Bluefly.com Cuts Jobs with an Eye on Profitability

Internet apparel and home furnishings retailer Bluefly.com (Nasdaq: BFLY) announced Tuesday that it is slashing 32 jobs, or approximately 34 percent of its workforce, in a bid to reach profitability, improve efficiency and diminish the need for additional capital.

The e-tailer also said it is implementing similar reductions in its marketing and operating expenses.

Although Bluefly -- which claims financier George Soros as a majority investor -- said the decision to trim overhead and streamline its operations "was not an easy one," the company maintained that the move was "clearly required" if it is to operate in the black before the end of next year. Currently, the New York-based firm is setting its profitability sights on the fourth quarter of 2002.

"Achieving profitability, while maintaining the value and quality Bluefly offers its customers and suppliers, is clearly the appropriate next step and we will continue to be supportive in this regard," said Neal Moszkowski, a partner at Soros Private Equity Partners.

Looking Ahead

Like many of its counterparts, Bluefly saw its fortunes wane over the past year as the overall economic slowdown forced e-tailers to scale back their expenses and operations.

Bluefly said that its latest cutbacks, though, would help ensure that it has enough cash on hand to fund operations for the next 12 months. Based on the restructuring efforts, the company also said that it would need less than US$5 million of additional investment capital to fund its operations until reaching profitability.

However, the e-tailer cautioned that the forecast results are not set in stone.

'No Assurance'

"Of course, these projections are based on a number of assumptions, including consumer demand and the company's ability to execute upon its plan," Bluefly said. "There can be no assurance that the assumptions will prove to be accurate."

The e-tailer said it expects to record a pretax charge of roughly $600,000 in the second quarter of 2001 in connection with the reductions.

Also on Tuesday, Bluefly announced that it was adding Josephine Esquivel to its board of directors. Esquivel previously served as a senior apparel, textiles, footwear and luxury goods equity analyst with Morgan Stanley Dean Witter.

Profits Up

In its first quarter results posted last month, Bluefly said it saw its gross profit spike 92 percent, from $668,000 in the year-ago period, to $1.28 million.

The e-tailer also reported a 24 percent increase in net sales, to $4.65 million from $3.74 million during the same quarter in 2000, and a 32 percent reduction in operating losses to $3.9 million, or 77 cents per share, from $5.74 million, or $1.17 per share, a year earlier.

However, factoring in a one-time, non-cash charge of $13 million, the company recorded a net loss of $17 million, or $3.57 per share, for the first quarter, compared to a net loss of $5.67 million, or $1.19 per share, in the year-ago period.