FIRMS GOING AFTER GENERATION Y PUT CASH INTO BUILDING WEB SITES
Byline: Vicki M. Young
NEW YORK — A handful of companies targeting Generation Y — Delia’s, ITurf and Alloy Online — have spent considerable dollars in the third quarter on infrastructure and marketing expenses related to Internet expansion, according to recent earnings reports.
Delia’s Inc. reported a $6 million net loss for the quarter ended Oct. 30, compared with net income of $747,000, or 5 cents a share, in the year-ago period. Sales increased 17.8 percent to $48.1 million from $40.8 million, but selling, general and administrative expenses were $32.4 million, compared with $9.7 million last year. The jump, partly due to an increase in sales and marketing expenses, was also attributed to additional infrastructure expenses connected to retail and Internet expansions.
Evan Guillemin, president, said in a statement that the results reflected the progress the company has made in positioning itself for long-term growth in its three distribution channels: catalog, retail and the Internet.
In the nine-month period ended Oct. 30, Delia’s reported net income of $12.8 million, or 82 cents a diluted share, on sales of $123.3 million. The results included a $70.1 million loss from the initial public offering of Iturf, its Internet subsidiary. In the year-ago period, Delia’s had net income of $2.6 million, or 19 cents a diluted share, on sales of $98.5 million. Delia’s said last month it would spin off its subsidiary.
ITurf reported a $6.3 million net loss for the quarter ended Oct. 30, compared with net income of $99,000 in the comparable period last year. The loss included a $652,000 charge for amortization of intangible assets, compared with just a $17,000 charge last year. Revenue rose to $5.3 million from $1.1 million. The company reported a 50.2 percent gross profit increase to $2.7 million, compared with $705,000 last year, but selling, general and administrative expenses swelled to $9.3 million, compared with $497,000 last year.
Stephen Kahn, president and chief executive officer, said in a statement that the company had been developing its infrastructure to meet the expected holiday traffic. Iturf will be updating its site with added features in January.
For the nine-month period, ITurf had a net loss of $8.3 million, compared with net income of $22,000, or 1 cent a share, in the comparable period. Revenue grew to $10.9 million compared with $1.9 million in the year-ago period.
Alloy Online Inc., another Internet destination site for Gen Y, also reported outstanding third-quarter revenue growth of 180 percent and gross profits exceeding 54 percent, but the company is still losing money due to high marketing expenses.
Alloy said it had a $4.9 million loss for the quarter ended Oct. 31, compared with last year’s $1.9 million loss in the same period. Revenues increased to $9.1 million from $3.3 million, while gross profits increased to $5 million from $1.6 million. Operating expenses, however, went to $10.5 million from last year’s $3.4 million.
Matt Diamond, chairman and chief executive officer, said in a statement that the broadened range of merchandise was well-received by customers during the back-to-school season, and that the company increased its multichannel marketing focus to leverage its Web site and catalog operations going into the holiday season.
The company earlier this year formed a preferred merchant partnership with brands such as Pacific Sunwear, Nike, Fossil and Guess.
Teen shoppers can choose items from the merchants for addition to their “Alloy Wish List” for future purchase. In addition to a holiday wish list sweepstakes, the Alloy site enables the lists to be e-mailed to parents and friends for gift ideas.
For the nine months ended Oct. 31, Alloy lost $10.5 million compared with a $5.4 million loss last year. The loss includes a $235,000 onetime charge this year for the early retirement of debt in the second quarter. Revenue was up 131 percent to $15.5 million.