Shares of youth-oriented retailer and marketer Alloy (NASDAQ:ALOY) were off about 5% this morning on news that it posted a net loss of $83.7 million for the fiscal year ended Jan. 31, well off last year's $23.3 million net profit. This came even as full-year revenues rose 24% to nearly $372 million. Operating expenses were largely to blame, jumping to nearly $260 million from about $134 million last year.

Alloy has busily recreated itself in recent quarters. Last year, it moved to outsource significant portions of its fulfillment and acquired several direct marketing businesses including OCM Direct, Collegiate Carpets, and Carepackages -- which all target students -- and former dot-com darling dELia*s, which sells and markets to young girls. The acquisitions, particularly dELia*s, quickly helped the top line.

But costs have also jumped as the company has stepped up its advertising and marketing programs, expanded its ad sales force and technical staff, and folded in its acquisitions. A larger company, simply put, means larger costs to run the show, and legal fees in connection with several ongoing lawsuits can't help. In its press release today, however, Alloy says it met the financial targets it set and subsequently adjusted to account for the changes to its business.

Investors, however, haven't flocked to support management's changes: Alloy shares are down significantly from mid-2003 levels and are about flat with where they were 12 months ago. It's perhaps unsurprising: Alloy finally managed a full-year net profit (and significant free cash flow) in fiscal 2003 after years below the water line, so it's not hard to see why a return to the "red zone" might disappoint.

Still, investors who believe in management's vision may want to look again, as Alloy has a solid balance sheet, and, one would hope, big plans to go with its growing expenses.

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Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.