eToys Inc. (Nasdaq: ETYS) shares jumped Wednesday on a three-year, $18 million marketing agreement with America Online, Inc. (NYSE: AOL).
Shares in eToys, a retailer of children's products, jumped up 2 1/8 to 32 5/8 in initial trading Wednesday, a nice gain, but well below a 52-week high of 85. Shares rocketed in the company's public debut, but plunked down after Amazon Inc. (Nasdaq: AMZN) announced plans to open an online toy store. EToys also faces challenges from traditional retailers such as Toys "R" Us, and Zany Brainy, Inc. (Nasdaq: ZANY), a specialty retailer of toys and multimedia products.
The new agreement gives eToys as premier retailer, or "anchor tenant" status to sell products toys and other children's products across several AOL, Inc. brands. The deal also provides eToys with promotion in other categories such as the AOL Families Channel, AOL.COM, Netscape Netcenter, and CompuServe. The pact is an expansion of a 1997 marketing agreement between AOL and Santa Monica-based eToys.
eToys announced a loss of 17 cents a share losses for its first quarter as a publicly traded company on July 27. Net sales for its first fiscal quarter as a were $8 million, an increase of 1,990 percnet over net sales of $400,000 for the same period in the prior year. Net sales grew 32 percent over the prior quarter. First Call is predicting a loss of 29 cents a share for the company's second quarter ending in September.