drugstore.com inc. Reports Solid Revenue Growth and Record Gross Margins in the Third Quarter of 2008
- Highest Gross Margins in Company's History of 28.6%, Up 190 Basis Points Year-Over-Year
- Beauty.com Grows 32% Year-Over-Year
BELLEVUE, Wash., Nov 05, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- drugstore.com, inc. (Nasdaq: DSCM), a leading online provider of health, beauty, vision, and pharmacy products, today announced its financial results for the third quarter ended September 28, 2008. The company reported strong quarterly net sales of $87.8 million, up 8.5% year-over-year, driven by over-the-counter (OTC) order growth, and a net loss of $3.6 million, or $0.04 per share. The company achieved record gross margins of 28.6%, up 90 basis points sequentially and 190 basis points over the prior year period, and adjusted EBITDA of over $3.6 million, up 20% sequentially and up 76% over the prior year period. Adjusted EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation, and amortization of intangible assets and non-cash marketing expense, adjusted to exclude the impact of stock-based compensation expense.
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"We posted a solid third quarter, with strong beauty growth, record gross margins, and adjusted EBITDA improvement of 76% over the prior year period to surpass $3.6 million," said Dawn Lepore, chief executive officer and chairman of the board of drugstore.com, inc. "Overall beauty revenues increased over 20% from the prior year period, aided by 32% growth in our Beauty.com business. Importantly, we are also continuing to see the benefits from our focus on our profitability initiatives as OTC margins improved 230 basis points to 31.6% year-over-year."
"Our sales growth was in-line with our previous guidance, but we did see an overall impact from the slowdown in the economy -- notably in the second half of September. While we are not recession proof, trends have improved in October, and we believe that we have a number of key differentiators, which should help fuel growth going forward. We serve a very attractive customer demographic and offer a wide selection of lower ticket items, a compelling value proposition, and a high percentage of replenishment products. Over the next three months, we should also start to see the initial benefits from the launch of two new growth initiatives: our international OTC platform and our online OTC store with Rite Aid. We believe our strengthened business model and strategic growth initiatives will position us to achieve OTC growth of over 9% and GAAP profitability in the fourth quarter of 2008," concluded Ms. Lepore.
GAAP net loss for the third quarter of 2008 was $3.6 million, or $0.04 per share, compared to a net loss of $2.4 million, or $0.02 per share, for the third quarter of 2007. The third quarter 2008 losses include $1.7 million in accelerated non-cash marketing expense, $800,000 related to consulting services, and $1.8 million in non-cash stock-based compensation expense, compared to $2.1 million in non-cash stock-based compensation expense for 2007.
For the third quarter of 2008, we reported $1.1 million of net income from our discontinued local pick-up pharmacy operations, as a result of our restructured agreement with Rite Aid announced on September 4, 2008.
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