Sales grew by double digits in the first quarter at drugstore.com, but costs related to the online retailer's acquisition by Walgreen Co. contributed to a net loss in the period.


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Drugstore.com posts 1Q loss despite robust sales

April 28th, 2011

BELLEVUE, Wash. – Sales grew by double digits in the first quarter at drugstore.com, but costs related to the online retailer's acquisition by Walgreen Co. contributed to a net loss in the period.

Drugstore.com said Thursday that sales for the first quarter ended April 3 rose 16% to a record $128.4 million, driven by strong growth in over-the-counter and vision sales.

OTC sales likewise grew 16% to $107.5 million, with total beauty revenue growth of 29% and sales on the retailer's Beauty.com sister site rising about 8%. Vision sales were up 17% to $21 million.

The company also noted that average net sales per order increased to $65, while net sales from repeat customers accounted for 71% of net sales. In addition, total orders grew by 14% to 1.8 million, and the online retailer served about 538,000 new customers (excluding our strategic partnerships), representing a gain of 13% versus a year earlier.

Drugstore.com said that during the first quarter, it incurred transaction expenses of $2.2 million associated with its sale to Walgreens, which is slated to closed by the end of June. Including those costs, drugstore.com recorded a net loss of $3.2 million, or 3 cents per share, compared with a net loss of $2.6 million, or 3 cents per share, in the year-ago period.

The net loss exceeded financial analysts' average per-share estimate of a 1 cent net loss for the first quarter, according to Thomson Financial. Analyst projections ranged from a low of a 1-cent-per-share loss to a high of 0 cents.

Also in the first quarter, drugstore.com reported $1.9 million of adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and $3.1 million of ongoing adjusted EBITDA, compared with $2.5 million of adjusted EBITDA and $4.4 million of ongoing adjusted EBITDA a year earlier.

"In the first quarter, we delivered strong OTC and vision growth of 16% and 17%, respectively," Dawn Lepore, drugstore.com chairman and chief executive officer, said in a statement. "With our continued investment in our marketing initiatives, we acquired approximately 540,000 new customers this quarter, up 13% over the first quarter of 2010. During the quarter, we made strategic progress on a number of fronts, including implementing our new site navigation, launching three branded sites for Luxottica and signing an agreement with GSI Commerce for our West Coast distribution center capability.

"Looking ahead, while gross margins are still being impacted by the more competitive e-commerce environment, we remain focused on driving growth, leveraging our platform and reducing our overall cost structure," Lepore added. 

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