Peapod, Inc. (Nasdaq: PPOD) yesterday announced financial results for the fourth quarter and year ended December 31, 2000. Record fourth quarter sales increased 11% to $23.7 million compared with $21.4 million for the same quarter in 1999. This sales growth is particularly significant because Peapod closed four markets in mid-September 2000 (Austin, Houston and Dallas, Texas and Columbus, Ohio). Excluding these closed markets, sales were up 45% for the quarter versus the same period a year ago, representing significant demand for Peapod’s services and faster growth then expected in new markets.

The Company updated guidance for the 2001 year. Revenues are projected to grow approximately 40% for the full year with gross margin expected in the 30% range. The Company is on track to reach profitability in Chicago and in one of the Company’s East Coast markets by mid-2001. The Company aims to reach profitability by year-end 2003 and expects a smaller loss than previously anticipated per common share in 2001, in the range of $3.40 to $3.60 per common share.

As of December 31, 2000, the Company had available for funding its operations approximately $14.7 million in cash and cash equivalents and a $20 million credit facility with Ahold. The credit facility currently remains unused. The Company expects its cash needs for the remainder of 2001 to be approximately $50 million, requiring the Company to complete a financing in the near future in order to continue operations. Although there are no written commitments in place, the Company is in discussions with Ahold regarding an increase in availability under the credit facility and additional financing. The Company’s guidance and projections contained in this press release assume that Peapod is able to complete an appropriate financing transaction on a timely basis.

The Company also announced that it will be closing its distribution center serving San Francisco in order to focus exclusively on pursuing its “clicks and bricks” business strategy in partnership with Ahold USA supermarket companies. As part of this strategy, Peapod has ended its supply arrangement with retailer Jewel-Osco in Chicago and has begun procuring certain dry goods and health and beauty aids for this market through Ahold subsidiaries, including Cleveland-based Tops Market. At the same time, Peapod has significantly enhanced the quality of its perishable mix in Chicago, featuring farm-fresh produce and restaurant-quality meats and seafood, eliciting very positive responses from customers.

Supply and Service Agreements with Ahold are now in place in all markets in which Peapod will continue to operate. In addition to the new arrangement in Chicago, Peapod continues close relationships with Ahold subsidiaries, Stop & Shop to serve Boston, Long Island, N.Y., and Fairfield County, Conn., and Giant Food to serve the Washington, D.C. metropolitan area (Northwest Washington, D.C., Montgomery County, Md., and Fairfax County, Va.). These relationships have given Peapod a considerably lower cost of entry into these markets and provided the Company with stronger buying power versus other online grocers, which should enhance the Company’s gross margin going forward.

The Company posted record sales for the fourth quarter in all markets except San Francisco, reflecting strong demand for Peapod’s Internet grocery service. Strong joint marketing, co-branding and promotional activities with Ahold store operations are driving increased customer counts and larger orders in Peapod’s current markets, led by Peapod by Stop & Shop and Peapod by Giant, which recorded sales exceeding company forecasts.

The Company’s gross profit margin showed a 566 basis point improvement from the 2000 third quarter as the Company’s Supply and Services Agreement with Ahold in Boston, Long Island, Fairfield County, Conn., and the Washington, D.C. metropolitan area enabled the Company to take advantage of Ahold’s purchasing power. While Supply and Services Agreements in the Long Island and Fairfield County markets were in place at the beginning of the 2000 fourth quarter, these agreements took effect in November in Washington, D.C. and Boston and in late December in Chicago.

During the quarter, Peapod recorded certain non-recurring charges related to changing suppliers and restructuring actions. The charges totaled approximately $4.5 million, including $1.3 million relating to changing supply and management agreements and for product discontinuances, $2.3 million for impaired assets and $0.9 million for facility closure and other costs. The Company will also incur further one-time charges in the 2001 first quarter related to the closing of the San Francisco distribution center. Excluding the preferred stock dividend, the net loss for the fourth quarter of 2000 was $23.8 million or $1.33 per share, compared with a net loss of $9.1 million or $0.50 per share for the same period in 1999. The net loss available to common stockholders, including the preferred stock dividend was $25.3 million or $1.41 per share for the fourth quarter of 2000.

For the full year ended December 31, 2000, net sales increased 28% to $92.8 million compared with $72.7 million for 1999. The Company reported a net loss, excluding preferred stock dividends of $56.8 million or $3.15 per share, compared with a net loss of $28.5 million or $1.62 per share for 1999. The net loss available to common stockholders, including preferred stock dividends and a non-cash deemed dividend on the preferred stock, was $116.9 million or $6.48 per share, for 2000.

