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Billion Dollar Unicorns: Zulily Attempts to Make a Turnaround

Posted on Tuesday, Aug 11th 2015

Billion Dollar Unicorn club member and online niche flash sales site Zulily (Nasdaq: ZU) appears to be making a slow turnaround according to recent quarter results. The stock’s performance has been rather weak of late and it had entered the list of the Wall Street’s worst performing stocks for 2015 after having dropped 47% during the year. Their recent moves suggest that things may improve in the future.

Zulily’s Financials

Zulily’s second quarter revenues grew 4% over the year to $297.6 million and an EPS of $0.06. The market was looking for revenues of $294 million and earnings of $0.04 per share.

Among key metrics, active customers grew 19% over the year to 4.9 million. Total orders placed increased 7% to 5.8 million with average order value at $53.63 compared with $53.85 a year ago. For the trailing twelve month period, 88% of orders were placed by repeat customers. Mobile usage has also increased and during the quarter, 56% orders were placed from a mobile device, compared with 49% a year ago.

For the current quarter, net sales are expected at $300 million-$325 million with non-GAAP adjusted EBITDA of $5 million-$15 million. The Street was forecasting revenues of $313.4 million for the quarter. They expect to end the year with net sales of $1.3 billion-$1.4 billion and non-GAAP adjusted EBITDA of $55 million-$70 million.

Zulily’s Expansion Moves

Last month, Zulily expanded their operations internationally. They plan to leverage their existing platform to launch new sites in eight different countries. Last month, they launched in three new markets — Mexico, Singapore, and Hong Kong.

They are also reworking their advertising strategy to target customers who are likely to be long-term customers instead of one-time shoppers. According to their reports, customers who were attracted to Zulily based on a story told about a unique dress ended up being return customers compared with those customers who joined Zulily based on an advertisement of a branded shoe. They are thus refocusing their advertisement dollars on new advertisements and setting a bigger budget for display and TV ads that are able to sell these stories better.

Zulily has been long plagued by customers being upset about longer shipping times. Till last year, average shipping time on their site was 13 days. That number has reduced marginally to 11.6 days in the latest quarter. They plan to continue to reduce that by allowing vendors to store their merchandise in their fulfillment centers. Zulily will also charge their vendors a fee to do this.

Finally, like other retailers, Zulily is also allowing customers to return merchandise. Currently, the return policy is being tested as a pilot for select customers who have complaints about the purchases. If Zulily takes it forward, it will spell additional confidence among their buyers.

Their stock is trading at $13.48 with a market capitalization of $1.66 billion. It fell from a 52-week high of $41.75 in September last year.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


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