A Silver Lining in Peapod’s Clouds?

Dancing in the aisles they’re not, but Chicago-based Internet grocery
operation Peapod said it attained operating profitability for
March in its Chicago market.

The bad news was that the company also reported a first quarter net loss of
$15.5 million or 86 cents per share, compared to a net loss of $12.7 million
or 70 cents per share for the year-ago quarter.

Revenues for the first quarter were $24.9 million compared with $24.8 million
a year ago.

The company said it is also making “considerable progress” toward reaching
operating profitability in the Long Island and Connecticut markets, where it
operates in strategic partnership with the Ahold supermarket chain Stop &
Shop. Ahold, a leading international food provider, owns a 58 percent stake
in Peapod.

“We are confident that Peapod can become the first Internet grocer to build a
sustainable, profitable business,” said Marc van Gelder, Peapod president and
CEO. “We expect current positive trends to strengthen in subsequent quarters
and we are focused on achieving operating profitability in our current
markets before we expand into new markets.”

Peapod stock closed Monday at $1.36, up 21 cents. Its 52-week high is $3.87;
the low is 68 cents. The company has never had a profitable quarter since
going public in 1997.

When determining operating profitability in a given market, Peapod said it
includes corporate expense allocations for its centralized call and billing
center, transaction fees and telecom expenses, while excluding marketing
costs, sales incentives (now netted against revenue) and other corporate

Peapod has exited five markets since September 2000: Austin, Houston and
Dallas, Columbus, Ohio and San Francisco. The company currently serves
markets in Boston, Connecticut, Long Island, Washington, D.C. and Chicago.

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