Theft trims eToys' margins by 4 percent

About $270,000 worth of inventory was stolen from the online toy retailer's distribution center, the company says.

Theft of inventory at eToys' distribution center sliced 4 percent off gross margins in the quarter ended March 31, the online toy retailer said today in an amendment to its filing for an initial public offering.

The Santa Monica, California-based company, which filed for the second time for an IPO after acquiring BabyCenter last month, said someone stole $270,000 in merchandise from its warehouse in Commerce, California, near Los Angeles. The theft decreased eToys' quarterly gross margins by 4 percent and annual margins by 1 percent.

eToys said its gross margins were 19 percent for the fiscal year ended March 31, 1999.

"We have begun undertaking a number of measures designed to address inventory theft, including the installation of enhanced security measures at our distribution facility," the company said in the filing.

eToys does expect to significantly expand its distribution capabilities through a deal signed last month with Fingerhut Business Services. Fingerhut operates a distribution center in Utah.

Also in the filing, eToys reduced the amount of goodwill it plans to amortize over the next five years as a result of the BabyCenter acquisition from $204 million to $180.7 million.