By  on February 22, 2010

Costs related to convertible notes prevented Bluefly Inc. from swinging to a fourth-quarter profit, but the New York-based Internet retailer was able to narrow its loss.

For the period ended Dec. 31, the net loss shrank to $148,000, or 1 cent a diluted share, from a loss of $1.4 million, or 10 cents a share, in the year-ago quarter. Most recent fourth-quarter numbers included $437,000 of noncash expenses related to its convertible notes.

Net sales decelerated 11.1 percent to $24.4 million compared with revenue of $27.4 million in the 2008 period.

Gross margin improved to 41.3 percent of sales, versus 37 percent a year ago, thanks to increases in product margin, the firm said. Operating expenses decreased by 15.2 percent to $9.6 million, from $11.3 million, for the quarter, and inventories fell 23.7 percent to $17.7 million from $23.2 million.

For the year, the Bluefly’s net loss contracted to $4.4 million, or 31 cents a share, from a loss of $11.3 million, or 90 cents a share, a year earlier. Revenue decreased 15.2 percent to $81.2 million versus $95.8 million last year.

“These results have provided a solid base for growth in 2010,” said chief executive officer Melissa Payner. “With the added support of our new investors, we believe we are not only positioned for growth in 2010, but we will be able to bring our customers an even greater offering of on-trend designer apparel and accessories and introduce new customers to the deal that is Bluefly.”

In a two-step deal initiated in December, Bluefly sold $15 million of newly issued common stock at a price of $1.70 a share to Rho Ventures. Approximately $4.7 million of the investment has already closed. Following the completion of the second closing at the end of this month, Rho will own about 33 percent of Bluefly’s shares, on a fully diluted basis, making it the company’s largest shareholder.

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