Buy.com May Be Headed for the Dot-Com Dustbin
Slowing growth and mounting losses could cause a cash crunch.
Slowing growth and mounting losses could cause a cash crunch.
What Happened?
Internet retailer Buy.com reported a third-quarter pro-forma loss of $0.16 a share, in line with Wall Street expectations. However, revenue declined sequentially for the second straight quarter to $190 million, just 20% higher than last year's third quarter. The company's gross margin inched up to 6.7%, but its customer growth was slower than expected despite increased spending on coupons and other enticements. CEO Greg Hawkins announced that Buy.com is closing its travel store and looking for additional financing to keep its U.K. and Australian operations afloat.
What It Means for Investors
These mediocre results do little to allay our
Buy.com's operating margin was essentially flat from last quarter, with only a token improvement from negative 14.5% to negative 14.4%. The company ran through about $30 million in cash this quarter and plans to burn a similar amount next quarter, which would leave it with $80 million in the bank to start 2001. Chief financial officer Mitch Hill said Thursday that he's confident Buy.com can start generating positive cash flow in 2001, but gave few concrete reasons for how this might be accomplished. Thus, unless it can rejuvenate its growth and get losses under control, we think it's increasingly likely that Buy.com will join the dot-com dustbin.
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