset by decreases in total marketing expenses of $0.3 million and total general and administrative expenses of $0.1 million, compared to the third quarter of 2011.