drugstore.com has announced financial results for the fourth quarter 2009 and fiscal year ended January 3, 2010. In the fourth quarter of 2009, drugstore.com reported quarterly net sales were up 25% to $117.4 million, driven by strong over-the-counter and Beauty.com sales. Gross margins increased 90 basis points year-over-year to a record 29.4%. For more on this story, check out an upcoming issue of ihr magazine.
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drugstore.com Reports Record Revenue Up 25% Year-Over-Year in the Fourth Quarter of 2009
- OTC Revenue Growth of 32% and Beauty.com Increases 28% in 14-Week Quarter
- Gross Margins of 29.4% are Highest in Company History
- New Customer Growth Including Partnerships of 49% Year-Over-Year
BELLEVUE, Wash., Feb. 9, 2010 (GLOBE NEWSWIRE) -- drugstore.com, inc. (Nasdaq:DSCM), a leading online retailer of health, beauty, vision, and pharmacy products, today announced its financial results for the fourth quarter and full year ended January 3, 2010. The fourth quarter and 2009 periods are based on a 14-week and 53-week fiscal calendar, respectively, and compare to a 13-week fourth quarter and 52-week year in 2008.
In the fourth quarter of 2009, drugstore.com reported quarterly net sales were up 25% to $117.4 million, driven by strong over-the-counter (OTC) and Beauty.com sales. Gross margins increased 90 basis points year-over-year to a record 29.4%. During the quarter, the company incurred expenses totaling $1.4 million related to its agreement to acquire Salu, Inc., owner and operator of SkinStore.com, and its strategic alliance with Luxottica Group S.p.A. Including these expenses, the company's net loss was $1.6 million, and adjusted EBITDA was $3.5 million, which compared to net income of $289,000 and adjusted EBITDA of $5.2 million reported in the same period of the prior year. 2008 fourth quarter adjusted EBITDA and net income results included a $3.1 million contribution from the company's discontinued local-pick-up (LPU) business. 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.
For the year, the company reported net sales of $412.8 million, a net loss of $1.4 million, and adjusted EBITDA of $17.1 million. Additionally, the company reported free cash flow of $1.4 million for 2009 compared to $680,000 for 2008.
"We are very pleased with our strong fourth quarter results reporting overall net sales growth of 25% and OTC net sales growth of 32%, including the positive impact of the 14-week quarter," said Dawn Lepore, chief executive officer and chairman of the board of drugstore.com, inc. "Our growth was driven by strong performance from our core business, including our beauty business on drugstore.com and Beauty.com, along with growing contributions from our partnerships. Our partnerships helped fuel new customer growth of 49% over the same period last year, while also reducing our marketing cost per new customer to its lowest level in company history. Gross margins were a record 29.4% in the fourth quarter, reflecting an increasing mix of higher margin categories, lower per-order shipping costs, and improved pharmacy margins. Driven by record net sales and gross margins, our adjusted EBITDA increased by 65% year-over-year, excluding the impact of our discontinued LPU business, and by over 125%, without the impact of the acquisition and strategic alliance expenses."
"We believe our strong financial results throughout 2009, and the pending acquisition of Skinstore.com, have even more firmly established our company as a clear leader in health and beauty online. In the coming year, we will further leverage our unique market position and infrastructure, with increasing contributions from Skinstore.com and our key partnerships with Medco and Luxottica. With the continuing ramp up of these initiatives, we are very optimistic about our growth prospects for 2010," concluded Ms. Lepore.
Outlook for First Quarter of 2010
For the first quarter of 2010, the company is targeting net sales in the range of $117.0 million to $121.0 million, a net loss in the range of $2.4 million to $3.5 million, and adjusted EBITDA in the range of $2.15 million to $3.25 million. This outlook assumes that the company's previously announced acquisition of Salu, Inc. will close within the next two weeks and includes an estimated $4 million to $5 million of net sales that the company expects Salu to generate after the closing of the acquisition as well as $1.9 million of transaction and integration related expenses.
Financial and Operational Highlights for the Fourth Quarter of 2009
(All comparisons are made to the fourth quarter of 2008 and reflect the reporting of the local pick-up business as discontinued operations and a 14-week quarter in 2009 vs. a 13-week quarter in 2008)
Key Financial Highlights:
* Gross margins increased 90 basis points to a record 29.4%.
* Total contribution margin dollars increased by approximately 26% to $24.6 million.
* Total orders grew by 28% to 1.8 million and contribution margin dollars per order decreased slightly to $14.
* Operating expenses as a percentage of net sales declined to 31% from 32%.
* Free cash flow more than doubled to $1.4 million for the trailing twelve months, compared with $680,000 for the trailing twelve months ended December 28, 2008.
* Cash, cash equivalents, and marketable securities were $36.9 million at year end compared to $38.2 million in the prior year.
Net Sales Summary:
* Total net sales increased almost 25% to $117.4 million. (Excluding the 14th week in the quarter, net sales increased 16%.)
* OTC net sales grew 32% to $92.1 million, including Beauty.com growth of 28%.
* Vision net sales grew 13% to $16.5 million.
* Mail-order pharmacy net sales declined 8% to $8.8 million
* Average net sales per order were $66. Average net sales per order for OTC increased slightly sequentially to $58, vision remained flat at $118, and mail-order pharmacy increased to $165.
* Net sales from repeat customers [1] represented 74% of net sales.
Key Customer Milestones:
* We served approximately 603,000 new customers, inclusive of our strategic partnerships, during the quarter, up almost 50% over the same period in the prior year.
* Marketing and sales expense per new customer decreased significantly on both a sequential and year-over-year basis to approximately $18.
* We have now served approximately 11.7 million customers since inception.
* The number of active customers [2] was 3.0 million, up 18% year over year.
SOURCE: drugstore.com press release
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