Odimo Q3 Sales Fall as Losses Continue to Grow

Third quarter net sales of online luxury retailer Odimo fell nearly 10 percent to $9.1 million compared to $10 million last year. Struggling Odimo reported their quarterly results yesterday and did not hold a conference call.

While online diamond and jewelry sales are biting into the independent stores' share of the market (see IDEX Online Research: Blue Nile Taking Market Share from Store-Based Jewelers, September 11, 2005), Odimo and its three web sites diamond.com, ashford.com, and worldofwatches.com are yet to find their share of market, despite the backing of diamond giant and DTC Sightholder Steinmetz.

This is reflected in the results for the third quarter ended September 30, 2005. Loss from operations was $3.5 million, compared to a $2.3 million loss in the third quarter of fiscal 2004. Net loss attributable to common stockholders decreased to $3.5 million, or $(0.50) per share on 7,162,000 average shares from a net loss of $4 million, or $(6.29) per share on 629,000 average shares.

Diamond sales were 33.7 percent of gross sales, compared to 34.2 percent of gross sales in the third quarter of 2004. Jewelry sales were 15.9 percent of gross sales, compared to 12.9 percent; Luxury goods sales were 11.6 percent of gross sales, compared to 14.4 percent; and watch sales were 38.8 percent of gross sales, compared to 38.4 percent of gross sales in the third quarter of 2004

One possible explanation for the fall in sales was the shrinking marketing and advertising budget. Marketing expenses during the quarter were $1.1 million, down from $1.4 million in the previous third quarter. As a percentage of net sales, marketing expenses decreased to 12 percent from 13.6 percent. 

This decrease, the company says, reflected its “focus on more directed and cost effective on-line advertising expenditures.”

But at the same time, Odimo saw general and administrative expenses swell to $3 million from $2.5 million, growing to 32.3 percent of net sales compared to 25.1 percent. In a release the e-tailer said the increase was primarily related to “public company expenses, including legal and professional fees related to exploring financing alternatives, of approximately $536,000.”

But a look at the first nine months of the fiscal year might give rise to some optimism. Net sales increased 8.5 percent to $33.4 million compared to $30.7 million in the first nine months of fiscal 2004.

Loss from operations was $9.5 million, a decrease from $10.2 million, including $4.7 million in stock based compensation expense in the first nine       months of fiscal 2004.

Net loss attributable to common stockholders decreased to $10.4 million, or $(1.73) per share compared to a net loss of $24.5 million, or $(38.91) per share.

Cash and cash equivalents at the end of the quarter were $1.2 million compared to $1.7 million at December 31, 2004. Inventories were $12.9 million compared to $14.3 million at December 31, 2004, a decrease of $1.4 million.