Zulily crashes on EPS miss, profit outlook

|By:, SA News Editor

Zulily (ZU -24.1%) expects Q2 revenue of $261M-$276M, above a $248.5M consensus. But net income is only expected to be in a range of -$2M to $3M; Q1 net income was -$3M (in-line with guidance of -$1M to -$5M).

Full-year revenue guidance has been hiked by $50M to $1.15B-$1.2B; consensus is at $1.15B. But net income guidance remains at $15M-$25M, and adjusted EBITDA guidance at $45M-$55M.

A major factor behind the bottom-line pressure: Gross margin fell 200 bps Y/Y to 26.8%, and (as discussed on the CC) is expected to remain pressured by fulfillment center investments - Zulily has a 2014 capex budget of $45M-$55M. SG&A spend was 17.1% of revenue vs. 17.3% a year ago, and marketing spend fell to 9.7% of revenue from 12.2%.

Q1 free cash flow was $1.6M. Active customers rose by 500K Q/Q and 1.8M Y/Y to 3.7M, and orders rose 91% Y/Y to 5.5M. Average order value rose 4% Y/Y to $55.34, and 47% of North American orders came from mobile devices.

Q1 results, PR