August 14, 2006, 12:00 AM

Q2 revenue at eCost.com falls 30% to $28.8 million

Although second-quarter total revenue at parent company and fulfillment services provider PFSWeb climbed 28.7% year-to-year, discount retailer eCost.com has struggled with services and credit card fraud, the company said today.

Paul Demery

Managing Editor, B2B E-commerce

Although second-quarter total revenue at parent company and fulfillment services provider PFSWeb climbed 28.7% year-to-year, eCost.com has struggled with services and credit card fraud, the company said today.

ECost.com, No. 58 in the Internet Retailer Top 500 Guide to Retail Web Sites, sells surplus merchandise from several manufacturers including Apple, Canon, HP, Seiko and Sony. PFSWeb acquired it in February 2006.

ECost.com’s revenue was $28.8 million for the second quarter ended June 30, down 29.9% from $41.1 million in the year-ago period. That resulted in a net loss of $4.3 million, bringing total net loss for PFSWeb for the second quarter to $3.2 million on total revenue of $109.3 million, compared to year-ago net loss of $500,000 on revenue of $84.9 million, the company says.

"We have experienced challenges in achieving our plans to improve the service and financial performance of the eCOST.com business segment since the merger,” says PFSWeb CEO Mark Layton. “The time and effort needed to meet certain quality and service targets for eCOST.com has been greater than we expected and has also contributed to lower than targeted revenue and gross profit margins during the June 2006 quarter and this is expected to continue into the September 2006 quarter.

“In addition, we experienced a significantly higher than normal level of fraudulent credit card activity in June and July 2006, due in part to problems experienced in the ERP systems conversion. We believe that these system issues have now been resolved.”

Layton adds: "We are making progress in the turnaround of eCOST.com and plan to complete our integration in the fall of 2006, in time for the holiday season. Over the past several months, we have made significant improvements in eCOST`s infrastructure, which we believe will increase operating efficiencies and enhance long-term performance. As previously discussed, we anticipate our merger with eCOST.com to produce total cost savings of approximately $4-$5 million on an annual basis once our integration efforts are fully implemented."

Among the changes made at eCost.com include the move of its headquarters to El Segundo, CA, which is expected to save $20,000 per month, PFSWeb says.

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