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KBkids.com fires 30 percent of work force

The online toy retailer joins the ranks of struggling e-tailers, firing about 30 percent of its staff.

KBkids.com joined the ranks of struggling e-tailers today, firing about 30 percent of its staff.

The online toy retailer had filed for an initial public offering in January, then it placed the share sale on hold last month. Today it fired about 45 of its 145 workers, chief financial officer Michael Wagner said.

Wagner said the layoffs were part of a deal for continued funding from Consolidated Stores, which owns KB Toys and about 80 percent of Denver-based KBkids.

"(The layoffs) were done basically to get in line with our funding for the next 12 months," he said. "We are attempting to streamline the business much more."

The laid off employees worked in several different departments and included some executives, Wagner said. The marketing department was hardest hit. He declined to break out numbers or percentages of people who left in each department.

Consolidated Stores will continue to fund KBkids, Wagner added. As part of the deal for continued funding, KB Toys will help KBkids with its marketing and fulfillment operations.

"Consolidated is very committed to this business," Wagner said. "Because of their toy business, they need an Internet presence."

The firings are the latest setbacks for e-tailers. Despite high sales growth, losses have mounted, and investors have generally lost interest in the sector.

In recent months, CDNow and Drkoop.com have said they are low on cash and are seeking outside funding. Online retail giant Amazon.com laid off 150 workers, or 2 percent of its work force, in January. And in December, Value America laid off half its staff and announced a major restructuring of the company.

KB Toys merged its online site with that of BrainPlay.com last July to form KBkids. As part of the merger, KB Toys agreed to invest $80 million for its 80 percent stake. BrainPlay.com, an educational toy store, invested all its online assets to take a 20 percent stake in the online toy retailer.

Like other e-tailers, KBkids.com has struggled with its finances and with fulfilling orders. During last year's holiday season, KBkids.com, like eToys and Toysrus.com, had problems shipping holiday orders on time.

For the six months ended September 30, 1999, the most recent period available, KBkids.com lost $14.1 million on $1.5 million in sales. The company had negative gross profit margins for the period, losing $553,000 before operating and marketing expenses.

A company's profit margin is the difference between what a company charges for its goods and services and what those goods and services cost the company.

In January, KBkids.com filed to raise up to $210 million in an initial public offering. The company did not specify the number of shares it planned to sell or indicate an initial price for the offering. The $210 million figure was made for the purpose of calculating a filing fee.

The company postponed its offering last month, citing market conditions. However, the company has not official withdrawn the offering.

"If the market (for Internet offerings) becomes more favorable, we definitely would like to go out," Wagner said.

Credit Suisse First Boston is leading KBkids.com's offering, in conjunction with Merrill Lynch, Deutsche Banc Alex Brown and E*Offering.