Chinese online retailer LightInTheBox Holding Co Ltd (LITB.N) reported a bigger quarterly loss after its operating costs rose 50 percent and sales of its wedding and prom dresses declined, sending its shares down as much as 23 percent.
The company said its current-quarter profit margins would also be hit by a switch toward cheaper, off-the-shelf clothing that fetches lower prices than its customized wedding dresses.
LightInTheBox forecast fourth-quarter revenue within a range of $75 million to $77 million, below the average analyst estimate of $83.1 million.
LightInTheBox's apparel business delivers the biggest profit margins for the company. But sales from that portion of the business - only the second-biggest revenue contributor - fell 8 percent in the third quarter ended September 30.
Facing tough competition from cut-price wedding retailers in the United States, the company said in August that it had placed "too much emphasis" on its high-end products.
On Tuesday, the company said the average order size for the third quarter had dropped to about $43 from more than $50. Apart from clothing, the company sells gadgets, small accessories and home and garden products.
"Traditionally, we have been very strong in customized apparel such as wedding and special occasion dress, which has much higher gross margins," Chief Financial Officer Zheng Xue said on a post-earnings conference call.
"Nowadays, we are offering more ready-to-wear, standard-size products. These tend to have lower gross margins."
The company, which went public in June, said it expected sales of its wedding and special occasions apparel to recover by the second quarter of 2014, because more people prefer to marry during the spring and summer.
Most of LightInTheBox's customers are located in Europe and the Americas. Xue said the company, which competes with industry behemoth Alibaba IPO-ALIB.N, planned to set up more warehouses outside China to reduce shipping costs.
LightInTheBox reported a third-quarter net loss of $2.4 million, or 4 cents per share, excluding items, compared with a net loss of $1.0 million in the third quarter of 2012.
Revenue rose 33.4 percent to $68.1 million.
Analysts on average had expected a profit of 5 cents per share on revenue of $70 million, according to Thomson Reuters I/B/E/S.
Total operating expenses rose to $33 million.
Shares of the company were down 21 percent at $7.89 in afternoon trading on the New York Stock Exchange on Tuesday.
(Additional reporting by Aditi Shrivastava; Editing by Robin Paxton and Kirti Pandey)