Drugstore.com Eyes Profits in 2003

Buoyed by the strong preliminary showing of its fourth quarter results, Drugstore.com (Nasdaq: DSCM) said Monday that it expects to hit its profitability target in 2003, approximately one year earlier than the pure-play retailer had previously projected.

According to the Bellevue, Washington-based company, it issued the stepped-up timetable as a result of the roughly US$43 million accrued in sales during the most recent quarter, representing a 19 percent spike over the same period in 2000. Moreover, Drugstore.com said it gained 225,000 new customers in the fourth quarter of 2001, bringing its customer base to about 2.4 million.

On the cash flow front, the e-tailer said it managed to slash its cash use to $9.7 million, ending the year with $79 million in its pockets. The company said it expects the year-end figure to be "sufficient" to reach the breakeven point.

"As our preliminary fourth quarter results are showing, Drugstore.com is well-positioned to reach profitability earlier than originally forecasted," says Drugstore.com president and chief executive officer Kal Raman. "We have been able to increase our sales , increase our customer base and lower our cash use, while maintaining a commitment to both our customers and investors."

Back in Black

Despite the recent strides, the e-tailer's latest rosy revenue forecast did not include comment on the financial shortfall it is expected to have incurred in the fourth quarter of 2001. In October, the company estimated it would suffer a net loss of $19 million for the period.

In addition to reaching profitability in 2003, Drugstore.com forecasts that its earnings before interest, taxes, depreciation and amortization will remain positive for the entire fiscal year ending December 2003.

Raman is scheduled to present the company's latest estimates at an Internet, software and networking conference sponsored by Morgan Stanley in Scottsdale, Arizona on Monday afternoon.

Investors seemed pleased with the forecast, sending the company's stock up $0.34 to $2.55 in morning trading.

Making Strides

Monday's announcement was the latest dose of good news for the online pharmacy and health and beauty product retailer, which has struggled to capture market share in one of the most trying e-commerce sectors.

Over the recently completed holiday season, Drugstore.com said it scored record revenues with sales running more than 30 percent higher in 2001 compared to the previous holiday.

For several weeks running, Drugstore.com also appeared as one of the fastest-gaining online commerce sites in terms of holiday shopping traffic, according to weekly tracking reports by Jupiter Media Metrix.

Drugstore.com is set to issue more detailed results for 2001 in its fourth quarter earnings release on January 28th.