WebHouse Club, a licensee of name-your-price e-tailer Priceline.com (Nasdaq: PCLN), announced Thursday it will wind down its grocery and gasoline operations over the next 90 days.
Another Priceline licensee, Perfect Yardsale, Inc., has also ceased operations, Priceline said Thursday. The company announced it will review its operations in the fourth quarter to “maximize efficiencies” and remove the costs of doing business with WebHouse Club and Perfect Yardsale.
Priceline shares plunged Thursday, falling 3 9/16 (38 percent) to 5 13/16. The news is the latest in a string of negative publicity for Priceline. The company said last month that third-quarter revenue will fall short of what analysts had expected, due in part to slower sales of airline tickets.
Reports of consumer complaints, along with news of an investigation by the Connecticut Attorney General’s office, have contributed to a steady decline in the company’s shares.
Priceline said it will take a non-cash loss in the third quarter to cover a warrant it received from WebHouse Club in the 1999 fourth quarter, for which it recorded a $189 million (US$) non-cash gain.
Perfect Yardsale Business ‘Very Small’
Priceline said Perfect Yardsale, which had been operating for less than a year, had a “very small base of business.” The e-tailer said it received reimbursement of $4.3 million in the second quarter for providing services to the two licensees. Royalties from the two totaled $361,000 in the quarter.
Perfect Yardsale has also said it will meet its customer, employee and supplier obligations, Priceline said.
Focus on Customers
Priceline said it will continue to focus on its core businesses of travel, financial services, telecommunications and autos, while expanding into business-to-business (B2B) services and international markets.
The company also plans to “intensify” its efforts to satisfy customers and suppliers, revamping its Web site and customer feedback process. Details of the plan and the outlook for the fourth quarter will be provided by November 2nd, when the company reports third-quarter results.
Cash and short-term investments as of September 30th were about $125 million, Priceline said.
Cash Crunch for WebHouse
WebHouse found that the enormous capital required to set up a network of stores and distributors made its business plan difficult, said its founder, Jay Walker.
“In light of the weakness of the current capital market environment, the WebHouse Club executive team has reluctantly concluded that it was unlikely to be able to raise the additional capital the WebHouse Club would need next year to achieve the necessary scale and our goals of profitability,” Walker said.
WebHouse said customers who ordered gas and groceries will receive full refunds, along with extra money to cover the savings they were expecting by using the service instead of buying at the grocery store or the gas station. Customers will be notified of their refunds by e-mail, and all refunds will be processed by October 20th, the company said.
Customers who ordered within the last two weeks and would rather take delivery instead of receiving a refund may pick up their purchases through Saturday.
Cash reserves of about $50 million, along with about $20 million of working capital, are “more than sufficient” to satisfy obligations to customers, employees and suppliers, said WebHouse, which had more than 7,200 grocery stores and 6,000 gas stations participating in its program.