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Online toy retailer eToys Inc. has filed for an IPO that could raise as much as $115 million (US$), though in its S-1 SEC filing, the company didn’t specify the number of shares it plans to sell, or an offer price. eToys was the fifth most-visited site on the Internet in December, according to MediaMetrix, attracting some 3.9 million visitors. In its S-1 filing, eToys claimed to have served 320,000 customers.
In addition to toys, the well-known online store sells video games, videos, software and music for children. In its filing, eToys said it's focused on providing convenience, information such as reviews and recommendations, and personalized services such as birthday reminders and "wish lists."
The company indicates that it is keenly aware of competition from established brick-and-mortar toy retailers such as Toys R Us, Wal-Mart and FAO Schwarz, all of which have online operations. Additional competition comes from market-leading toy makers such as Mattel and Hasbro, which also sell on the web, and from a wide range of other Internet shopping sites.
How the Money Will Be Used
Proceeds from the IPO will be used for advertising and marketing to build brand awareness, and to increase eToys' product offerings. It currently offers some 8,500 items, representing upwards of 700 brands. The company also said it plans to add more services to its site and to beef up its technology in the areas of inventory management, transaction processing, order fulfillment and network infrastructure.
The firm, headquartered in Santa Monica, California, plans to open a second fulfillment facility somewhere outside of greater Los Angeles because its current 60,000 square-foot operation is "inadequate" to handle a significant increase in business. The company also revealed that it's having difficulty integrating a new financial and accounting system with its other information systems.
Losses Total $17.5M, With More to Come
Between its online launch in October 1997 and the end of last year, eToys has accumulated a total deficit of $17.5 million. The company said it expects its losses will increase significantly as it continues putting more money into its brand and Web site.
For the first nine months of FY 1999, ended December 31, eToys had a loss of $15.3 million, $0.58 per share, on sales of $23.9 million, with $22.9 million of those sales made during the holiday shopping season. For the comparable period a year ago, eToys had a loss of $1.1 million, $0.14 per share, on sales of $530,000. Its loss for FY 1998 totaled $2.3 million.
The company has been growing quickly, increasing its headcount from 13 people to 235 during 1998. It was founded by Edward C. Lenk, described in the S-1 filing as "Uncle of the Board" as well as president and CEO. Prior to founding eToys, he was director of strategic planning at The Walt Disney Company, where he was responsible for strategic planning and new business development of Worldwide Attractions and Resorts. He is an alumnus of Bowdoin College and the Harvard Business School.
Goldman, Sachs will head the underwriter group that also includes BancBoston Robertson Stephens, Donaldson, Lufkin & Jenrette Securities and Merrill Lynch. Its proposed trading symbol on Nasdaq is ETYS.
