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iTurf--in a nutshell
iTurf has a very real chance of being one of the best internet
investments ever. The internet is a medium that capitalizes on
information and the ability to distribute it rapidly, making it
convenient for commerce and community.
On the day iTurf became public the following statement was made: "iTurf
seems to be one of the more well-planned Internet companies that have
gone public recently," said Mark Basham, an analyst with Standard &
Poor's equity group. "Instead of just being an e-commerce site, they've
realized that they need to provide a more comprehensive solution."
At this early stage in its development, iTurf differentiates itself from
others because of its popular Delia*s products and popular www.gURL.com
web site. Unlike most internet stocks, iTurf earned a profit during
1998.
On June 2nd, iTurf announced its 1st Quarter earnings of 1999. This was
the first glimpse we've been given of iTurf's results since going public
on April 9th. The company did not disappoint. Here's a synopsis of
iTurf's First Quarter results:
1) iTurf's revenues grew tremendously, while expenses were kept in
check:
- Net revenues for the first quarter increased nearly 40 times to $2.6
million.
- The gross profit for the first quarter was $1.3 million.
- The net loss for the first quarter was $197,000, or $0.01 per share.
2) iTurf enjoyed increased traffic to both its e-commerce and community
websites:
- Quarter over quarter, iTurf's traffic grew 74.1% to 50 million page
views in the month of April, compared to 29 million page views in
January, 1999.
- iTurf also reported 731,000 unique visitors in April, as measured by
Media Metrix, compared to 635,000 unique visitors in February, the first
month for which consolidated numbers were available.
- Cumulative commerce customers increased 88.1% during the first quarter
to approximately 66,000 from 35,000 as of January 31, 1999.
- iTurf's gURL.com is one of the largest and fastest-growing online
communities focused on Generation Y in the country.
- iTurf added two new e-commerce properties, dotdotdash.com and
storybookheirlooms.com, both of which target the younger sisters of the
core dELiAs.cOm consumer.
- The recent AOL marketing agreement provides iTurf with a key
opportunity to reach the largest consumer audience in cyberspace, which
not only gives the company significant "new" customer opportunities, but
also serves as an important brand building vehicle.
iTurf is developing a sophisticated and interactive web-site.
Interactive games, music and webzines will all be a part of the
web-site. During the recent CNBC interview, CEO Kahn discussed iTurf's
ability to source and merchandise not only Delia*s products but many
other vendor products. Prior to entering into this broader online
retailer market, iTurf has built-in a Generation Y community and entered
into a two year deal with American Online (AOL) to give it tremendous
traffic.
Unlike most internet sites, iTurf has developed a natural "repeat"
customer system. And every month there are more young people entering
into the Generation Y age group.
A study conducted by Jupiter Communications and NFO Interactive among
600 teens (age 13-18) and kids (5-12) on their e-commerce habits
revealed two-thirds on online teens and 37 percent of online kids have
researched or purchased products online. By 2002, Jupiter predicts teens
will account for $1.2 billion and kids will account for $100 million of
the e-commerce dollars spent.
According to CEO Kahn: (i) iTurf already has an 11 million customer list
to work with; (ii) iTurf plans to leverage Delia*s 60 million catalog
circulation; (iii) Generation Y is the population segment most
comfortable with the internet; (iv) iTurf has a sourcing and merchandise
capability for the Delia*s brand, thousands of vendors, and potentially
in-house products; (v) iTurf's web sites experience more than 1.5
million page views/day; (vi) iTurf's sales are ramping-up; and (vii) the
AOL marketing agreement will significantly increase traffic through
iTurf's web sites.
I think that it is very positive that iTurf was the first to target the
Generation Y market, has $81.3 million of working capital, and
starts-off with the mailing list of Delia's to generate an audience.
BTW, my daughter receives the catalog frequently. (Note: Yes--and
buys--of course, only being 12, for the time being I do control the
purchases.) Here's my thinking:
First, iTurf's business plan is focused on the young female Generation Y
segment. iTurf's goal is to build iTurf into the most heavily-trafficked
Generation Y destination online. The key elements of its strategy are
to: (i) strengthen the recognition of the iTurf brand and each brand in
its network of sites; (ii) enhance its online offerings to drive traffic
to its sites and increase revenue; (iii) expand the infrastructure of
its Web sites to enhance functionality for users and to support growth
of our business; and (iv) develop iTurf.com as the online meeting place
and community for Generation Y.
Second, working off of Delia's mailing list and commencing a hip
marketing campaign (with $81.3 million to work with) will generate a
wide audience.
Third, iTurf's web-page is a marketer's dream. In a few months you will
see every major consumer company (e.g., Coca-Cola, McDonald's,
Volkswagen, AquaFresh, Sony, Disney) placing ads on the web-page. Why?
These companies will want to instill brand loyalty in this young
audience. And here they are all in one place.
Fourth, Delia's clothing is very popular with my daughter and her
friends. The quality is good, which pleases my wife.
Fifth, iTurf will begin to market other vendor's products (e.g., CDs,
movies, interactive games, etc.).
In my opinion, unlike most internet stocks, iTurf (because of its market
niche) will be very profitable. I fully acknowledge that it will take
time. iTurf has acknowledged that as it spends advertising dollars to
realize its business strategy, we (investors) should expect costs to
exceed revenue for the foreseeable future. However, in my mind, these
teenagers have no fear when it comes to the computer and the internet
(unlike my wife and myself). Getting "connected" with Generation Y first
and early in e-commerce and i-community bodes very well for
profitability. The returns that we have seen in stocks like AOL and
Yahoo may potentially be replicated with an investment in iTurf (at
least, I hope).
Well, you ask? If the iTurf potential is so great why the sorry stock
performance here-to-date? Regarding iTurf and its sorry stock
performance:
First, it was Delia*s (i.e., iTurf's majority shareholder) future
earnings projections for itself soon after the iTurf IPO, that stalled
iTurf's momentum.
Then, it was the overall downturn in Net stocks that knocked iTurf down
significantly.
And, last week, it was Barron's negative article on Amazon.com that took
the focus away from iTurf's impressive 1st Quarter's earnings report.
FWIW, some of the best investment houses in the business support iTurf,
its business strategy, and its execution if that plan:
Date Broker Action From To
13-May-99 CIBC Oppenheimer- Started - Buy
5-May-99 Hambrecht & Quist- Started - Buy
5-May-99 BT Alex. Brown- Started - Buy
4-May-99 JP Morgan- Started - Buy
22-Apr-99 Sands Bros- Started - Buy
Hope that helps. Good investing!
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