NEW YORK — Accelerating sales and a surge in new customers gave Bluefly’s stock price a healthy boost Tuesday, but the discount Internet retailer still had a pool of third-quarter red ink with which to deal.

This story first appeared in the November 12, 2003 issue of WWD. Subscribe Today.

For the three months ended Sept. 30, the New York-based firm posted a net loss of $2.5 million against a year-ago loss of $2.2 million. However, including a $5.1 million noncash charge related to preferred stock in last year’s quarter and preferred stock dividends in both periods, the net loss applicable to common shareholders contracted to $3.4 million, or 31 cents a diluted share, from $7.9 million, or 76 cents.

Sales for the quarter jumped 30.2 percent to $8.2 million from $6.3 million last year. Selling, marketing and fulfillment expenses were reduced slightly, to $2.92 million from $2.95 million.

Investors were encouraged by the results and sent shares up 55 cents, or a whopping 21.6 percent, to close the day at $3.10 on the Nasdaq after hitting a new 52-week high of $3.40 in midday trading.

Net sales soared 64 percent in October to $4.1 million from $2.5 million in October 2002.

“October 2003 was our second highest month of net sales ever,” Ken Seiff, chief executive, said, noting that only December of 2002, a month in which it had $4.2 million in net sales, was better. Stronger comparisons going forward, however, make such a sustained sales increase unlikely, he cautioned.

Gross margins eroded to 21.3 percent of sales from 32.9 percent in the 2002 quarter as a result of promotional pricing which, Seiff said, “enabled us to successfully liquidate over $3 million of inventory from the previous quarter,” Seiff said, adding that the fourth quarter’s gross margin is expected be at or just shy of last year’s level of 31 percent.

Bluefly acquired 29,522 new customers despite spending 54 percent less on acquisition cost per new customer, lowering that metric to $10.52 from $23.07. However, gross average order size dropped 1 percent to $161.87 from $163.64.

“I believe the acceleration in growth rate we saw this year is also attributable to the launch of an improved version of our Web site and the addition of new fall merchandise towards the end of the month,” Seiff said.

As reported, last month George Soros invested an additional $2 million in the firm, lifting his investment to date in the retailer to approximately $55 million.

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