Drugstore.com Posts Smaller-Than-Expected Loss, Sets Long Term Fiscal Goals
Although Drugstore.com's stock dropped 17% Monday, after reporting fourth quarter losses that were below what analysts predicted, the company says its strategy of "controlling costs" will allow it to break even by 2004, the Seattle Times reports. The company's net losses were $43.2 million in the fourth quarter, while net sales were $36.2 million -- nearly double the $18.5 million from the same quarter last year (Dudley, Seattle Times, 1/23). Drugstore.com is projecting a loss of $83 million to $88 million for this fiscal year (Berck, New York Times, 1/23). To break even by 2004 and distinguish itself from dot-com "flame outs," the company is implementing a "long-term regimen of fiscal discipline" with "concrete sales targets." Last week, the company laid off 125 employees, a move that is expected to save $20 million this year. CEO Peter Neupert said the stock price, which is currently trading around $2 a share, does not reflect his company's "worth." He said: "We are differently positioned. I don't think the market reflects that. I can't influence perceptions. I can influence our results, so I stay incredibly focused."
About 44% of Drugstore.com's sales come from prescription drugs, as many customers are chronically ill. Neupert expects drug sales eventually to account for 50% of the firm's sales. To boost sales, the company is targeting seniors, who are "going online faster than any other group." Still, analysts say online prescriptions are a "tough sell" because they require faxing or mailing in prescriptions and waiting for delivery. So Drugstore.com has developed a partnership with Rite Aid Corp., which allows customers to order online and pick up their drugs at the store. In addition, the online retailer offers other services "not normally available" at traditional pharmacies, such as comparison shopping for brand-name versus generic drugs and email notification for refill reminders and product recalls. Neupert added: "We can just make it easier. You have access to information and convenience that you can't get in your corner drugstore. You can shop for prescriptions. You can't wander around the back of a pharmacy and compare drugs" (Hillis, Reuters, 1/24).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.