July 29, 2004, 12:00 AM

A look inside SmartBargains

IPOs offer an inside look at previously tight-lipped companies. SmartBargains’ IPO reveals that the company had a net loss of $1.4 million on $92.2 million in revenue for the fiscal year ended Jan. 31, an 87% improvement on its net loss of $10.7 million for the prior fiscal year, when it reported revenue of $75.8 million.

Because many e-retailers are privately held, it’s rare to get a glimpse of how well they’re performing financially and of their strategic plans. But if they file for an initial public offering of stock, as SmartBargains Inc. did last month, they tell how they operate, how they’re doing, and where they’re heading.

SmartBargains, which sells excess merchandise at discounted prices at SmartBargains.com, is seeking up to $80.5 million through an IPO. That kind of money could provide a major boost to a company that reported $13.6 million in working capital as of May 1, minus $5 million in payments due creditors.

Its goals, meanwhile, are to expand beyond the 7,000 products it currently offers and to improve its ability to build customer relationships through expanded fulfillment services, advertising and market analysis. “We believe that significant opportunities for expansion exist in product lines for children, the home and women’s and men’s apparel,” the company says.

It also expects to expand relationships with its base of 300 suppliers, including retailers and wholesalers as well as manufacturers. For example, it plans to sell merchandise in new departments created for individual brands, and to expand the number of products manufacturers drop-ship to customers.

If all goes well, SmartBargains hopes the extra capital will also expedite its move in recent years away from financial losses. It posted a net loss of $1.4 million on $92.2 million in revenue for the fiscal year ended Jan. 31, 2004. That represented an 87% improvement on its net loss of $10.7 million for the prior fiscal year, when it reported revenue of $75.8 million.

Although it posted a subsequent 16.8% increase in first-quarter revenue, to $22 million from $18.8 million a year earlier, it widened its Q1 net loss by 12%, to $1.7 million, due to increased expenses including those tied to discount shipping offers.

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