As EToys Posts Loss, It Looks to the Future

EToys Inc. will make money by early 2003, the company’s executives promised Thursday--if the unprofitable online retailer can hang on that long. At the moment, EToys has enough cash to get it only into next year.

The Santa Monica-based firm reported Thursday that its fiscal fourth-quarter sales surged fourfold. But losses grew by a similar degree, sending EToys’ already battered stock down 25% more.

In a morning conference call with analysts, company executives said they continue to look for additional financing, but provided no details of how much they’re seeking, or when they hope to obtain it. One analyst suggested that the company needs at least $200 million, an amount that will help it grow annual sales above $750 million, a level at which EToys believes it will be profitable.

For its fourth quarter ended March 31, EToys’ losses--excluding charges for deferred compensation and acquisitions--widened to $36.6 million, or 30 cents a share, from an $8.9-million loss, or 10 cents, a year earlier. EToys’ net loss totaled $48.4 million, or 40 cents, from a $13.3-million loss, or 15 cents, a year earlier.

Analysts had predicted a loss of 32 cents per share, according to First Call/Thompson Financial.

For the year, EToys’ red ink, excluding noncash charges, ballooned to $148.1 million, or $1.29 a share, from a $22.4-million deficit, or 27 cents a share, in the same year-earlier period. The firm’s net loss for the year came to $189.6 million, or $1.65 a share, compared with a $28.6-million shortfall, or 35 cents, last year. Annual sales grew to $151 million, up from $30 million a year earlier.

EToys’ shares fell $2.38 to close at $7.13 in Nasdaq trading Thursday, putting the stock’s year-to-date downturn at 73%. EToys’ shares sold for $20 in an initial stock offering a year ago, and hit a high of $86 in October.

Sean McGowan, an analyst with Gerard Klauer Mattison in New York, said investors should be pleased with the results--even if they are disappointed with the stock price--because they beat expectations.

“They have done a pretty good job of delivering results in line with expectations,” McGowan said. “But it’s pretty clear that losses will continue, and there are some fair questions as to where the money is going to come from to fund those losses.”

Chief Executive Toby Lenk and Chief Financial Officer Steven Schoch gave no answers to those questions, but said they were “encouraged” about fund-raising prospects.

EToys said its customer acquisition cost came to $24 per customer in its fourth quarter, a “significant decrease” from a year ago. Orders from repeat customers accounted for 49% of purchases.

The firm said its average order was $62 for its fiscal year, up slightly from a year ago, and that it served 1.9 million customers, up from 365,000. Lenk said those figures, combined with investments in warehouse space, international expansion and other technology, should be enough to convince investors of EToys’ long-term prospects.

At a Glance

Other technology sector earnings, excluding one-time gains or charges unless noted, include:

* About.com Inc. said it lost $7.5 million, or 44 cents a share, in the first quarter, compared with a loss of $11.9 million, or $1.37, a year earlier, excluding amortization and noncash compensation. Analysts expected a much larger loss of 58 cents. Revenue surged to $15.8 million from $2.37 million.

* Adaptec Inc. said fiscal fourth-quarter net income, after royalty payments and acquisition-related costs, fell 21% to $36.4 million, or 33 cents a share, as revenue grew 16% to $213.1 million. The company also said it will create a unit to focus on its software business, which had revenue of $31 million in the quarter.

* Electronic Data Systems Corp., the second-biggest U.S. computer services company, said first-quarter profit rose 25% to $226.4 million, or 47 cents a share, matching estimates, as new contracts to run computer systems for other companies jumped 50% to a record $4.5 billion. Sales grew 5% to $4.53 billion.

* HomeGrocer.com Inc. reported a loss of $35.3 million, or 28 cents a share, before costs for stock-based pay, matching analyst forecasts, as it continued to spend for its expansion. The company lost $3.7 million, or 31 cents, a year ago. Revenue rose elevenfold to $21.2 million from $1.8 million.

* Network Solutions Inc. said net income more than tripled to $14.7 million, or 20 cents a share, from $4.8 million, or 7 cents, a year earlier, as its registrations of Internet addresses more than doubled. The results beat estimates of 14 cents. Revenue more than doubled to $98.2 million from $38.1 million a year ago.

* NetZero Inc. reported a fiscal third-quarter loss of $22.2 million, or 24 cents a share, excluding amortization and stock-based compensation, a much-better performance than the 30-cent loss analysts expected. The company had a loss of $5.1 million, or 50 cents a share, a year ago. Revenue rose to $16.9 million from $781,000.

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Bloomberg News and Reuters were used in compiling this report.