eToys Issues Dire Earnings Warning

18 December 2000

In yet another blow to the e-tail world, eToys on Friday issued a warning that its earnings would be dramatically below the figures previously forecast.

Expected income in the quarter to December 31 now stands at $120–$130 million, a landslide from the $210–$240m predicted only six weeks ago. At the same time, forecast operating losses have jumped from 22%–28% of revenue to 55%–65%.

eToys blames its reduced earnings forecast on “the current disfavour” towards e-tailers and [somewhat less predictably], “a consumer population meaningfully distracted by the [US] presidential election and its aftermath”.

The online toystore expects the cash reserves of $50–$60m it should have by the end of the year to last only until March. It admitted it was in need of “an additional, substantial capital infusion,” while ceo Toby Lenk warned of job losses to cut costs. eToys has also hired investment bank Goldman Sachs to look into mergers, asset sales and investments.

News source: Financial Times