Can Drugstore.com Heal Itself?

Online pharmacy and e-tailer drugstore.com Inc. posted a pro forma fourth
quarter loss of $14.7 million on record net sales of $43.5 million, up 20
percent from the year-earlier quarter.


The Bellevue, Wash.-based company said the pro forma net
loss was 22 cents a share, compared to a net loss of 45 cents a share a year
ago.


Net sales for fiscal 2001 reached $145.3 million, a 32 percent increase over
fiscal year 2000. Pharmacy sales were 54 percent of net sales for the year.


Pro forma net loss for 2001 (excluding impairment and restructuring charges,
amortization of intangible assets, amortization of stock-based compensation,
extraordinary gain and cumulative effect adjustment) was $68.6 million, a
$74.5 million decline from fiscal year 2000.


“Our fourth quarter results demonstrate that we can be both a high growth
retailer and drive significant operating improvements in many areas from
increasing gross margin to reducing costs that benefit the bottom line,” said
Kal Raman, president and CEO.


Still, the fully diluted results show that the company faces some real
challenges. On a GAAP basis, the net loss for 2001 was $282.8 million and
reflects non-cash impairment and restructuring charges of $178 million,
primarily associated with the write-down of the company’s intangible assets.


The GAAP loss on a per share basis for 2001 was $4.28 versus $3.56 for 2000.


Earlier this month drugstore.com said that it expects to reach profitability
in 2003, a year ahead of its previous forecast, adding that it reduced its
burn rate in an effort to reach profitability with the $79 million in cash it
has left.


The company said it added 225,000 new customers, bringing its customer base
to about 2.4 million people. Going forward, the company said it expects 2002
net sales of $200 million.

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