SAN FRANCISCO, Aug. 2 /PRNewswire-FirstCall/ -- RedEnvelope, Inc.
(NASDAQ:REDE) today reported financial results for the first
quarter 2006, which ended July 3, 2005. First Quarter Results The
Company's net revenues for the first quarter of its 2006 fiscal
year were $25.0 million compared to $21.1 million in the first
quarter of the prior fiscal year, an increase of 18.2%. The net
loss was $(1,752,000), or $(0.20) per share, compared to a net loss
of $(952,000), or $(0.11) per share in the first quarter of fiscal
year 2005. "We are pleased with our results for the first quarter,"
said Alison May, RedEnvelope's President and Chief Executive
Officer. "Our top line growth, at 18.2% over the first quarter of
fiscal 2005, was comparable to our growth rate of 19.2% for the
first quarter of our last fiscal year. In addition, at 53.0% our
gross margin was essentially unchanged from 53.2% for the first
quarter of fiscal 2005. While our net loss was greater than for the
first quarter of fiscal 2005, it met our expectations as we
invested in brand building advertising this quarter, and are now
fully staffed compared to the first quarter of last fiscal year,
having filled a number of key positions in areas such as marketing,
information technology and product development. We currently expect
that the variance in general and administrative expenses over the
prior fiscal year will narrow as we approach the Holiday season,"
continued Ms. May. "The results of our different marketing channels
varied, with catalog performing below our expectations and online
channels performing above expectations. We are very pleased that we
have been able to achieve greater-than-expected growth in our
online channels in a rapidly changing and competitive environment,"
said Ms. May. "Based on customer feedback and marketing analysis,
we have made adjustments to some creative aspects of our catalog as
well as to our catalog assortment and product density with the goal
of improving our catalog performance for the coming fall and
Holiday seasons." Marketing expenses as a percentage of revenues
increased from 23.4% in the first quarter of fiscal 2005 to 27.5%
for this quarter. This increase was mainly due to the final portion
of the Company's advertising campaign and market research expenses.
Fulfillment expense as a percentage of revenues declined from 16.1%
to 13.6%, or 250 basis points, while the fulfillment accuracy rate
was just over 99.9%. "We are very pleased with efficiency
improvements in our fulfillment operations," said Ms. May. "We were
able to handle our 18.2% revenue growth with essentially no growth
in our fulfillment expenses. We are encouraged by these results as
we prepare for the Holiday season," Ms. May added. "Our focus
during the summer is on Holiday readiness. We have improved our
individual productivity at the fulfillment center and have seen
significant improvement in our personalization productivity. We
also have made systems improvements and management changes, and
expect to complete the renovation of our call center facility in
September, which we currently believe will allow us to increase our
seating capacity by approximately 21% for the Holiday season," said
Ms. May. Balance Sheet The Company's inventory position is at a
seasonal low, providing what it believes to be appropriate
inventory for its annual summer sale. Cash and short-term
investments along with our current liabilities are also consistent
with the Company's expectations for the quarter. Business
Highlights -- For the first quarter of fiscal year 2006, net
revenues from existing customers represented approximately 55% of
total net revenues. -- For the first quarter of fiscal year 2006,
based on an internal quality control sampling of outbound orders,
the Company processed orders with an accuracy rate of just over
99.9%. -- For the first quarter of fiscal year 2006, net revenue
per order increased to approximately $80 from approximately $76
during the first quarter of fiscal 2005, and gross profit per order
increased to approximately $42 from approximately $40 in the first
quarter of fiscal 2005. -- At the end of the first quarter,
RedEnvelope's customer file totaled approximately 2.5 million
names, a growth of approximately 139,000 customers. -- Jewelry was
the Company's largest product category, representing approximately
27% of net revenues. -- For the first quarter of fiscal 2006, the
Company shipped approximately 312,000 orders, an increase of
approximately 12% over the first quarter of fiscal 2005. Business
Outlook The following business outlook contains forward-looking
statements describing management's current expectations for future
periods. The matters discussed in these forward-looking statements
are subject to numerous assumptions, risks and uncertainties, some
of which are listed or referred to in the cautionary note below.
The forward-looking guidance provided in this press release is
based on limited information available to RedEnvelope at this time,
which is subject to change. As a result of these uncertainties and
information limits, actual results in the future may differ
materially from management's current expectations. Although
management's expectations may change after the date of this
release, RedEnvelope undertakes no obligation to revise or update
the guidance below. The lack of any revision or update is not meant
to imply continued affirmation of the guidance. Currently
RedEnvelope anticipates revenue growth for fiscal 2006 of at least
20% with positive net earnings. In addition, RedEnvelope currently
anticipates capital expenditures for the fiscal year 2006 will be
approximately $3.5 million in line with its currently anticipated
depreciation expenses for fiscal year 2006. Webcast of Management
Presentation RedEnvelope, Inc. will make a presentation regarding
these results and the Company's business outlook over the Internet
at 2:00 p.m. (PT) / 5:00 p.m. (ET) today. To listen, please log on
to http://www.redenvelope.com/, go to "About RedEnvelope," and
follow the link entitled "August 2, 2005 Management Presentation:
First Quarter Results" that will be posted on that page. After the
webcast, interested parties may access a replay through the same
link. The replay of the webcast will remain available on our
website for twelve months. To access an electronic copy of this
press release, please visit Investor Relations under the "About Us"
tab at http://www.redenvelope.com/. Business Risks This press
release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 that involve risks, uncertainties
and assumptions, such as statements regarding our plans, objectives
and future operations and estimates of our financial results,
capital expenditures and depreciation expense for future periods.
