Moms-oriented retailer Zulily dialed down its sales outlook for the year, as it struggles with faster-than-expected shopper attrition and weighs how to lure more loyal customers.

Share story

Moms-oriented retailer Zulily dialed down sales expectations for the year Tuesday, as it struggles with faster-than-expected shopper attrition and weighs how to lure more loyal customers to its online deals site.

Zulily executives said the company has realized that last year’s extensive marketing campaigns highlighting well-known brands had attracted many one-time purchasers, not as loyal or as profitable as previous generations of buyers who’d come to zulily seeking to discover quirky items and became repeat buyers.

“The customers that we acquired in 2014 are churning out at a faster pace than we would have expected,” said zulily Chairman Mark Vadon.

So the Seattle-based company is pulling back on marketing efforts while it fine-tunes a new model to drum up customers that are more similar to its historical cohort of loyalists.

Both the lull in marketing and the unexpected shopper attrition mean that zulily expects to generate sales of $1.3 billion to $1.4 billion this year, down from previous expectations of $1.5 billion to $1.65 billion.

Wall Street didn’t take to the news kindly: shares were down 19.3 percent to $9.54 in aftermarket trading, less than half the $22 per share level of the company’s initial public offering in November 2013.

A little more than a year ago, in February 2014, investors enamored with zulily’s breakneck growth drove share prices to nearly $70 apiece.

Zulily is also making other tweaks to its business model, aiming to improve customer satisfaction. CEO Darrell Cavens says the website had become too cluttered, “making it difficult for some customers to shop.”

The company has been “carefully reducing the number of events,” which is what zulily calls each of its daily offerings, to about 100 a day. The company declined to specify how many more events were being offered before it cut back.

The CEO also addressed shipping times, which many customers thought were too long in comparison with competitors like Amazon. Last week the average time until an order shipped was 10.5 days, down from 13.7 days in the fourth quarter of 2014, Cavens said in the earnings call.

Although zulily has long contended that its clients are willing to wait longer in order to get the best prices and a wide selection, the company has been investing in fulfillment centers and in working directly with its vendors in order to make items move faster. The long-term goal is to bring the lag time to an average of 7 days, Cavens has said.

Zulily on Tuesday reported earnings of 1 cent per share on revenue of $306.6 million, up 29 percent from last year, but below Wall Street expectations of $313.3 million on average.

Zulily also announced Brian Swartz was named chief financial officer to replace Marc Stolzman, who left the company in March. Swartz comes from Apollo Education Group, a private-sector education company.