DRUGSTORE.COM: Sales Growth, Investor Cash Brightens Retailer’s Future
Financially-troubled drugstore.com, the online health and beauty products retailer, got a double dose of good news this week, as the company reported greater second quarter earnings than analysts expected and a group of venture capitalists announced plans to inject $63 million into the company's coffers, the Seattle Times reports. Company sales skyrocketed 593% to $24.6 million, up from $3.5 million during the same quarter last year. The company's net loss, however, increased 176.6% to $54.7 million, compared to $19.7 million last year (Lee, 8/1). The company remains hampered by lackluster stock prices. Shares Monday fell to a 52-week low of $4.94, after climbing as high as $67.5 last August. Despite the stock price decline, company officials and analysts are optimistic about drugstore.com's future. Noting that repeat customers accounted for 59% of total orders and that the company added 232,000 new customers last quarter, drugstore.com spokesperson Judith McGarry said the company is "comfortable" with some analysts' predictions that it will turn a profit by 2003. Pointing to the new infusions of investor cash, McGarry said, "Over the past couple of months investors have approached us and they saw a lot of opportunity here." J.P. Morgan Securities analyst Tom Wyman agreed, saying "I don't think there is any way to look at this other than a terribly good sign. Any [internet] company that raises money now must have a lot going for it." Drugstore.com's association with Amazon.com and some large health care organizations also bode well, Wyman said, adding, "Most of the partnerships that drugstore.com has signed recently with WellPoint and CIGNA haven't even kicked in yet" (Cook, Seattle Post-Intelligencer, 8/1). However, some analysts are still concerned. Conan Laughlin, a Deutsche Banc Alex. Brown analyst, indicated that even with the $63 million from investors, drugstore.com will run out of cash by 2001 unless it cuts some of its spending (Krantz, USA Today, 8/2).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.