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Webvan Reroutes Business Model

On the heels of its recent pre-announcement of fourth-quarter losses, Webvan Group Inc. Thursday re-established its business model for 2001.

The online grocery-delivery service plans to achieve standalone profitability by targeting its 10 existing markets, completing the integration of HomeGrocer.com, and implementing a cash conservation program to reduce annualized corporate and operating expenses.

Additionally, the company postponed the commercial launch of its services in Northern New Jersey, Baltimore and Washington, D.C. Further, a facility in the south Bronx region of New York City, which the company had planned to occupy, has now been subleased, according to Bud Grebey, spokesperson for Webvan.

"Our priority right now is to focus on the profitability of existing marketets and bring the entire company into a positive cash flow," he said. "Once we attain profitability, we will pursue new venues for business."

"Webvan is taking the necessary actions to deliver on its value proposition to customers and conserve capital in the current economic environment," George T. Shaheen, chairman and chief executive officer of Webvan Group Inc., said in a statement.

"We are aligning our business strategy with the priorities we established for 2001 and are positioning Webvan for future growth. We believe these actions will strengthen our business, conserve cash and significantly reduce our need to raise additional capital.

"Under this plan, the company would need to raise an additional $40- to $60 million in capital by the end of 2001, or early 2002, to fund its 2002 operations up to the point when the company generates a positive cash flow," he said.

In related news, the company released is fourth-quarter and year-end results Thursday.

Webvan reported that its fourth-quarter pro-forma net loss was $109.1 million, or a loss of $0.23 per share. Fiscal year 2000 pro-forma net loss was $413.2 million, or a loss of $0.91 per share.

Pro-forma net loss and net loss per share excludes the amortization of goodwill resulting from the company's September 2000 acquisition of HomeGrocer.com, and non-cash compensation and restructuring charges, and includes the operating results and sharecounts of HomeGrocer.com for the entire fiscal year.

Net sales for the fourth quarter 2000 were $84.2 million, an increase of 325 percent over pro forma net sales of $19.8 million for the fourth quarter of 1999.

Pro forma net sales for fiscal year 2000 totaled $259.7 million, an increase of 642 percent over the pro forma $35.0 million for fiscal year 1999. These results include the full impact of HomeGrocer.com sales over these periods.

The company stated that its active customer accounts in the preceding 12 months ending December 31, 2000 exceeded 640,000, an increase of more than 22 percent from the 524,000 at the close of the third quarter of 2000. Repeat orders represented 86 percent of total orders during the fourth quarter. The average order size for the recently completed quarter was approximately $112, an increase of 9 percent over the $103 reported for the prior quarter.

Gross profit for fourth quarter 2000 was $22.9 million, a gross margin of 27.2 percent, up from third quarter 2000, in which pro forma gross profit was $21.2 million, or a gross margin of 25.8 percent.