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Originally published February 24, 2014 at 1:50 PM | Page modified February 25, 2014 at 11:21 AM

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Stock soars as zulily posts good results, talks of growth

Online retailer zulily surpassed Wall Street expectations by a wide margin in its first earnings report as a public company.


Seattle Times business reporter

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If I were a gambling person, I'd wager that in 6-18 months, Amazon will acquire zulily... MORE

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Online retailer zulily, which Monday easily beat investor expectations for its first quarter as a public company, said it aims to keep its strong momentum by topping $1 billion in sales this year and expanding into additional products.

The Seattle company, which focuses on flash sales of apparel, toys and other products geared toward moms, turned its first full-year profit and saw the number of active customers double to 3.2 million by year’s end.

Now zulily seeks to keep its foot on the pedal by investing heavily in warehouses to increase its ability to handle shipments. It also wants to press into new categories, such as products for the home.

“In the coming year, I see an incredible opportunity to expand our offer in the home category,” Chief Executive Darrell Cavens said in an earnings call. He said this segment of products had already grown significantly without a tremendous amount of focus from zulily’s team of buyers.

The company predicted its sales will top $1.1 billion this year, up from $695.7 million in 2013.

The strong results and lofty outlook seemed to reassure investors about their bet on the company, which debuted in a red-hot initial public offering in November.

Shares jumped 10.15 percent in after-hours trading to $47.19 as fourth-quarter earnings of 10 cents per share on revenue of $257 million surpassed Wall Street expectations by a wide margin. According to Bloomberg, analysts predicted 4 cents per share on revenue of $225.6 million.

Not all Internet names have been so fortunate: Twitter, which had its own high-demand IPO a few days before zulily, saw its stock tank earlier this month after showing disappointing figures in its first earnings report as a publicly traded company.

Shares of Groupon, a deals site that was once a darling with investors, also took a dive last week amid disappointing earnings.

On Monday, zulily logged profit of $12.9 million for the year ended Dec. 31, versus a $10.3 million loss the previous year.

Fourth-quarter sales reached $257 million, double the comparable period in the previous year.

“Clearly this has been a great year for the company,” Cavens said in the call.

To keep up with its growth, zulily says it will keep hiring aggressively. It will also invest between $45 and $55 million in 2014, mainly to beef up its fulfillment centers. It recently leased a new distribution center in Nevada that, according to its executives, will double the size of its existing facility in that state. In addition, the company plans to invest in “significant automation” to move items faster once they reach the distribution center.

Zulily typically doesn’t store the items it sells; it waits until a customer has placed an order with it before asking the vendor to ship it. That allows the company to offer a wider variety of products at a lower cost, but it also results in longer waits.

During the earnings call, analysts asked whether zulily is reducing the time it takes for customers to receive their purchases, an issue critics say could limit zulily’s growth.

Company executives responded that zulily strives to drive down the lag, but that there are no plans for a big change in the way it handles inventory. Consumers are primarily drawn by the value of zulily’s offer, not by how quickly they can get the products, and to some extent are willing to trade that value for time, the executives said.

Ángel González: 206-464-2250 or agonzalez@seattletimes.com. On Twitter: @gonzalezseattle



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