RealTime IT News

The Rx Fails to Cure

Three days after laying off 10 percent of its workforce, eponymous pharmacy and e-tailer drugstore.com reported a net loss of $45.7 million on sales of $26.5 million.

The loss compared to a loss of $41.9 million in the same period a year ago. The good news was that sales for the third quarter of 2000 were up substantially from the $12.1 million in sales for the same quarter in 1999.

On Friday, the online drugstore cut 60 jobs, and a spokeswoman was quoted as saying that the company needs to balance cash conservation with growth. The company took steps to reassure investors that it remains financially sound, having raised $63 million in August.

The stock closed Friday at $2.56, essentially unchanged. Its 52-week high is $55.

The company tried to put a happy face on its earnings report today. CEO and Chairman Peter Neupert said in a statement: "We are very pleased with third quarter results despite significant reductions in spending, we delivered solid increases in revenue, gross margins and repeat orders. These strong results underscore our continued ability to leverage our investments, while we execute our strategy of sustainable growth."

Still, the company has yet to post a profitable quarter and in fact lost a total of $2.16 per share for the first two quarters of 2000. The loss per share for the third quarter was 80 cents.

The company said it is expecting that fourth quarter net sales will range from approximately $29 million to $30 million, in line with current Wall Street consensus forecasts. It also anticipates that fourth quarter losses before interest, taxes and amortization will be approximately the same as the third quarter.

Regarding 2001, drugstore.com said it recognizes that the external investment environment has changed dramatically and it intends to take steps to modify its spending in order to reduce operating losses while continuing to grow the business.

The company said it anticipates that 2001 net sales will range from approximately $135 million to $145 million, while losses before interest, taxes and amortization will range from approximately $105 million to $110 million. drugstore.com is planning to reduce previously planned 2001 operating expenses by over $50 million, primarily through the reduction of marketing and administrative expenses, and the layoffs.

"We believe we're making these decisions from a position of strength," Neupert said. "We are the No. 1 online drugstore, and we successfully raised another $63 million in August, despite a very challenging capital markets environment.

"We believe these cost-cutting steps are prudent and appropriate actions that are consistent with our stated strategy of achieving sustainable growth, while conserving cash on hand."