Retailution: Egghead, A Chicken & Web Story?

When the Beatles sang about “revolution number nine” perhaps they were
foreshadowing the explosive and plainly true emerging world of
Internet-based commerce. We dub it “retail-ution.”

Don’t believe the hype, it’s way under. Or at least that’s where the bets
are being placed today.

Anecdotal evidence comes via a story that ran on the Associated Press
today–British Airways moves to close its U.S. ticket offices and be purely
an electronic medium based for tickets sales: Internet, phone, or indy travel

Bricks and mortar just ain’t worth the cement. Of course,
(NASDAQ:AMZN) proved that a couple years ago, and we’d say it still is doing
that as Barnes and Noble (NYSE:BKS) tries to write its own knockoff of
Amazon’s tale.

British Airway’s move follows the software outfit Egghead Software
(NASDAQ:EGGS), which will shut its 80 stores and be solely Web and phone

Because of bricks and mortar and the threat from Web sales by rivals, EGGS
recorded a pre-tax net loss of $6.6 million, or 29 cents per share for its
fiscal third quarter ending December 27. This compares with the net income of
$1.5 million or 9 cents per share for the comparable period last

Consolidated sales from continuing operations for the third quarter
of fiscal 1998 were $99.1 million, a decrease of 12.4%. However, Internet
sales of $11.8 million represented an increase of $9.3 million from the
prior year comparable period. Comparable store sales decreased 14 percent
for the third quarter of fiscal 1998.

The move should not be undescored, however. EGGS nine-month revenue to
December 27 was $218.6 million. Yes, it was down 19.6% vs. the same period
last year but still $200 million revenue. Now EGGS is betting on its
Internet effort–just $11.8 million revenue worth.

Mecklermedia forecasts that sales of software products over the Internet
may reach $14 billion in just two years, 7x more than currently. Software
may be delivered packaged via express shipment or downloaded directly over
the Web.

Will investors buy this package from EGGS?

The current trend on Wall Street is to cut Web-based retailers much slack
as they “build rand” yet post losses. As CNET’s Halsey Minor said at our
Internet Finance
Symposium at Fall Internet World: “We don’t want to post a profit. A dollar
spent today on marketing is worth ten times that much next year.”

So, tell us what you think. What do you think of Egghead’s move?
Eggheaded? (click “stocktalk” below to send an e-mail with your

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