WebHouse Club Failure a Bad Blow for Priceline
Planned retrenchment could be too little, too late.
Planned retrenchment could be too little, too late.
What Happened?
Privately held Priceline WebHouse Club, which licenses Priceline.com's (PCLN) name-your-own-price model for gasoline and groceries, announced that it will shut down over the next 90 days because it won't be able to get the funding it needs to continue. Perfect Yardsale, another privately held Priceline licensee, also announced that it is shutting its doors. Priceline will take a noncash charge against third-quarter earnings for the value of the warrants it held in WebHouse Club, and will also revamp its Web site in response to persistent customer complaints.
What It Means for Investors
This doesn't do much to repair Priceline's battered public image, which--as we warned in a recent
Priceline's announcement that it will revamp its Web site and improve its customer service is welcome, but hardly surprising since the company had to do something to combat the recent barrage of negative publicity. We think that Priceline needs to make some fundamental changes in its business model to ease restrictions, and give its customers more choice, if it wants to survive. But even if it does that, we're still skeptical about Priceline's ability to expand beyond a niche audience that values price over customer service.
David Kathman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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