News Column

zulily tops Wall Street estimates as revenue nearly doubles

August 6, 2014

By Ángel GonzÁlez, The Seattle Times



Aug. 06--Moms-oriented retailer zulily brought in more profitthan Wall Street expected in the second quarter, as it saw a big jump in customers and a near doubling in revenue from last year.

The Seattle-based flash sales site also raised its 2014 sales guidance to a range of $1.2 to $1.225billion, up from previous estimates of between $1.15 to $1.2 billion.

Net income of $7.8 million, or 9 cents per share, widely beat analysts' expectations of 3.6 cents and surpassed last year's 5 cents per share. Revenues of $285million, up 97 percent, also topped expectations.

The earnings beat comes after a miss in the first quarter, which, coupled with worries about shipping delays, led to a double-digit tumble in share prices in early May. The fast-growing site is closely watched by investors after experiencing last November one of the hottest initial public offerings seen last year.

Wednesday's results had shares down 1.83 percent at $38.65 in aftermarket trading, giving back some of the 4 percent gains seen through the day.

Zulily says the number of people who actively purchase from its online site rise to 4.1 million, an 86 percent increase from last year, while 84 percent of orders in North America were made by repeat customers.

The company also increased its capital spending by $10 million to accelerate the automation of work in a new fulfillment center in Nevada. Now it plans to spend between $55 million and $65 million during 2014.

CEO Darrell Cavens said the company plans to build a third fulfillment center on the East Coast in 2015, a complement to its centers in Nevada and Ohio.

The company will also launch an updated iPad app and its first Android tablet app later this month, Cavens said.

Investors worried about zulily's capacity to cope with its own growth when the company reported an increase in shipping delays as it scrambled to fulfill orders at the end of the first quarter.

Those delays were seen as aggravating what many analysts see as a weak point in zulily's business model: Because it carries no inventory, shipping times are much longer than those of competitors such as Amazon.

The company says customers are willing to wait in return for a wider array of deeply discounted products.

Executives said that in the second quarter the shipping issues had been worked through, and the time between order and shipment shrank to an average of 12.6 days from 13.2 days in the first quarter.

Zulily started out focusing on clothes and toys mothers bought for their children, but has since branched out to add more fashion and home dÉcor items. It is also ramping up apparel for men -- although it still expects the purchasing to be done by "our core female demographic buying apparel for men in their families," said Chief Financial Officer Marc Stolzman in an earnings call.

More than two thirds of what the company now sells is not related to children's apparel, Stolzman said.

Ángel GonzÁlez: 206-464-2250 or agonzalez@seattletimes.com.

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(c)2014 The Seattle Times

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Source: Seattle Times (WA)


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