WBVN on the brink. From Forbes.com:
forbes.com
Disaster Of The Day: Webvan
Penelope Patsuris, Forbes.com, 01.10.01, 3:59 PM ET
NEW YORK - Webvan will likely be the next high-profile e-commerce outfit
to crash and burn.
The online grocer admits it's got a burn rate of $100 million a quarter, and
just $212 million in the bank at the end of fourth quarter 2000.
"We will likely need $80 million to $100 million in additional capital in the
third quarter of 2001," says a company spokesperson with a flair for
understatement. Needless to say, Webvan (nasdaq: WBVN) has
postponed plans to expand into New Jersey, Baltimore and Washington,
D.C. Currently it's in 10 cities. "We're not ending our aspirations to build a
national [business]," says the spokesperson, "but we know we have a
short runway and need to use our capital wisely."
In a preview of its fourth-quarter earnings, which will be released on Jan.
25, Webvan admits it will miss fourth-quarter revenue estimates, with
sales for that period reaching just $84 million.
But the company crows that it will lose just 23 cents per share in the
quarter instead of the 26 cent per share loss analysts anticipated. The
trouble is that the company reduced its loss by shrinking marketing
expenses, which in turn slowed the growth of its new customer
acquisitions. Hence the missed revenue target.
Webvan needs to contain what it spends to warehouse, pick, pack and
ship the food and toiletries it deliveries to people's doorsteps, according
to Prudential Securities analyst Mark Rowen, who adds that the company
has consistently refused to reveal exactly how much it spends on
fulfillment costs.
"That's the key to getting their operating losses under control," he says. "At
the rate they're going, it doesn't become a viable business until they reach
an average order size of $400 to $500." And that's not going to happen
anytime soon.
Because today is the thirtieth straight day that Webvan has traded at under
a dollar, the Foster City, Calif.-based company is expecting notification that
it will be delisted from the Nasdaq.
Clearly, additional funding from the public markets is unlikely, as is any
partnership with a traditional grocer. "Webvan has 330,000-square-foot
distribution centers," says Rowen, "which is far more of a commitment
than any regular grocer wants to take on. Companies like Kroger's are
looking at online deliveries as just another channel."
That means only a private investor willing to take a risk can save Webvan,
and that needs to happen in the next six months. |
