Record net sales by drugstore.com driven by OTC growth

BELLEVUE, Wash. Drugstore.com reported record net sales of $120.6 million for the first quarter ended March 30, up 10 percent and driven by over-the-counter order growth, the company stated Monday.

Drugstore.com posted a net loss of $2.7 million for the quarter, or $0.03 per share, and EBITDA of $2 million, a 45 percent improvement as compared to the first quarter of 2007.

“The first quarter of 2008 demonstrates that we are executing on our strategy—delivering core OTC sales growth of 15.5 percent, growing Beauty.com 38 percent year-over-year while expanding overall gross margins by 150 basis points year-over-year,” stated Dawn Lepore, chief executive officer and chairman of drugstore.com. “We believe our revenue growth was ahead of current e-commerce trends in OTC and prestige beauty, offering evidence that we can drive growth even in a tougher economic environment without sacrificing margin. Additionally, we are pleased with the benefits we are seeing from our improved operational efficiencies and grew contribution margin dollars 22 percent year-over-year, exceeding $20 million for the first time in company history. Based on growing sales and expanding margins, we reported positive adjusted EBITDA that almost doubled from the first quarter of 2007, despite investing over $1.3 million on our profitability initiatives.”

Core OTC revenues grew by approximately 16 percent to $64.4 million in the quarter, the online druggist reported. OTC net sales grew by more than 15 percent to $64.9 million.

Along with its financial results, drugstore.com noted its chief financial officer There du Pont will be resigning to run a private foundation effective May 29. Du Pont will continue as a consultant for the company until the end of August. In his stead, drugstore.com is promoting two senior financial executives—Rob Potter, current vice president, chief accountant, will be named vice president, chief accounting officer and Tracy Wright, current vice president of financial planning and analysis, will become vice president and chief finance officer.

“Rob and Tracy have each been with drugstore.com over four years and have stepped up to spearhead the finance team,” Lepore said. “They share over 34 years of combined corporate finance experience and I feel very confident that they are the right team to lead our finance organization. We have also recently hired Jon Axelsson from Wawa, who brings over 20 years of experience in warehousing and transportation operations, to take over There’s operational responsibilities and to continue to drive margin improvement. Jon has an impressive background from Wawa, Federal Express, UPS, and QVC, and will serve as senior director of operations.”

For the second quarter of 2008, the company is targeting net sales in the range of $118 million to $122 million, net loss in the range of $2 million to $3 million, and adjusted EBITDA in the range of $2 million to $3 million.

Due to the challenging economic environment, drugstore.com revised its initial fiscal year 2008 guidance, with net sales targets now between $490 million and $500 million, a net income or loss in the range of a $3 million loss to a $1 million gain and adjusted EBITDA in the range of $16 million to $20 million.

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