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Originally published February 25, 2014 at 11:24 AM | Page modified February 26, 2014 at 10:54 AM

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Zulily shares soar as investors buy into bullish outlook

Shares of mom-oriented online retailer zulily on Tuesday jumped 36.3 percent a day after the company posted strong earnings and a bullish outlook. Its valuation has soared by more than $2 billion, a jump that’s nearly as big as the market value of Washington Federal, the state’s largest

Seattle Times business reporter

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Online retailer zulily added more than $2 billion to its market value the day after posting strong results and a bullish outlook.

Shares of the Seattle-based startup, which launched four years ago and focuses on mom-oriented flash sales, closed at $58.41 on Tuesday, a 36.3 percent boost.

With a one-day jump nearly equal to the total market value of Washington Federal, the largest bank based in the state, zulily’s valuation soared to about $7.13 billion.

The big pop underscores how the accelerating migration of consumers from brick-and-mortar retail to its online equivalent is challenging the dominance of traditional retailers, even as it opens doors for upstarts like zulily.

Just last week, Sears, one of the legacy retailers most troubled by the transition, announced it would close its historic Sodo store — just a few blocks from zulily’s original headquarters.

On Monday, as zulily posted its first quarterly earnings as a publicly traded company, it said it expects to top $1 billion in sales this year and enter new product categories, as well as to invest large sums in automating its warehouses and continue its hiring spree.

Investors are buying those rosy expectations. However, analysts with RBC Capital Markets, while highlighting zulily’s “large growth opportunity” and “attractive business model,” also brought up some caveats.

Among these are continued competition from larger e-commerce rivals such as Amazon, as well as the way zulily’s orders are handled.

The company typically doesn’t hold inventory. It waits until customers have purchased an item to order it from the manufacturer, which allows for lower prices but results in longer delivery times than many competitors’.

These delays “could become a significant competitive disadvantage over time,” the RBC analysts warned.

Moreover, while zulily’s fulfillment expertise has worked well so far, its ability to scale up to its lofty ambitions remains unproved, the analysts said. “It may not be sufficient to support a multibillion-dollar sales rate and more aggressive fulfillment schedules.”

Ángel González: 206-464-2250 or On Twitter: @gonzalezseattle

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