Zulily Shares Drop on Report of Slowing Customer Growth

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Zulily Inc., an online retailer that sells bibs, clothes, strollers and other products that appeal to new parents, declined 7.3 percent after an analyst report said new customer sign-ups have decelerated this quarter.

The shares closed at $23.56 today, after earlier dropping to $22.61, the lowest price since the day after the company’s November 2013 initial public offering.

Zulily’s new customer activation has “slowed significantly” so far in the current period, which may weigh on sales for several quarters, according to a report today by Steve Weinstein, an analyst at ITG Inc. He cited e-mail delivery problems in the third quarter and higher marketing costs for the slip in new customer growth.

“It’s not a total surprise, because they said that would be a problem going into Q4,” Weinstein said in an interview. He said the slowdown was more severe than the company expected. It will be important to see how Zulily addresses the issue in coming months, he said.

The fourth quarter is typically the most lucrative of the year for retailers, thanks to the holiday shopping season. Weinstein estimates Seattle-based Zulily will report fourth-quarter revenue of $408 million.

On average, analysts project the retailer’s sales will rise to $412.2 million this quarter, according to data complied by Bloomberg. In last year’s fourth quarter, sales were $257 million.

Laura Jones, a spokeswoman for Zulily, declined to comment.