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Drugstore.com, Buy.com report hefty losses, but top estimates

E-tailers Drugstore.com (Nasdaq: DSCM) and Buy.com (Nasdaq: BUYX) both reported hefty first quarter losses Monday, but topped Wall Street estimates.

In both earnings releases, Drugstore.com and Buy.com touted gross profits, which is sales minus costs of sales. A gross profit means that a company sold its wares for more than it paid for them. Many e-tailers such as Egghead.com (Nasdaq: EGGS) and Amazon.com (Nasdaq: AMZN) have gross profits. Wall Street typically focuses on operating losses and net losses, which include sales and marketing and administrative costs.

Drugstore.com reported a first quarter loss, before amortization of intangible assets and stock-based compensation, of $38.9 million, or 86 cents a share. Wall Street expected a loss of $1.02 a share, excluding goodwill, according to First Call Corp., an earnings tracking firm. Net loss including charges was $49.5 million, or $1.09 a share.

Drugstore.com said first quarter sales were $22.7 million, up 23 percent from the fourth quarter. Drugstore.com added 295,000 new customers in the quarter, and now has more than 1 million customers. Repeat orders accounted for half of sales.

In the quarter, Drugstore.com raised $138 million via a secondary stock offering and private placement with Amazon, which is now promoting the online drugstore on its home page.

Buy.com checked in with a first quarter net loss of $32.8 million, or 28 cents a share. The results topped First Call consensus estimates by a penny. Sales were $207.6 million, up 92 percent from $107.9 million a year ago.

In Buy.com's case, the chirping about gross profits may be warranted -- before going public in February the e-tailer had a habit of selling goods for less than it paid for them. Gross margins were 4.3 percent in the first quarter, still razor thin, but a big improvement on the negative 0.8 percent reported in the fourth quarter.

The company also said advertising accounted for 4.7 percent of sales in the first quarter, up from 3.6 percent in the fourth quarter. Among other key metrics, Buy.com said average order size was $188, repeat orders accounted for 63 percent of sales and hardware and software sales accounted for 89 percent of revenue.

Buy.com added 449,500 customers in the quarter, down from the 616,900 added in the fourth quarter.
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