Marc van Gelder, Peapod’s President and Chief Executive Officer, commented, “We are very pleased with the progress Peapod continues to make in streamlining and focusing our business. We have become closely aligned with Ahold in our procurement and targeting of market opportunities and we feel confident that Ahold is committed to the future success of home shopping through Peapod. We’re convinced that we can jointly make this service a profitable and rewarding business with good returns in the future.”

Van Gelder continued,”The Peapod management team has been strengthened considerably, adding several experienced Ahold specialists from operations, finance and human resources. I am particularly pleased that Andrew Parkinson, chairman and one of the co-founders of Peapod, has resumed an active role in the management of the Company in the position of Chief Financial Officer. Andrew has done a terrific job working with Ahold’s management and in leading the effort of integrating Peapod with Ahold operating companies.”

Van Gelder concluded, “Peapod today is in a much better position. We believe we have the best possible bricks and mortar partner in Ahold and the most efficient and scalable business model in the industry. We are confident that 2001 will be a strong year in which Peapod makes sustainable progress with our key operating metrics as we execute our focused plan for growth and future profitability.”

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 more than 124,000 customers in Boston, Southern Connecticut, Long Island, Washington, D.C., Chicago and San Francisco. 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.”

About Ahold

Ahold is a leading international food provider with annualized sales approaching US $60 billion, operating over 8,000 stores across the United States, Latin America, Europe and Asia. In the United States, Ahold USA’s five supermarket companies – Stop & Shop, Tops Market, Giant-Landover, Giant-Carlisle and BI-LO – have over 20 million weekly customers shopping a combined total of over 1,300 stores with annualized sales approaching US $22 billion. In spring 2000, Ahold acquired America’s second-largest food distributor, U.S. Foodservice, with annual sales approaching US $12 billion. The company is pursuing a multi-channel strategy of reaching customers through food retail, foodservice and e-commerce. Ahold stock is traded on the NYSE in the form of ADRs.

Except for historical matters contained herein, the matters discussed in this press release, including statements herein regarding Peapod’s expansion strategy, its market position, its sufficiency of resources and ability to obtain financing, and its 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 Company’s limited capital resources and 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; (13) the Company’s ability to build brand identity and customer loyalty; (14) the Company’s ability to attract and retain key personnel; and (15) 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.

                       financial table to follow

Peapod, Inc.
Financial Summary
in thousands, except per share and operating data

Quarter Ended Twelve Months Ended
December 31, December 31,
——————— ———————
2000 1999 2000 1999
———- ———- ———- ———-
Statement of Operations:
Net sales $23,732 $21,433 $92,844 $72,696
Cost of sales 17,564 16,075 71,646 55,585
———- ———- ———- ———-
Gross profit 6,168 5,358 21,198 17,111

Operating Expenses:
Fulfillment operations 13,444 8,120 37,279 23,580
General and administrative 3,654 1,551 11,423 6,958
Marketing and advertising 4,662 2,948 8,190 6,730
System development and
maintenance 1,661 1,117 5,809 3,543
Depreciation and
amortization 1,908 619 4,251 2,222
Pre-opening expenses 0 70 0 898
Non-recurring expenses 4,510 0 10,118 2,830
———- ———- ———- ———-
Total operating expenses 29,839 14,425 77,070 46,761
———- ———- ———- ———-
Operating Loss (23,671) (9,067) (55,872) (29,650)

Other Income (Expense):
Investment income 390 32 1,079 1,384
Interest expense (118) (72) (486) (187)
Non-cash interest expense (433) 0 (1,480) 0
———- ———- ———- ———-
Net loss (23,832) (9,107) (56,759) (28,453)

Non-cash deemed dividend
on preferred stock 0 0 56,953 0
Preferred stock dividends
and accretion 1,453 0 3,163 0
———- ———- ———- ———-
Net loss available to
common stockholders ($25,285) ($9,107) ($116,875) ($28,453)
========== ========== ========== ==========

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Net loss per share
available to common
stockholders –
basic and diluted ($1.41) ($0.50) ($6.48) ($1.62)

Net loss per share
available to common
stockholders, exclusive
of preferred dividends
– basic and diluted ($1.33) ($0.50) ($3.15) ($1.62)

Shares used to compute net
loss per share
– basic and diluted 17,967,948 18,071,984 18,043,749 17,542,990

December 31,
2000 1999
———- ———-
Balance Sheet:
Cash, cash equivalents and marketable securities $14,676 $11,200
Total assets 45,733 20,780
Long-term obligations 6,794 1,129
Total stockholders’ equity 22,556 9,710

Operating Data:
Customers 124,400 111,900
Orders 772,100 571,300
Numbers of markets 6 8
Households in service area 6,792,300 8,476,100