Q3 sales at Drugstore.com rise 4% to $100.6 million

With a boost from beauty products, net sales at Drugstore.com Inc. rose 4.2% year-over-year to $100.6 million for the third quarter ended Oct. 1, as net loss narrowed by 64% to $2.6 million from $7.1 million, the e-retailer reported yesterday. Number of orders grew 4% to 1.3 million, as the number of active customers grew 11% to just under 2.2 million. Operating cash flow reached a record high in Q3 of $1.9 million.

“Our third quarter results reflect continued progress in 2006 and steady improvement of our business model, with record positive cash flows from operations," says Dawn Lepore, chairman and CEO. Drugstore.com is No. 32 in the Internet Retailer Top 500 Guide to Retail Web Sites.

The e-retailer’s Q3 core over-the-counter sales grew 17% to $45 million, as mail-order pharmacy sales declined 11% to $17.2 million. But while average OTC sales per order remained flat at $55, mail-order pharmacy sales per order rose 18% to a record high of $176. Sales per order for local store pick-up declined 6% to $104. Drugstore offers store pick-up through Rite Aid stores.

"As part of our strategic plan, we have focused on our OTC segment where gross margins increased by 320 basis points to 30.2% and contribution margin dollars increased 41% over the third quarter of 2005,” Lepore says. “Along with margin expansion, we continue to see healthy sales growth of over 17% in our core OTC business which was driven by the strong performance of a number of key categories – most notably our beauty business. Beauty.com reported 38% year-over-year growth, reflecting the addition of a number of high-end prestige brands.”

Drugstore expects to deliver accelerated growth in the fourth quarter “through a number of strategic initiatives and new partnerships,” Lepore adds, without offering further details.