April 1, 2009, 12:00 AM

Sagging sales to businesses drag down results at eCost.com

The online retailer of computers and consumer electronics reported a revenue drop of 4.1% for the year, despite a 13% increase in sales to consumers, as business customers cut back purchases.

Online discount retailer eCost.com reported a 4.1% drop in 2008 revenue, despite a 13% increase in sales to consumers, as business customers cut back their purchases. The online retailer is expanding into product categories beyond computers and consumer electronics in hopes of expanding its reach to more consumers.

The results for eCost.com, No. 119 in the Internet Retailer Top 500 Guide, were included in the financial results of its parent company, PFSweb Inc., which also provides outsourced e-commerce management and fulfillment services for retailers. The company reported total revenue of $451.8 million for the year, up 1.1% from $446.8 million in 2007.

Revenue from eCost.com was $99.8 million for 2008, compared with $104.1 million for the prior year. The online retailer’s fourth quarter sales dropped 11.9% to $25.1 million from $28.5 million in the prior-year quarter, despite a strong showing in business-to-consumer sales.

“The b2c business increased 13% as compared to the prior year, and represented 70% of eCost.com’s total fourth quarter revenue,” says chairman and CEO Mark Layton. “We remain focused on the b2c segment as we believe it is more financially attractive to our business and generally provides higher gross margins. As part of this focus, we have increased the number of targeted consumer demographic segments we service and dramatically increased the number of consumer products listed on the site.” The site now offers 200,000 products, including a wider selection of housewares, home furnishings and sporting goods and apparel.

Adjusted EBITDA for eCost.com for the year was a loss of $1.8 million, compared with a loss of $2.2 million in 2007. EBITDA stands for earnings before interest, taxes, depreciation and amortization and is a standard measure of a company’s operating income.

Revenue in the Service Fee unit, which includes e-commerce outsourcing as well as other revenue, grew 15% in 2008 to $85.4 million from $74.5 million. The company attributed that growth to the first fruits of its end-to-end e-commerce outsourcing service introduced early in 2008. The first client for that service, Roots.com, No. 485 in the Internet Retailer Top 500 Guide, went live in August. Another site went live in 2008 as part of a master agreement with an unnamed luxury goods retailer, which plans to launch two more of its brands under this agreement in 2009, PFSweb says.

The company took a writedown of $16.25 million in the fourth quarter to account for a sharp drop in its stock market value-the company’s stock price declined 87% in the second half of 2008 amid the stock market meltdown. Excluding that impairment charge, the company’s net income for the fourth quarter was $100,000, down from net income of $700,000 in the same period the prior year. For the year, the company’s net income without the writedown was $600,000, compared with a net loss of $1.4 million in 2007.

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