With revenue up 12%, RedEnvelope looks for a potential buyer

RedEnvelope.com Inc. has hired investment bank W.R. Hambrecht & Co. to explore the possible sale or merger of the company, the online gift retailer said yesterday. It also reported that net revenue rose 11.6% year-over-year to $113.2 million for the fiscal year ended April 2, as its net loss widened 8% to $5.6 million.

For its 13-week fourth quarter, net revenue declined about 0.01%, to $22 million from $22.2 million in the year-ago quarter, which included 14 weeks. Net loss for the quarter was $4.5 million, compared to a net loss of $3.1 million Q4 of 2005.

The retailer, No. 109 in the Internet Retailer Top 500 Guide to Retail Web Sites, also reported some positive developments, including a 25% year-over-year increase in the number of customers to 2.9 million and a rise in fourth quarter gross profit margin to 48.8% from 47.4% a year ago. It said it expects to achieve profitability in the 2007 fiscal year.

Net revenue per order rose to about $79 for the year ended April 2, up from $78 in the prior year, as its number of shipped orders rose 10% to 1.4 million. Although most sales are online, the company also sells through a catalog but doesn`t break out online and offline sales.

"We are pleased with the growth of the business in fiscal 2006, but disappointed that we did not reach profitability," said Ken Constable, president and CEO. "However, we believe our brand is strong, our business model is sound and our management team is experienced and confident. Our long-term outlook is positive, and we are committed to revitalizing and profitably growing our business.”

"In fiscal 2007,” he added, “we intend to focus our strategic attention on the relationship-building essence of gift-giving, simplify our business, and execute with excellence. With this focus, we expect to achieve profitability in fiscal 2007, before accounting for stock option expensing.”

Gary Korotzer, RedEnvelope’s vice president of marketing, will speak at the Internet Retailer 2006 Conference & Exhibition in June in Chicago on the topic “Online Retailers Finally Discover Loyalty Programs.”