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Bluefly Benefits From Other Retailers Woes
By Monica Summers
NEW YORK (Reuters) - Unlike many retailers, Bluefly Inc. (Nasdaq:BFLY - news), an online retailer that sells designer fashions at discount prices, said it is benefiting from the downturn in the U.S. economy as it snatches up fall merchandise orders abandoned by upscale department stores and wholesalers.
While retailers like Bergdorf Goodman and Saks Fifth Avenue have been canceling fall shipments and readjusting future orders, New York-based Bluefly, which sells apparel from top designers like Prada and Calvin Klein for up to 75 percent off, said it has been snatching up a lot of the relinquished goods.
``There's been an extraordinary amount of product available,'' Bluefly's Chief Executive Ken Seiff told Reuters on Thursday. ``And we certainly have been buying everything that we're finding from designer brands at very compelling prices.''
In fact, Bluefly said a good many products in its current offering are from this year's fall fashion lines, instead of products left over from one or two seasons ago.
``We used to be much further behind the season,'' Seiff said. ''Because of the glut of inventory we are buying in-season product, so we're bringing in fall products from right now.''
Seiff said he also expects this holiday season to be less promotional than in previous years because of the better inventory and also because the retailer has negotiated better discounts from vendors due to the weak retail environment.
He also said Bluefly has seen little impact from the spate of anthrax scares that have affected the U.S. postal system.
``Two weekends ago, we did as much business as we did on any weekend since last Christmas,'' he said.
``While we are powerfully aware that there are events going on at the Postal Service and in public places, the net impact so far has probably been to drive more business online,'' Seiff said ``It seems to be a non-issue with direct mail.''
THE LAST OF A DYING BREED
Earlier on Thursday, Bluefly said its loss for the third quarter had narrowed about 49 percent from a year ago, helped along by a decrease in new customer acquisition costs, a key metric for online retailers, and an increase in gross profits.
The results marked the fourth consecutive quarter of narrowing losses for Bluefly, which for an online retailer is a somewhat auspicious occasion when considering the massive amounts of Internet-only retailers that have disappeared in the dot-com shakeout of the past two years.
``It's not something I think about in that way,'' Seiff said of his company's achievements. ``It's very satisfying to have a business that has now performed well, (and) it's even more satisfying to see the progress that we're making internally.''
Seiff said his company has spent much of the past three to six months building more of a ``performance-oriented culture,'' and creating development and training programs for its staff.
``I think we're beginning to see the payoff from that,'' Seiff said.
On a small scale, investors have seemed to notice the payoff, as well. News of the company's improving results boosted Bluefly's shares by more than 14 percent, or about 17 cents, to end the day at $1.35 on the Nasdaq stock market.
Over the past year, Bluefly shares have lost 48 percent of their value. The stock's 52-week range is 37.5 cents to $2.625.
Seiff credits his company's survival to many things, namely its ability to curb costs and keep Bluefly's core customer, which he describes as young, affluent and more fashion savvy than most online shoppers.
``We've spent a lot of time trying to more deeply understand our customer,'' Seiff said.
``They're not typical outlet shoppers or off-price shoppers,'' Seiff said. ``This is a new silent minority that is looking for not only great product and discounts, but also are requiring a much higher level of service.
``I think it's been our focus on service that has led to the cult-like following within our customer base,'' he said.
LOSSES NARROW, OPERATING COSTS FOLLOW SUIT
Bluefly said its net loss for the quarter ended Sept. 30 narrowed to $2.4 million, or 33 cents a share, from $4.9 million, or $1.01 a share, in the year-ago quarter.
Bluefly's third-quarter sales rose 48 percent to $5.1 million from $3.5 million a year ago, driven by an increase in sales to repeat customers and an increase in average order size to $144, up 33 percent from $108 in the same period last year.
In addition, the cost to acquire new customers fell 59 percent in the quarter to $23.73 from $57.45 in the third quarter of 2000.
Also contributing to the reduction in losses were the 30 percent reduction in selling, marketing and fulfillment expenses, and an 11 percent drop in general and administrative expenses.
``The weak retail climate has actually led consumers to want to buy the same product and pay less for it, which has increased our worth to our customer and our profile within the industry,'' Seiff said.
``I think what the Internet allows you to do is ... process an awful lot of information to tell you what's working,'' he said. ``As a result, we can very quickly determine where we're efficient and where we're not efficient.'' |
