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.

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