Peapod Adds New CEO as Losses Widen

Peapod, Inc. (Nasdaq: PPOD) reported higher sales but a wider loss for the first quarter Wednesday, as new investor Royal Ahold NV announced a new chief executive for the money-losing online grocer.

The Dutch supermarket chain said Marc van Gelder will serve as the online grocer’s new president and chief executive officer. Van Gelder comes to Peapod from Stop & Shop Supermarket Co., another U.S. chain owned by Ahold.

Van Gelder takes over the position left vacant when William Malloy abruptly resigned for health reasons earlier this year. The departure plunged the company into dire financial straits when a consortium of four companies backed out of a planned $120 million (US$) investment, leaving Peapod with only $3 million on hand.

Analysts Approve

Van Gelder’s appointment is “most likely a positive” for Peapod, said Barry Stouffer, an analyst at J.C. Bradford & Company. “Obviously he has bricks-and-mortar experience, which could be a real plus,” Stouffer told the E-Commerce Times, “as long as he’s capable of thinking outside the box when he has to.”

Royal Ahold also named three new directors to Peapod’s board: Michael Meurs, the Dutch chain’s chief financial officer; William J. Grize, president and chief executive officer of Stop & Shop; and Steve Odland, president and chief executive officer of Tops Supermarkets, another Royal Ahold subsidiary.

Sales Rise, Loss Widens

First quarter results indicated that Peapod still needs to find a profitable business model. The company reported that a 52 percent increase in orders drove sales to $24.9 million in the period, compared to $18.0 million in the year-earlier quarter.

Despite the surge, the company posted a wider loss before items of $8.6 million, or 47 cents per fully diluted share. After $4.1 million in expenses related to severance agreements and other costs, Peapod lost $12.7 million, or 70 cents a share, compared with $5.0 million, or 29 cents, in the first quarter of 1999.

The results were reported after the close of trading Wednesday. Peapod shares were down 1/8 in Thursday morning trading at 3 1/8.

Under Pressure

“Peapod performed better than ever during the first quarter while we were focused on securing long term financing for the company,” said Andrew Parkinson, chairman and co-founder of Peapod. “We delivered record revenues on a monthly, weekly and daily basis.”

J.C. Bradford’s Stouffer said the results were in line with his expectations. “Given the duress the company was under, I think that was an accomplishment,” he said.

Peapod has “a lot of balls in the air,” and it remains to be seen how well it will perform as it reassesses its strategy, said Stouffer.

The Royal Ahold transaction has yet to formally close. Peapod shareholders will vote on the plan at a meeting this summer, though principal shareholders and directors holding 30 percent of the company’s outstanding shares have agreed to vote in favor of it.

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