Drugstore.com more than halved its net loss from a year ago in its fiscal 2010 fourth quarter as sales jumped 23% on an adjusted basis.


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Drugstore.com pares 4Q loss on robust sales

February 9th, 2011

BELLEVUE, Wash. – Drugstore.com more than halved its net loss from a year ago in its fiscal 2010 fourth quarter as sales jumped 23% on an adjusted basis.

However, the online health and beauty care retailer posted a higher net loss for its 2010 fiscal year, despite a 24% surge in revenue on an adjusted basis from fiscal 2009.

Drugstore.com said late Tuesday that sales for its 13-week fourth quarter ended Jan. 2 climbed to $123.6 million from $108.6 million in the prior-year period, which covered 14 weeks. On an unadjusted rate, not accounting for the different lengths of each period, revenue grew 14% in the 2010 fourth quarter, according to the company. 

The online retailer noted that during the quarter over-the-counter sales rose 24% to $106.2 million (15% unadjusted), with total beauty growth (including Salu Inc.), of 56% and Beauty.com growth of about 10% (45% and 2% unadjusted, respectively). Vision sales were up 14% to $17.4 million (6% unadjusted).

Meanwhile, average net sales per order in the fourth quarter increased to $66, and sales from repeat customers represented 69% of revenue, drugstore.com said. The retailer served about 533,000 new customers (excluding our strategic partnerships), up 15% (7% unadjusted) versus a year ago. Total orders (excluding partnerships) rose 17% to 1.7 million (9% unadjusted).

On the earnings side, drugstore.com turned in a net loss of $663,000, or 1 cent per share, in its 2010 fourth quarter, an improvement from a net loss of $1.6 million, or 2 cents per share, a year earlier. The result was in line with the financial analysts' forecast of a 1-cent-per-share loss, according to Thomson Financial.

The retailer reported $5 million of adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and $4.2 million of ongoing adjusted EBITDA in the fourth quarter of 2010, compared with $3.5 million of adjusted EBITDA and $4.2 million of ongoing adjusted EBITDA a year earlier. Adjusted EBITDA excludes the impact of stock-based compensation expenses, while ongoing adjusted EBITDA factors out the impact of expenses or income from discontinued operations, certain legal actions, settlements and related costs outside normal course of business, restructuring and severance costs, impairment charges, and other one-time charges and credits, the company said.

For the 2010 fiscal year, drugstore.com saw its revenue swell to $456.5 million from $375.6 million in fiscal 2009, up 21.5% on an unadjusted basis. The net loss for 2010 came in at nearly $3.6 million, or 3 cents per share, compared with just under $1.4 million, or 1 cent per share, in 2009. Analysts had projected a fiscal 2010 loss of 4 cents per share, Thomson Financial reported.

Adjusted EBITDA for fiscal 2010 totaled $20 million, versus $3.5 million a year earlier, while ongoing adjusted EBITDA was $16.3 million (ongoing adjusted EBITDA wasn't reported for fiscal 2009). Drugstore.com reported free cash flow of $4.4 million for 2010, compared with $1.4 million for 2009.

"We are pleased with our revenue growth in the fourth quarter in a highly competitive environment, as our holiday sales outpaced e-commerce growth for the quarter," drugstore.com chairman and chief executive officer Dawn Lepore said in a statement.

"While gross margins were impacted by product mix and holiday promotions, total orders excluding partnerships increased over 17%1 from the prior-year period," she explained. "For the quarter, we reported OTC sales up 24%, as adjusted, including a strong performance from SkinStore.com, which contributed to total beauty growth of 56%, as adjusted. Additionally, this quarter we accelerated the growth of our vision business, up 14% on a comparable basis over the prior-year period, and recently launched two branded sites, PearleVision Contacts and LensCraftersContacts, for Luxottica."

Lepore noted that drugstore.com is on track with its growth plan, which in part has entailed a stronger emphasis on beauty care and OTC health care.

"During 2010, we made important strategic progress, achieving our targets for OTC and total beauty growth and, even more importantly, laying the groundwork to deliver significant growth to both our top and bottom lines," she stated. "Through the sale of our pharmacy assets to BioScrip Pharmacy Services and the acquisition of SkinStore.com, we have refocused the business on our faster growing OTC and vision segments and have a clear plan of how to succeed in these markets. I am confident that the improvements we have made to our site, the extensive testing we conducted on new product offerings, and the important investments we made this year position us for a strong 2011."

Looking ahead, drugstore.com forecasts sales of $123 million to $126 million for its fiscal 2011 first quarter. It also projects a net loss of $700,000 to $2.5 million, adjusted EBITDA of $2.7 million to $4.3 million, and ongoing adjusted EBITDA of $2 million to $3.5 million.

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