Re: [Marketwatch] eToys: Rise and Fall of a Superstar

Date view Thread view Subject view Author view

From: Strata Rose Chalup (
Date: Wed Dec 20 2000 - 15:33:15 PST

Anybody know an art magazine that could use a domain name?


Adam Rifkin wrote:
> eToys fell 72% today after being down 97% from its high. Its market cap
> is down to $37 million. Ouch.
> Nice of Goldman Sachs to downgrade the company it took public from
> "market outperform" to "market perform". It ended the day at 28 cents a
> share, how is this market perform? I do remember that last year at one
> point Goldman upgraded eToys when it was at sixty bucks a share. And
> now? Dying quickly... average daily volume for ETYS is 4 million;
> today 46 million shares exchanged hands.
> EToys: Rise and fall of a superstar
> By Deborah Adamson,
> Last Update: 4:14 PM ET Dec 18, 2000
> LOS ANGELES (CBS.MW) - EToys on Monday became the poster child of the
> instant but fleeting stardom plaguing Internet retailers, as the company
> sent out an S.O.S for more cash to stay in business.
> EToys, a Wall Street darling a year ago with its stock sailing to its
> high of $86 a share, is the highest profile dot-com yet to run parallel
> to the boom-and-bust destiny of online retailers that included such
> popular sites as and
> The third-quarter sales shortfall that EToys (ETYS: news, msgs)
> announced on Friday went well beyond the recent spate of quarterly
> warnings by other retailers as EToys also said that to be viable through
> next year, it needs more cash three months sooner than expected. See
> full story.
> In another sell-off of the stock on Monday, investors bid the stock down
> to a mere 28 cents a share, losing 75 cents for the day.
> EToys' financial game plan hinged on a much higher level of sales,
> analysts said. With top lines faltering, the rest has unraveled.
> The company cited the effects of the weakening U.S. economy, stiff
> competition, current disfavor of Net retail sales and distractions
> because of the election controversy.
> Surprising severity of warning
> Melissa Williams, an analyst at Gerard Klauer Mattison, said she was
> surprised by the magnitude of EToys' warning.
> The analyst maintained her "neutral" rating on the stock but cut the
> loss estimates. However, at this point when EToys' own future is
> questionable, "I don't know if it matters," she said.
> Lauren Cooks Levitan, an analyst at Robertson Stephens, suspended her
> ratings and estimates for EToys. In a research note, she commented that
> the "worst case scenario plays out" for the e-tailer in which both cash
> and time are running out.
> EToys had a "stunning" lack of consumer demand, despite building an
> enviable order fulfillment and customer service operation, Levitan
> wrote. Moreover, the alliance of (AMZN: news, msgs) and Toys
> 'R' Us (TOY: news, msgs) -- the Net's most successful retailer and the
> world's largest toy chain - damaged EToys with its free shipping offer
> on orders of $100 and up, Levitan said.
> EToy's sales now are expected to be between $120 million and $130
> million for the quarter - far off the $210 million to $240 million the
> Los Angeles company previously projected. Its operating loss would be 55
> to 65 percent of sales, vs. the earlier estimate of 22 to 28 percent.
> Novelty wears thin
> Kurt Barnard, president of Barnard's Retail Trend Report and an old
> retail-industry hand, said e-tailers overestimated their appeal and
> viability. Initially, they generated much excitement by their sheer
> novelty. But when old-economy retailers started catching up by offering
> shopping on their own Web sites, e-tail rivals faltered.
> After all, Barnard argued, given a choice, consumers would rather buy
> from an established retailer online such as Wal-Mart instead of an
> Internet company without much financial history and deep pockets. Also,
> shoppers may prefer buying from established retailers' Web sites because
> it's more convenient for them to return merchandise at the nearest store.
> Compounding the problem, online retailers faced gargantuan costs in
> everything from creating online ordering and distribution systems to
> building an attractive brand name. These two challenges aren't as
> problematic for established retailers, which have the money and
> recognition to push forward a successful online front.
> Barnard says the Internet's true role in retailing is as a marketing
> channel to supplement real stores. As such, pure plays such as EToys
> would have a hard time prospering.
> "If they only had thought things through carefully," he said.
> Media coverage
> It's also possible that EToys' decline was helped along by a kind of
> self-fulfilling prophecy in the media coverage emphasizing the company's
> troubled prospects, according to the report by Robertson Stephens' Levitan.
> Williams, the Gerard Klauer Mattison analyst, said the seasonality of
> EToys' sales - with the majority coming during the Christmas holidays -
> was a big hurdle. EToys needed to generate a lot of sales to support the
> level of expenses it carried. Seasonal sales, where the fourth quarter
> would make or break the year's performance, made it difficult.
> In Levitan's view, all of EToys' problems have been "quite devastating
> and substantially outweighed compelling evidence that EToys is
> delivering a consumer experience among the best of all Internet
> retailers this holiday season."
> ----
> Adam@KnowNow.Com
> What you know you can't explain, but you feel it. You've felt it your
> entire life, that there's something wrong with the world. You don't know
> what it is, but it's there, like a splinter in your mind, driving you mad.
> -- The Matrix

Strata Rose Chalup [KF6NBZ]            
VirtualNet Consulting                  
 ** ISP/ASP Systems Integration, Architecture, & Project Management **

Date view Thread view Subject view Author view

This archive was generated by hypermail 2b29 : Wed Dec 20 2000 - 15:41:56 PST