USA: Internet grocer Peapod achieves operating profitability in Chicago
Marc van Gelder, President and Chief Executive Officer, said, "We are confident that Peapod can become the first Internet grocer to build a sustainable, profitable business. With everything we have learned in the past months and the positive reaction from our customers, we are confident we are moving in the right direction. We expect current positive trends to strengthen in subsequent quarters and we are focused on achieving operating profitability in our current markets before we expand into new markets."
Driving the operating profit performance in the Chicago area are key metrics that have steadily improved over the past six months. Gross profit per order increased $14.00, to more than $45 per order, due to higher product margins and increases in average order size. In addition, operational costs were reduced $10.00 per order due to Peapod's proprietary Smart Flow(TM) yield management routing technology, as well as substantially increased efficiencies in the Company's Chicago operation. In addition to reaching operating profitability in Chicago, the Company said it is also on track to do so in two East Coast markets, Long Island and Connecticut, by mid-year. In these East Coast markets, Peapod co-brands with the Ahold-owned supermarket chain Stop & Shop. When determining operating profitability in a given market, Peapod includes corporate expense allocations for its centralized call and billing center, transaction fees and telecom expenses, while excluding marketing costs, sales incentives (now netted against revenue) and other corporate overhead.
Revenues for the first quarter of 2001 were $24.9 million compared with $24.8 million in the year-ago quarter. Excluding five markets closed since September 2000 (Austin, Houston and Dallas, Texas, Columbus, Ohio and San Francisco), sales were up 42%, representing the benefits of increased marketing in Chicago and alignment with Ahold in all of Peapod's markets.
The Company's gross profit margin of 32% in the first quarter of 2001 reflects significant improvement from 22% in the year-ago quarter and 26% in the 2000 fourth quarter, due in large part to the advantages associated with leveraging Ahold's procurement and buying power in purchasing grocery goods.
Excluding the preferred stock dividend, the Company reported a first quarter net loss of $15.5 million or $0.86 per share, compared with a net loss of $12.7 million or $0.70 per share for the 2000 first quarter. This year's first quarter performance does, however, reflect a $4.6 million reduction in the net loss on a comparable basis from the $19.3 million net loss recorded in the 2000 fourth quarter before non-recurring items.
Peapod continues to use a centralized distribution model with two formats: free-standing distribution centers serving large metropolitan areas and smaller, fast-pick centers in smaller markets. The Company implemented the McLane warehouse management system in one East Coast facility in February, resulting in increased receiving and picking efficiency in serving customers. This system will continue to be rolled out this year in all other facilities.
Van Gelder added, "We are pleased with the progress we have made in all markets. Joint marketing, co-branding and procurement leverage with Ahold USA supermarket companies are producing results that continue to exceed Company forecasts and are creating strong brand awareness for Peapod. We are convinced we have the winning "clicks and bricks" strategy in the Internet grocery business. We believe Peapod is well positioned to emerge as the long-term leader in an expanding U.S. Internet grocery marketplace."
About Peapod, Inc.
Founded in 1989, Chicago-based Peapod, Inc. is a leading Internet grocer, providing consumers with broad product choices and local delivery services. With 2000 sales of approximately $93 million, the Company currently serves markets in Boston, Southern Connecticut, Long Island, Washington, D.C. and Chicago. In addition, Peapod is a provider of targeted media and research services to consumer goods companies, offering its unique medium for targeting promotions and advertising at the point of purchase and conducting cost-effective research. Peapod's shares are traded on the NASDAQ under the symbol ``PPOD.'' Ahold, the leading supermarket company along the eastern seaboard with worldwide sales approaching US $60 billion, has a 58% stake in Peapod. Customers of its supermarket chains Stop & Shop in Boston, Long Island and Connecticut and Giant Food Inc. in the Washington, D.C. area are offered the Internet and home delivery services of Peapod.
Except for historical matters contained herein, the matters discussed in this press release, including statements herein regarding Peapod's competitive strengths and market position, its business strategy, its sufficiency of resources and ability to obtain financing, markets for Peapod's products, general trends and trends in Peapod's operations or financial results, Peapod's expansion strategy and Peapod's future prospects and profitability, are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that these forward-looking statements reflect numerous assumptions and involve risks and uncertainties that may affect Peapod's business and prospects and cause actual results to differ materially from these forward-looking statements. Such risks include, without limitation: (1) the sufficiency of the Company's resources and its ability to obtain financing; (2) the Company's limited operating history; (3) the complexity of the Company's business systems; (4) the Company's ability to manage its growth and expansion strategy; (5) the Company's relationship with Ahold and its affiliates; (6) the Company's ability to leverage its brand name; (7) the Company's ability to respond to rapid technological change; (8) the impact of future losses and negative cash flow; (9) the impact of significant future capital investments; (10) competition from traditional and online retailers; (11) the success of the Internet as a medium for grocery shopping; (12) the Company's ability to build brand identity and customer loyalty; (13) the Company's ability to attract and retain key personnel; and (14) the risk factors identified in the Company's Annual Report on Form 10-K for the period ended December 31, 2000 and risk factors identified from time to time in any other filings made by the Company with the Securities and Exchange Commission.
Peapod, Inc. Financial Summary in thousands, except share, per share and operating data (unaudited) Quarter Ended Quarter Ended March 31, December 31, ------------------------- ------------ 2001 2000(a)(b) 2000(b) ------------ ------------ ------------ Statement of Operations: Net Sales $ 24,937 $ 24,774 $ 23,732 Cost of Sales 16,963 19,216 17,563 ------------ ------------ ------------ Gross Profit 7,974 5,558 6,169 Operating Expenses: Fulfillment operations 12,443 8,931 12,633 General and administrative 3,757 2,039 4,465 Marketing and advertising 3,019 1,200 4,662 System development and maintenance 951 1,189 1,661 Depreciation and amortization 1,991 664 1,908 Nonrecurring expenses 761 4,118 4,510 ------------ ------------ ------------ Total operating expenses 22,922 18,141 29,839 ------------ ------------ ------------ Operating Loss (14,948) (12,583) (23,670) Other Income (Expense): Investment income (expense) 95 (103) 390 Interest expense (214) (56) (118) Non-cash interest expense (443) - (433) ------------ ------------ ------------ Net loss $ (15,510)$ (12,742)$ (23,831) ============ ============ ============ Net loss per share exclusive of preferred dividends and accretion(c) $ (0.86)$ (0.70)$ (1.33) Shares used to compute net loss per share 17,981,511 18,207,875 17,967,948 March 31, December 31, ------------------------- ------------ 2001 2000(a) 2000 ------------ ------------ ------------ Balance Sheet: Cash, cash equivalents and marketable securities $ 3,703 $ 3,770 $ 14,676 Total assets 35,330 16,698 45,733 Borrowings on credit facility 6,000 - - Long-term obligations 4,226 988 4,829 Total stockholders' equity 5,606 (889) 22,556 Operating Data: Customers 120,000 129,800 124,400 Orders 205,534 205,540 203,710 Numbers of markets 5 8 6 Households in service area 5,031,600 8,586,100 6,792,300 (a) First quarter 2000 results include 4 markets which were exited in September 2000 and did not contribute to first quarter 2001 results and one market which was exited in March 2001. (b) Certain amounts previously presented in the Company's earnings releases were reclassified in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. The numbers presented are from that Annual Report on Form 10-K. (c) Net loss per share is not intended to represent an alternative to basic and diluted net loss per share (as determined in conformity with generally accepted accounting principles), as it does not include preferred dividends or accretion.
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