Zulily said it will be opening a third distribution center next year in order to keep up with the breakneck sales growth it has been experiencing.
The announcement was made on the company’s conference call this afternoon, which discussed results including revenue growth of 97 percent.
But despite beating analyst expectations, it is clear the need to increase its distribution and logistics capacity is taking a toll.
The e-commerce company, which sells home goods and clothing to mothers, said it was burdened by a backlog of shipments from the first quarter, and that the solution will require major investments that will put pressure on gross margins in the near term.
That may be one reason why investors are taking a more conservative outlook on the company this afternoon. In after-hours trading, the stock fell $2.12, or 5.4 percent, to $37.25 a share.
Zulily’s CEO Darrell Cavens said the solution includes replacing its Nevada facility with a more efficient one that will be up and running by September and updating its 17-acre center in Ohio with six miles of conveyor belts. In addition, a third facility is being planned for the east coast in 2015, with details coming later this year.
“We are really making sure we have the capacity for future purchases,” said Cavens, who added that there’s currently 1,000 employees in each of the existing facilities.
Despite pressure to keep up with demand, the company said it still managed to improve shipping times with orders going out in 12.6 days, an improvement over the prior quarter when it took 13.2 days.
