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Zulily grows modestly in Q2 and improves its profit margin

August 6, 2015 04:37 PM
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Flash-sale retailer of women’s and children’s apparel zulily Inc. reported modest sales growth for the second quarter and progressed in streamlining fulfillment operations, improving product selection and driving growth from mobile commerce.

Approximately 56% of orders were placed from a mobile device during the second quarter, up from approximately 49% for the same period last year, zulily reported.

The e-retailer also reduced the number of events it offered to customers during the quarter, which helped to improve conversion rates and allow its merchandising team to better focus on creating a unique selection of products, CEO Darrell Cavens told analysts on a conference call.

Ongoing investments in its fulfillment and supply chain network continue to pay off for zulily, as the merchant reported average order-to-ship times are at 11.6 days, down one day from the same period a year ago. Delivery times are longer than for most online retailers because zulily only orders products from suppliers after a sale ends and it knows how much consumers have purchased.

Since zulily purchases inventory after an event is over, its biggest challenge in reducing delivery times is getting the product from the vendor’s warehouse to zulily fulfillment centers, Cavens told analysts. Zulily then handles fulfillment to the customer.

To speed this along, zulily rolled out a new vendor fulfillment service in February where it charges suppliers a fee to use its fulfillment centers for storage and shipment of items the suppliers sell through zulily and other channels. Thousands of units a day are now shipped for vendors through this program, though it still represents a small percentage of sales.

“By offering vendor fulfillment services, we deepen our relationship with vendors, help them scale their businesses beyond just zulily events and improve our customer experience by reducing ship times,” Cavens said on the call. “We continue to rapidly add new vendors to the platform and are excited about the future impact it can have on improving our customer experience over time.” 

For the period ended June 28, zulily reported:

  • $297.6 million in total sales, a 4.4% increase compared with $285.0 million in the first quarter of 2014.
  • Gross profit of $92.5 million, up 14.2% from $81.0 million. Profit margin increased 2.7 percentage points to 31.2%.
  • Marketing expenses of $26.9 million, a 10.7% increase from $24.3 million.
  • Selling, general and administrative expenses of $60.3 million, a 23.1% increase from $49.0 million.
  • Net income of $3.5 million compared with $7.8 million a year earlier.
  • Active customers grew to 4.9 million, a 19% increase.
  • Total orders placed increased 7% to 5.8 million.
  • Average order value was $53.63, down 0.4% from $53.85.
  • For the 12 months ended June 28, 88% of orders were placed by customers who had previously purchased from zulily.

For the first six months of the year, zulily also reported:

  • Net sales of $604.2 million, a 15.5% increase compared with $522.9 million in the first half of 2014.
  • Net income of $1.1 million versus $4.8 million in the first six months of 2014.

Zulily, ranked No. 39 in the Internet Retailer 2015 Top 500 Guide, is predicting sales of $1.3-$1.4 billion for the full year, or anywhere from 8% to 17% growth. That compares with 72.5% growth zulily experienced in 2014, as it increased sales to $1.20 billion from $695.7 million.

 

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