Buy.com cuts 2001 sales goal, aims for profits

Buy.com (Nasdaq: BUYX) fell short of analyst estimates in the fourth quarter and drastically cut its sales target for 2001 as the company focuses on profits.

After market close Thursday, the Internet retailer reported a fourth quarter loss of $27.4 million, or 20 cents per share, excluding amortization and equity losses from joint ventures. Four analysts surveyed by earnings tracking firm First Call predicted a loss of 19 cents per share for Buy.com's quarter ended Dec. 31.

Buy.com predicted 2001 sales of $580 million to $600 million, or 43 to 45 percent below the First Call forecast of $1.05 billion for this year.

Stock market downturns for online retailers forced Buy.com to take measures to speed up profitability, said Greg Hawkins, chairman and CEO.

"One implication of these changes is the tradeoff in reduced anticipated revenue as we tighten our retail focus, positively migrate gross margins, and reduce operating expenses," Hawkins said. "While other players in the e-tailing world are resorting to distribution center shut downs, the strength of buy.com's virtual operating model ... is now being employed to effectively reset our model without exposure to large infrastructure reductions and write-offs."

Gross margin will be 12 to 13 percent for 2001, with an annual loss of less than 5 percent, said the company, which expects positive operating cash flow in the fourth quarter of this year.

Buy.com will focus on its U.S. business, Hawkins said. The company signed a deal to sell its British operations to a European firm, and plans to close its Canadian unit on Friday. Buy.com also has cut 25 jobs.

The company will concentrate on computers, software, consumer electronics, wireless and clearance products. Buy.com plans to devote most of its available 2001 marketing budget -- which will be reduced -- to online activities.

First quarter sales will range between $132 million and $137 million, the company said. Executives expect gross margins of 10.5 percent to 11.5 percent for the March quarter, compared to 6.8 percent in the December period.

Fourth quarter revenue fell 2 percent year-over-year to $196.7 million, or about 11 percent below the lone revenue estimate submitted to First Call. "The fourth quarter was an intensely competitive environment with general softness in th technology sector," Hawkins said. "This resulted in a revenue performance that did not meet expectations."

For the full 2000, Buy.com reported a loss of $97.9 million, or 76 cents per share, on revenue of $787.7 million.

Shares of Buy.com fell 3 cents to 91 cents in Thursday's regular trading ahead of the fourth quarter report.>