Bluefly, Inc. has reported strong growth in second quarter revenue. However, the online retailer was unable to stem growing losses as marketing and advertising costs increased.

The company said that revenue increased by approximately 29% to $21.6 million from $16.8m second quarter 2006. However, the company's net loss increased to $2.1m from $1.9 million.

Operating loss increased to $2,249,000 compared to operating loss of $1,754,000, primarily as a result of an increase of $1.1m in spending related to marketing and advertising and $899,000 incremental stock-based compensation expense incurred in connection with existing stock based compensation awards.

"We are pleased with the continued growth in revenue and gross profit improvement and believe these kinds of improvements demonstrate that we are on a path toward profitability,'' said Melissa Payner, Bluefly's chief executive Officer. "The operating loss, excluding the non-cash charges related to stock based compensation, decreased compared to the prior year. In fact, when we exclude these amounts from both this quarter and last year, the operating loss is 35% lower comparatively.''
 
The company said that inventory declined by $1.1m since December 2006.