Pets.com Rolls Over, Prepares to Shut Down
Beleaguered online pet supply store Pets.com became fresh road kill on the information superhighway Tuesday, the first publicly traded “dot-com” to be shut down completely.
The retailer, which came to symbolize both the gold rush mentality of the dot-com sector and its swift decline, had seen its stock plummet in recent months amid disappointing sales, stiff competition and serious second thoughts about whether the pet supply business was suited to the Internet in the first place.
“I am deeply saddened by this event,” Pets.com Chief Executive Julie Wainwright said in a statement. “It is well known that this is a very, very difficult environment for business-to-consumer Internet companies.”
The company, known for its television commercials featuring an obnoxious sock-puppet dog, said it contacted more than 50 companies to seek cash or a buyer. None were willing to bail it out.
Pets.com fired 255 workers, or about 80% of its 320 employees. The rest will help it shut down, said spokesman John Cummings.
The company plans to sell its inventory, equipment and even its popular sock puppet to try to return “something” back to its shareholders, Wainwright said.
Pets.com joins a growing list of online retailers that started with high expectations, betting they could use the Web to reach customers. Instead, they quickly used up the cash raised in their initial public offerings as losses mounted.
Several publicly traded dot-coms are hovering near death, but Pets.com will be the first to close its business. The company’s Web site said it will stop taking orders on Thursday.
Florida-based Mortgage.com, an online provider of home loans, was the first publicly traded dot-com to announce its closure, but the company still is winding down its operations.
“Just because you can buy something over the Internet doesn’t mean that people will,” said George Zachary, a partner at venture capital firm Mohr, Davidow Ventures. “In the end, if your dog is hungry, it’s much easier to drive over to the store than to order something over the Web.”
Shares of San Francisco-based Pets.com fell 44 cents to finish at 22 cents in Nasdaq trading Tuesday. The stock has dropped 98% since its IPO in February. The company had accumulated losses of $146.6 million as of Sept. 30.
Pets.com, which has almost 570,000 customers, needed to raise at least $20 million to continue to operate, said analyst Tim Fogarty of Thomas Weisel Partners
Amazon.com Inc., the biggest Internet retailer, owned about 30% of Pets.com as of Oct. 31, said Amazon.com spokeswoman Patty Smith. The value of its stake at that date was “down to zero,” she said.
Pets.com launched during the dot-com heyday of 1999, when new retailers were appearing on a daily basis, mimicking the Amazon.com model in different merchandise categories.
The plan was to centralize the fragmented pet supply business with an Internet store selling everything from dog food to aquarium accessories and high-end bird cages. Venture capitalists raced to back the company and a group of competitors, giving them unprecedented amounts of funding.
Pets.com also was the only Internet pet supply retailer that managed to raise cash by selling shares to the public, shortly before the market euphoria for dot-coms evaporated.
Underlying its weak stock price were several business problems, including a reluctance among consumers to shop for their pets online, costly shipping charges for bulk items like kitty litter, and severe discounting to compete with rivals like Petsmart.com and Petopia.com.
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Dog Gone
Shares of Pets.com (ticker: IPET) once traded as high as $14, but plunged Tuesday to a recordow of 22 cents after the company said it would cease operations.
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Weekly closes and latest on Nasdaq for Pets.com
Tuesday: 22 cents, down 44 cents
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Source: Bloomberg News
