EToys Warns of Weaker-Than-Expected Sales

EToys Inc. warned that its fiscal third-quarter sales would fall short of expectations due to weaker-than-expected holiday buying and said it was exploring a merger, asset sale or other restructuring. The company, which said it plans to announce layoffs in January, has hired investment banking firm Goldman Sachs to find a way to keep its doors open. It now has enough money to continue operations through the end of March. The Santa Monica-based company slashed its quarterly net sales forecast by almost one-half to between $120 million and $130 million, from its previous estimate of $210 million to $240 million. The company also said its operating loss will be 55% to 65% of revenue, rather than the 22% to 28% previously projected. If the new estimates hold, the quarter’s performance would still be better than the 59-cent loss posted a year ago. But the company said that unless it raises additional capital or realizes significant savings from layoffs and other cost-cutting measures, it may be unable to stay in business. Shares in EToys closed off 3 cents at $1.03 on Nasdaq, before the news was announced.