EToys Losses Soar With Sales
EToys Inc. boosted quarterly revenues more than 2,000%, even as mounting competition pressured the leading online toy retailer to increase its marketing expenses and chalk up substantial losses, it announced Thursday.
The Santa Monica-based company recorded $13.3 million in sales in its second quarter ending Sept. 30, up from $600,000 in sales during the same period last year. The firm also increased its customer base more than 30% to 611,000 accounts, and 42% of orders for the quarter came from repeat shoppers.
But EToys decided to pump up its marketing expenses by about one-third in advance of the critical holiday shopping season, said Chief Financial Officer Steve Schoch. That, along with investments in infrastructure to accommodate the expected holiday crush, kept the company in the red, said President and Chief Executive Toby Lenk.
Excluding nonrecurring items, EToys lost $32.1 million, or 27 cents a share, during the quarter. That was significantly more than the company’s $3.2-million loss a year ago, though slightly better than the 28-cents-a-share loss that Wall Street expected, according to a survey of analysts by earnings tracker IBES International.
Before the earnings figures were released, EToys shares fell $2.56 to close at $70.63 on Nasdaq.
Lenk said the company decided to boost its marketing budget because consumers are becoming more receptive to shopping for toys, books and other children’s products online. This will also be EToys’ first holiday season facing competition from e-commerce powerhouse Amazon.com and a new crop of rivals such as EHobbies, ToyTime.com and Walt Disney Co.-backed Toysmart.com.
“They’ve got to have visibility this Christmas,” said Mitchell Bartlett, senior analyst with Dain Rauscher Wessels in Minneapolis. “There’s a lot of competition out there. They are clearly the best-known and they have the greatest mind share right now, and they’ve got to cement that.”
At a Glance
Other technology-sector earnings, excluding one-time gains or charges unless noted:
* Electronic Data Systems Corp.’s third-quarter profit grew 18% to $257.3 million, or 51 cents a share, beating estimates by 2 cents, as a surge of new contracts and cost-cutting began to pay off for the computer services company. Sales rose 8.3% to $4.71 billion.
* Barnesandnoble.com Inc. reported a third-quarter loss of $21.9 million, or 15 cents a share, a much better performance than the 23-cents-a-share loss analysts forecast, according to First Call Corp., as revenue tripled. In the year-earlier period, the company lost $18.6 million, or 16 cents. Barnes & Noble Inc. and German publisher Bertelsmann each own 41% of Barnesandnoble.com. Revenue climbed to $49.1 million from $15.6 million. The company also forecast a full-year loss of 76 cents to 78 cents a share, better than the 86-cent loss forecast by analysts polled by First Call. The company said it expects sales this year of $188 million to $193 million, about $30 million more than earlier forecasts.
Barnesandnoble.com is focusing on controlling marketing costs, in part through cross promotions with Barnes & Noble bookstores and Bertelsmann’s book clubs and magazines. The retailer said that, although it is doubling marketing expenses in the fourth quarter to promote the site for the holiday shopping season, it expects those costs to decrease steadily thereafter.
* Go2Net Inc. reported pro forma earnings of $5.32 million, or 12 cents a share, excluding merger costs, in its fiscal fourth quarter, better than the 6 cents analysts estimated, according to First Call Corp. Including the merger costs, Go2Net said its loss widened to $10.7 million, or 37 cents a share, from a loss of $390,372, or 2 cents, a year ago. Revenue nearly tripled to $9.78 million from $2.49 million. The company, which is about 34%-owned by Microsoft Corp. co-founder Paul Allen, has bought seven smaller companies this year to broaden its product line and attract more users.
* Infoseek Corp. reported a loss of $21.5 million, or 34 cents a share, in its fiscal fourth quarter, excluding amortization and expenses from its merger with Walt Disney Co. Analysts were expecting a much larger loss of 42 cents, according to First Call. Revenue soared to $41.3 million from $19.2 million. Including the extraordinary expenses, the company had a net loss of $53 million, or 85 cents, for the period ending Oct. 2, from $2.6 million, or 8 cents, a year ago.
* Priceline.com Inc. reported a third-quarter loss before costs of $11.9 million, or 8 cents a share, 2 cents better than the average estimate of nine analysts polled by First Call Corp. The loss excludes costs for issuing warrants to suppliers and taxes on exercised options. Including those costs, the company’s loss widened to $102.2 million, or 71 cents a share, from $19.8 million, or 19 cents, a year earlier. Revenue climbed $152.2 million from $9.2 million.
* Storage Technology Corp. reported that its fiscal third-quarter profit plunged 91% and said it will cut up to 1,750 jobs, or 20% of its work force worldwide, in a move it said it expects will result in savings of $150 million a year. The data-storage product maker, which is exploring options that include a possible sale of the company, said profit from operations tumbled to $4.7 million, or 5 cents a share, from $50.6 million, or 48 cents, a year ago. Revenue edged up to $574 million from $571 million.
StorageTek cut about 500 jobs in April as it warned that demand for one of its products had been lower than expected and that it was having manufacturing problems with another. The company warned Thursday that it will miss earnings forecasts as customers delay purchases because of year 2000 issues. The latest results exclude a $32.4-million pretax charge for litigation expenses and the earlier job cuts.
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Bloomberg News contributed to this report.
