Los Angeles-based eToys notified about 700 of its approximately 1,000 employees that they would be laid off. Of the 700, about 380 were laid off today with the remaining 320 to be laid off by March 31.
eToys also said Thursday that it planned to shut down warehouse operations in City of Commerce, Calif., and Greensboro, N.C., in the next 30 to 60 days, consolidating those operations within eToys' existing distribution centers in Ontario, Calif., and Blairs, Va.
The company cautioned about layoffs last month, when it issued an earnings warning that revenues for its third fiscal quarter could be half of what analysts expected.
As a result of a revenue shortfall, eToys said, it will run out of cash around the end of March. It has begun exploring options to sell the company or its assets.
Calls to the company were not returned.
The toy sector is one of the most ravaged sectors in the Internet shakeout, suffering from paper-thin margins, grueling competition and investor disillusionment. Last spring, Disney-backed Toysmart.com and Los Angeles-based Toytime.com closed down.
In September, the nation's second largest toy merchant, Toys "R" Us, gave up running its own Web site and launched a joint toy-selling venture with Amazon.com.