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Drugstore.com narrows deficit significantly. (Business).

BELLEVUE, Wash. -- Drugstore.com narrowed its deficit considerably during this year's third quarter behind robust sales growth, strengthened margins and improved expense ratios.

The on-line purveyor of prescription medications and other health and beauty aids products reported a net loss of $26.2 million over the three months ended September 30, versus a deficit of $45.7 million in the third quarter of 2000. Backing out a $7.5 million extraordinary gain on the rene-gotiation of an equity guarantee, the company lost $33.7 million in the 2001 period.

Sales grew 32.1% to $35 million from $26.5 million.

On an operating basis the retailer registered a $34.5 million loss, compared with $48.1 million in red ink the preceding year. Gross margins jumped 7.9 points to 17.1%, while the operating expense ratio plummeted to 63.5% of sales from 144% in the third quarter of 2000. This year's operating loss also included $7.67 million in noncash expenses, $9.2 million for the amortization of intangible assets and $1.42 million for the amortization of stock-based compensation.

In the 2000 quarter the company recorded $9.69 million for the amortization of intangible assets and $2.71 million for the amortization of stock-based compensation.

Bottom-line results also reflect a 64.4% decline in interest income to $847,000.

The company's pro forma net loss -- excluding other noncash expenses, amortization of intangible assets, amortization of stock-based compensation and the extraordinary gain -- to- taled $15.4 million, compared with $33.3 million in the 2000 quarter.

During the nine months drugstore.com's net loss amounted to $99.9 million, down from $149.8 million in the 2000 span. Results in the 2001 period reflect the extraordinary third quarter gain, partially offset by a $4.12 million item for the cumulative effect of an accounting change. Backing out those items, the on-line retailer lost $103.3 million thus far this year.

Year-to-date volume grew 37.9% to $101.8 million from $73.8 million.

The company's operating loss for the nine months fell to $107.1 million from $156.1 million. Gross margins expanded to 16.2% from 5.5% a year ago, while the operating expense ratio was whittled to 72.9% of sales from 169% in the year-earlier period. Operating losses for the 2001 span also included $15 million in noncash expenses, $28.6 million for the amortization of intangible assets (versus $25.1 million in 2000) and $5.87 million for the amortization of stock-based compensation (versus $10.3 million a year ago).

Interest income, meanwhile declined 39.9% to $3.78 million from $6.29 million.

Drugstore.com's pro forma net loss for the nine months was $53.9 million, compared with $114.5 million a year ago.

Looking to the fourth quarter management expects sales to be in the $40 million-to-$41 million range, with gross margins at 17% to 17.5%. The company pro forma net loss is anticipated to be about $19 million.

After adding 152,000 customers in the third quarter drug-store.com hopes to bring an other 210,000 to 220,000 on board in the fourth period. All told, the customer base swelled to 2.16 million by the end of the third quarter.

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Title Annotation:3rd-quarter earnings report
Comment:Drugstore.com narrows deficit significantly. (Business).(3rd-quarter earnings report)
Publication:Chain Drug Review
Article Type:Brief Article
Geographic Code:1USA
Date:Nov 19, 2001
Words:545
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