RedEnvelope ends Q1 in the red

The web represented about 79% of all orders for RedEnvelope Inc. in the first quarter, but the direct marketer of gifts also posted lower sales and a higher net loss.

For the first quarter of the 2008 fiscal year, RedEnvelope, No. 120 in the Internet Retailer Top 500 Guide, posted e-commerce revenue of about $19.4 million.

But overall Q1 sales declined to $24.5 million from $26.9 million in the previous year, while RedEvelope’s net loss rose to $3.6 million from $900,000 in Q1 of fiscal 2007.

“We expected to be in a revenue downdraft this quarter, with resulting bottom line losses. This was a result of reduced prospecting late last year and early this year, which resulted in a weakened customer file,” says CEO John Pound. “Our creative and brand statement were weak through Q1, as we had not yet been able to change our message to our customer.”

Capital expenditures for the first quarter were approximately $2.3 million as RedEnvelope invested in its fulfillment center and technology, including its web site. RedEnvelope anticipates spending an additional $3.8 million during the remainder of fiscal 2008. The company relaunched its e-commerce site on Aug. 28. “We have a new, re-invigorated branding statement,” says Pound.