eToys Reports Record Sales, Heavy Losses

Online toy retailer eToys, Inc. announced Thursday that net sales for its fiscal year ended March 31st reached $151 million (US$), five times higher than earnings of $30 million one year earlier. However, the company also reported a loss of $148.1 million for the fiscal year, or $1.29 per share, compared with a loss of $22.4 million and 27 cents per share a year ago.

Q4 net sales were $23 million, almost a fourfold increase over net sales of $6.1 million one year earlier. A fourth quarter loss of $36.6 million, or 30 cents per share, compares with $8.9 million or 10 cents per share in last year’s fourth quarter.

Significantly, 49 percent of orders placed in the fourth quarter came from repeat customers, while cumulative customer accounts over the one-year period grew from 365,000 to 1.9 million.

Still Struggling To Survive

Although eToys was the second-most-visited Web site during the holiday season, its stock price has been unstable for a number of reasons.

Chief among them was the company’s emergency spending to deliver toys for free to customers who were growing impatient waiting for late orders.

Additionally, an unexpected number of online competitors and higher than anticipated order fulfillment costs have compounded the company’s problems.

Now, despite surpassing its primary competitors in customer counts, average order size and revenue, eToys is finding that investors are still wary. However, some analysts believe that the much-publicized potential shakeout of online retailers could work to eToys’ advantage if legions of smaller competitors close up shop.

New Strategies

eToys is attempting to battle back by mounting an aggressive summer marketing campaign aimed at persuading customers to purchase summertime products.

The campaign will include heavy use of television and magazine advertising, beginning next week, as well as a new section on its Web site devoted to 1000 summer products. The Web section debuted on Tuesday.

The new strategy is indicative of the company’s goal to encourage sales throughout the calendar year, rather than relying on the holiday season to deliver the vast majority — last year 70 percent — of its total revenue.

In addition to infusing the company with much needed revenue in traditionally slower seasons, the move is intended to keep the company’s name in front of the public year-round. Once that end is accomplished, eToys may also begin selling its own brand of toys.

Future plans also call for the addition of advertising to its Web site.

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