NEW YORK (CNNfn) - Webvan Group Inc. announced its expansion into four new markets Tuesday as part of the firm’s plan to take its online grocery and drug store business nationwide.|
The Foster City, Calif.-based company, which is using the $375 million raised in its initial public offering earlier this month to help fund its $1 billion expansion, will open distribution centers in the Chicago, Seattle, Dallas and Washington D.C. markets.
"The signing of these leases marks an important step in Webvan's corporate strategy and evolution into national coverage,” said George Shaheen, president and chief executive officer. "When operational, these distribution centers will greatly expand Webvan's reach into four of the top e-commerce cities in the country."
Shares of Webvan (WBVN) rose 3-7/8 to 28-9/16 in morning trading as Wall Street analysts reacted positively to the news.
Deutsche Bank Alex Brown started its coverage with a "strong buy” rating and set a $50 price target on its stock, while Robertson Stephens initiated its coverage of the company with a "buy” rating.
"We believe Webvan is taking an aggressive approach to addressing the [$400 billion-plus] grocery and consumer-product-fulfillment market," Robertson Stephens analysts Lauren Cooks Levitan and Lowell Singer said in their research report.
"We believe the company is building the leading model for online grocery, using highly automated distribution centers and a complex hub-and-spoke delivery system to provide the ‘final mile' of service not only for grocery products, but over time for a wider range of products."
Bear Stearns and Donaldson Lufkin & Jenrette also initiated their coverage with "buy” ratings.
Webvan provides free delivery of goods within a 30-minute window specified by the customer.