Green thumb? Try gangrene.
thestandard.com
November 15, 2000, 1:32 PM PST
Frost Hits Garden.com
The online retailer fails to secure financing or find a buyer, so its retail operations
will be plowed under.
By Reuters
AUSTIN, Texas (Reuters) – Garden.com
(GDEN) Inc. (GDEN), an online retailer of
gardening products, on Wednesday said it
will shut down its retail operations and
plans to sell its consumer business assets
after it failed to secure financing to fund
operations or find a buyer for the
company.
The Austin, Texas-based company, the
latest victim in the shakeout in the online
retail sector, also said it plans a "phased
layoff" of its consumer business employees.
The company cut 30 percent of its work
force on Sept. 28. At that time
Garden.com said it hired investment bank
Robertson Stephens to evaluate strategic
alternatives for the company.
Shares of Garden.com, which have been on
a steady downward slide over the past
several months, were down 75 percent by
midafternoon at 1/16. The stock's 52-week
high was $15 a share back at the end of
1999.
Garden.com's demise comes on the heels
of several other Internet retailers recently
shutting their virtual doors.
MotherNature.com (MTHR) (MTHR), which
sold health care products, and Pets.com
(IPET) Inc. (IPET), a retailer of pet-related
products, both ceased operations earlier
this month.
Additionally, Priceline.com Inc. (PCLN) shut
down its WebHouse online grocery service
and closely held Furniture.com, which sold
furniture and home decor products online,
also closed its doors.
Although many industry watchers were not
surprised at the failure of most online
retailers, Garden.com's demise appears to
have struck a chord with some as many
people thought the site's editorial content
was unique and because it didn't appear to
have many online competitors.
Some analysts said they often thought
Garden.com was destined to be snatched
up by one of the larger traditional home
improvement retailers, such as No. 1 player
Home Depot (HD) Inc. (HD.N)
But that prospect did not pan out as Home
Depot, like many top traditional retailers,
has yet to fully roll out its own online retail venture.
"When it comes to actually selling products, the gardening market has
two issues: it tends to be something that people want to go to the
store to buy and also shipping costs can get really high," said David
Cooperstein, director of consumer e-commerce research at Forrester
Research (FORR) .
In addition, Cooperstein said most gardening products, like potting
soil or perennial plant bulbs, don't necessarily spark the kind of brand
loyalty from consumers that other retail products do, making it
difficult for suppliers to compete for dollars.
Garden.com's closure comes just over a year after the company's
initial public offering, during which it raised about $49.2 million selling
4.1 million shares, or a 24 percent stake in the company, at $12 a
share.
On the day of its IPO, the company's share price surged 59 percent
to close at $19-1/16 on the Nasdaq stock market, surprising most
analysts who at the time had not expected online retail businesses to
fare well in what was already a rapidly deteriorating market for
dot-coms.
"Despite every best effort...to rebuild stockholder value and ensure a
future for Garden.com's consumer business, all possible avenues have
been exhausted and it is clear that the only course of action
available to us is to conduct a staged shut-down of our retail
operations," President and Chief Executive Cliff Sharples said in a
statement on Wednesday.
Garden.com said the consumers assets that are fit to be sold include
product inventory, some of its Web addresses, editorial content,
photo library, online gardening tools and planners, as well as other
intellectual property.
The company said it will lay off its employees in phases as it
continues with a "going out of business" sale to consumers. In
September, the company said it had laid off 93 of its 246 employees,
leaving 153 on staff.
Garden.com said while reducing its operating expenses and marketing
costs in an effort to slow its cash burn rate, it also attempted to find
additional funding for operations, and also sought out a partner or
acquirer for the company.
"While that search included contacts with several interesting
prospects, none were prepared to fund or acquire the company," the
company said in a statement.
Earlier this week, the company posted a first-quarter loss of $9.9
million, or 56 cents a share, versus a loss of $5.6 million, or $1.45 a
share, in the year-ago quarter. Revenues were $2.6 million versus
$1.4 million a year ago.
The first quarter loss was narrower than Wall Street analysts on
average had expected, which was a loss of 62 cents a share,
according to First Call/Thomson Financial.
Copyright 2000, Reuters News Service |
