's Wings Still Flapping (News) November 4, 1999's Wings Still Flapping

By Dave Marino-Nachison (TMF Braden)
November 4, 1999 (Nasdaq: BFLY) -- a company working to build an online fashion outlet where shoppers can save on fashionable apparel, household items, and other merchandise from a broad range of suppliers and designers -- reported third-quarter financial results today.

It was what you'd expect from an e-tailer, sequential-quarter revenues rising 17% to $1.2 million and net losses increasing sharply. Costs rocketed as the company prepared for the holiday season by adding inventory, enlisting new designers, moving to a better fulfillment center, creating an in-house customer service department, upgrading to better transaction software, and building better photo studio space.

The stock didn't do much today. In fact, it hasn't done much all year since settling in the $10-per-share range in the spring following a precipitous winter fall from highs fueled by the company's relaunch as an Internet-based retailer after years in the golfwear business.

What's the story here? Hard to say.

Here's a stock that for about the life span of a mayfly was a Wall Street darling thanks to timing and its willingness to reinvent itself as an online player. But since then, trying to get a handle on has been a pretty difficult task.

Minneapolis-based John G. Kinnard & Co., one of the few brokerages that covers, has maintained a "strong buy" rating since starting coverage in April, though it hasn't offered much in the way of reasoning beyond the same arguments given for most e-tailers without a significant marketable advantage: It's online, it's advertising, sales are growing, etc.

Recently, Kinnard even took a stab at valuing -- saying the shares might be worth $24 each -- after applying a broader online retail segment price-to-sales valuation to its own full-year revenue estimates.

Is that the best Kinnard could do? Hopefully not, but in the case of, it might be. At this point, it's still essentially a press-release driven dot-com stock with some dedicated stockholders -- and plenty of problems. For example, if not for a recent influx of cash from a group including noted financier George Soros, the holiday season might have been a disaster with inventory and the aforementioned staff and systems improvements perhaps too dear.

So lives on, despite ever-widening losses seen continuing indefinitely.

But given the market's apparent unwillingness to drop's shares too much farther given its leading position in its chosen field -- whether the online discount fashion apparel retail segment is much of a market is another question -- and an infusion of cash that will allow it to battle through the holiday season, there could conceivably be some upside for speculative investors, at least in the short term.

(There was some goofiness involving and earnings estimates today. That sort of thing isn't really our bag, so if you're interested, here's a story from

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