Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Zulily, Inc. (NASDAQ:ZU) were getting taken to the cleaners today, dropping as much as 32% after the company reported weak earnings in its first-quarter report.
So what: The online flash-sales retailer showed strong sales growth in the quarter, but operational problems weighed on the bottom line. Revenue jumped 87% to $237.9 million, but Zulily did not seem fully prepared to handle those new orders, as backlogs and shipment times increased, and it reported an adjusted net loss of $0.02 per share compared to estimates of a penny profit. The company uses a unique business model of purchasing products with vendors after customer orders come in. The model enables deep discounting, but also caused headaches when Zulily received a jump in orders near the end of the quarter, resulting in overtime wages and longer shipping times.
Now what: Despite the bottom-line miss, the report had plenty for investors to be happy with, as sales in the quarter topped estimates of $233.6 million, and the company lifted its forward full-year revenue guidance to $1.15 billion-$1.20 billion, ahead of the consensus at $1.15 billion. With sales nearly doubling, I'd give management some time to iron out the cost side of the equation. For now, it's more important for Zulily to be expanding its customer base and driving customer loyalty to continue building the brand and growing sales.
Looking for a high-flying stock that won't burn you?
Give me five minutes and I'll show you how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year, his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252%, and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.
Jeremy Bowman has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.