Our actual results and the timing of events could differ materially
from those anticipated in these forward-looking statements as a
result of several factors. Factors that could affect future
performance include, but are not limited to: marketing and
advertising programs and related expenditures may not cause
anticipated increases in sales; ongoing system upgrades and
enhancements and our call center renovation could fail to achieve
desired results or cost savings or could take longer than
anticipated to implement; delays in introducing new products,
competition relating to new or existing products or failure of the
market to accept these products; planned fulfillment center and
system upgrades and enhancements could fail to achieve desired
results or cost savings or could take longer than anticipated to
implement; difficulties encountered in, or increased costs of,
fulfillment; economic conditions and changes in consumer spending
levels; any significant disruption of our operations due to network
or systems failures or disruptions, power outages, regulatory
actions, natural disasters or attacks; our limited operating
history; difficulties encountered in predicting consumer
preferences, managing inventory levels or gaining access to popular
products; increased or more effective competition from other
retailers; difficulties encountered in managing our growth;
increased costs for, or delays or difficulties in the receipt of,
merchandise ordered by us; seasonality of the retail business;
increases in shipping, advertising or marketing costs; increases in
sales or other taxes; lower than expected utilization of electronic
commerce by consumers; product returns that exceed expectations;
litigation that may have an adverse effect on our financial
results, product offerings or reputation; changes in foreign
currency exchange rates; changes in key management personnel;
integration of recently hired key personnel, including our Chief
Financial Officer and other managerial, technical, finance,
accounting and operations personnel; difficulties encountered in
properly staffing our operations or providing satisfactory customer
service; changes in government or regulatory requirements affecting
e-commerce that may restrict, or increase the cost of, our
operations, and other risk factors described in detail in our
Report on Form 10-K for the fiscal year ended April 3, 2005,
including, without limitation, those discussed under the captions,
"Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Factors That May Affect
Future Results," which document is on file with the Securities and
Exchange Commission (the "SEC") and available at the SEC's website
at http://www.sec.gov/. These forward-looking statements are made
only as of the date of this press release, and RedEnvelope
undertakes no obligation to update or revise the forward-looking
statements, whether as a result of new information, future events
or otherwise. RedEnvelope, Inc. is an online retailer of upscale
gifts for every occasion, every day. RedEnvelope offers a unique
assortment of imaginative gifts through its catalog and website,
http://www.redenvelope.com/. CONTACT: media, Susan Hook of
RedEnvelope, Inc., +1-415-512-6193, or investors, Jordan Goldstein
of Financial Dynamics, +1-415-439-4500, for RedEnvelope, Inc.
REDENVELOPE, INC. STATEMENTS OF OPERATIONS (Unaudited) Thirteen
Weeks Ended July 3, June 27, 2005 % 2004 % (In thousands, except
per share data) Net revenues $24,978 100.0% $21,131 100.0% Cost of
sales 11,729 47.0% 9,899 46.8% Gross profit 13,249 53.0% 11,232
53.2% Operating expenses: Fulfillment 3,405 13.6% 3,395 16.1%
Marketing 6,863 27.5% 4,944 23.4% General and administrative 4,811
19.3% 3,841 18.2% Total operating expenses 15,079 60.3% 12,180
57.7% Loss from operations (1,830) -7.3% (948) -4.5% Interest
income 140 0.6% 75 0.4% Interest expense (62) -0.3% (79) -0.4% Net
loss $(1,752) -7.0% $(952) -4.5% Net loss per share - basic $(0.20)
$(0.11) Weighted average shares outstanding - basic 8,919 8,635
REDENVELOPE, INC. BALANCE SHEETS (Unaudited) July 3, June 27, 2005
2004 (In thousands) ASSETS Current assets: Cash and cash
equivalents $2,172 $8,061 Short-term investments 14,471 21,101
Accounts receivable, net 1,109 849 Inventory 11,794 8,275 Prepaid
catalog costs and other current assets 2,243 1,792 Total current
assets 31,789 40,078 Property and equipment, net 7,423 6,236 Other
assets 538 471 Total assets $39,750 $46,785 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and
accrued expenses $9,496 $12,143 Capital lease obligations, current
578 597 Total current liabilities 10,074 12,740 Capital lease
obligations, long-term 141 671 Deferred Rent 833 -- Total
liabilities 11,048 13,411 Commitments and contingencies
Stockholders' equity: Common stock 90 88 Additional paid-in capital
114,232 113,011 Deferred compensation (16) (71) Notes receivable
from stockholders (44) (44) Accumulated deficit (85,560) (79,604)
Accumulated other comprehensive income (loss) -- (6) Total
stockholders' equity 28,702 33,374 Total liabilities and
stockholders' equity $39,750 $46,785 DATASOURCE: RedEnvelope, Inc.
CONTACT: media, Susan Hook of RedEnvelope, Inc., +1-415-512-6193,
or investors, Jordan Goldstein of Financial Dynamics,
+1-415-439-4500, for RedEnvelope, Inc. Web site:
http://www.redenvelope.com/
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