August 2, 2001, 12:00 AM sales, profits increase in Q2 vs. Q2 `00

Bluefly paid lower prices for merchandise, cut advertising expenses, increased repeat-buyer rates and boosted its average ticket to create a stellar quarter.

Second quarter sales at New York City-based Bluefly Inc., an Internet retailer of designer fashions at discounts of up to 75%, grew by 16% over last year’s second quarter, the company reported today, while gross profit increased by 104% and operating losses narrowed for the third consecutive quarter.

Bluefly`s net sales in the second quarter of 2001 increased to $5.28 million from $4.56 million in the second quarter of 2000. The growth was driven primarily by an increase in sales to repeat customers, which grew to 56% of sales in the second quarter of 2001 from 45% a year earlier, and by a 34% increase in average order size, to $140 from $104 a year ago.

Bluefly`s second quarter gross profit increased to $1.7 million from $843,000 in the same period a year ago. The company said the increase in gross profit was the result of both an improvement in gross margin, which increased to 32.6% in the second quarter of 2001 from 18.5% a year ago, and the increase in net sales.

Bluefly`s operating loss for the second quarter of 2001 (before interest income and expense) decreased to $4.2 million from $5.2 million a year ago. The reduction in operating loss was driven by, among other things, the increase in gross profit and decrease in advertising expenses, the company said. Included in the operating loss for the second quarter of 2001 were one-time expenses of $340,000 incurred in connection with the plan to streamline operations announced in June.

"The weak retail environment has improved our ability to acquire top designer merchandise and has enabled us to pay lower prices for this merchandise," said Ken Seiff, CEO of Bluefly, which sells products from over 450 designers. "In our effort to reach profitability by the end of 2002, we have shared some of these savings with our customers by offering them bigger discounts and retained the rest of the savings for ourselves, which we see reflected in the 104% increase in gross profit, 20% reduction in operating loss, and 14 percentage point increase in gross margin. Looking to the future, we are optimistic not only because many of the benefits of the cost savings measures we initiated in the second quarter have yet to be realized but also because Bluefly has demonstrated an ability to grow in both strong and weak retail environments."


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