Zulily (NASDAQ:ZU), the e-commerce brand known for discounted baby clothes, saw its shares nose dive by 30% on Wednesday. The company showed reduced margins and higher expenditures in its first quarter earnings.
The company’s net loss unexpectedly doubled during the three-month period to $3 million, or two cents per share. This comes despite an 87% increase in revenue to $238 million.
Zulily said that the increase in orders led to a shipment backlog. This resulted in Zulily hiring more workers and paying more overtime wages. Zulily had $16 million in capital expenditures, a sharp increase from $3 million last year.
Zulily does not purchase items from vendors until after the orders come in. Although this helps facilitate discounts, it creates inefficiencies when there is a surge in orders.
Pointing to a 93% increase in customers, CEO Darrell Cavens remains optimistic. "This year has started off with strong revenue and active customer growth." Zulily has succeeded at targeting young mothers. “We remain obsessed about changing the way people shop by giving them an experience they can't find elsewhere."
The company said more than 80% of its North American orders were from repeat customers. The average order increased 4% to $55.
Zulily says it expects sales of $1.2 billion for the year. Annual net income is estimated to be $20 million.
The Seattle-based company went public in November and has seen its shares fall 15% in the past six months.