Sales at Drugstore.com in 2000 tripled over 1999; Drugstore lays off 125 to cut costs

Fourth quarter sales at Drugstore.com, an Internet retailer of health, beauty, wellness and pharmacy products, were $36.2 million, representing a more than 95 percent increase over the fourth quarter of 1999. In the fourth quarter, drugstore.com reported a gross profit of $5.2 million, or 14.5% of net sales as compared to a loss of $3 million or negative 16.3% of net sales in the fourth quarter of 1999. Drugstore.com added 257,000 new customers in the fourth quarter, while orders from repeat customers were 62% of total orders in the quarter. Average revenue per order was $54, up from $38 in the fourth quarter of 1999. The company reported a pro forma net loss for the fourth quarter (excluding amortization of intangible assets and amortization of stock-based compensation) of $28.6 million, or $.45 per share.

Net sales for fiscal year 2000, which ended Dec. 31, were $110 million, up more than 215% over fiscal year 1999. Pharmaceutical product sales were 44% of net sales in the fourth quarter. For fiscal year 2000, drugstore.com reported a gross profit of $9.3 million, or 8.4% of net sales, as compared to a loss of $8.5 million or negative 24.3% of net sales in fiscal year 1999. The company reported a pro forma net loss for 2000 (excluding amortization of intangible assets and amortization of stock-based compensation) of $143.1 million, or $2.64 per share.

Drugstore.com ended fourth quarter 2000 with approximately $130 million in cash, cash equivalents, and marketable securities. Total cash used for fourth quarter 2000 was $17.2 million, a significant improvement over prior periods.

"Despite all the doom and gloom, our increases in revenues and gross margins during the fourth quarter confirm the company's ability to earn customer confidence and loyalty," said drugstore.com president and CEO Peter Neupert. "As the undisputed online leader in this huge and growing market, drugstore.com is well positioned for high-quality, sustainable growth."

Drugstore.com also announced on Friday the lay-off of 125 employees. The cuts came in all areas but were primarily in administration and overhead. The lay-offs were effective immediately.

During the fourth quarter, Drugstore.com shipped most orders within 24 hours and answered more than 95% of all incoming customer phone calls within 30 seconds. For this year, Drugstore.com says it expects to reduce overall planned operating expenses by $20 million while keeping its net sales targets unchanged at $135 million to $145 million. Losses before interest, taxes and amortization will range from $83 million to $88 million. The company anticipates 2001 gross margins will continue to improve, ranging from 14% to 16%. The $20 million cost reductions will come primarily through the reduction of marketing and administrative expenses, and an approximate 20% reduction in headcount. As a result of these changes and the improving fundamentals, the company believes it has enough cash to last until it reaches operating cash flow break-even. It still expects to reach this break-even level in 2004 but believes that it can do so at a smaller net sales base; i.e., between $450 million and $500 million in net sales.