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eToys to slash 70% of staff
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January 4, 2001: 5:30 p.m. ET
Web retailer to slash 700 of 1,000 jobs in bid to reduce costs
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NEW YORK (CNNfn) - eToys, the financially troubled Web-based toy retailer, said Thursday that it will eliminate 70 percent of its 1,000 workers in what may be a death rattle for the company.
Los Angeles-based eToys (ETYS: Research, Estimates) said that it sent "job elimination notices" to roughly 700 of its 1,000 eToys and BabyCenter employees. About 380 employees will end their service to the company today, and about 320 will leave by March 31, eToys said.
The company also announced plans to cease warehouse operations in Commerce, Calif., and Greensboro, N.C., during the next 30 to 60 days and said it will consolidate those operations within eToys' existing distribution centers in Ontario, Calif., and Blairs, Va.
The company said it would close its United Kingdom Web site on Jan. 19, and fully wind down its European business shortly thereafter.
eToys announced on Dec. 15, that revenue for the crucial holiday quarter would be significantly less than earlier projections, largely because of "a generally harsh retail climate and the continued disfavor of Internet retailing."
At that time, the company said it had hired Goldman, Sachs & Co. as its financial advisor to explore strategic alternatives for the company, which may include a merger, asset sale, investment in the company or another comparable transaction.
eToys' stock, which traded as high as $28 within the past 52 weeks, closed Thursday at just 16 cents, placing a market value of about $25 million on the whole company.
eToys said on Dec. 15 that it anticipates having enough cash to survive until March 31, "although there can be no assurance in this regard." The company had previously estimated it would run out of cash by June 30, 2001.
eToys' fourth-quarter revenue fell far short of its earlier expectations as the company faced intense competition from other Web-based toy retailers, such as Toysrus.com, and the Web operations of broad-based mass merchants, such as Wal-Mart Stores Inc. The company said on Dec. 15 that its fourth-quarter revenue would be $120 million to $130 million, far short of its previous estimate of $210 million to $240 million. It forecasts an operating loss for the period equal to 55-65 percent of revenue, or as much as $84.5 million.
As of Sept. 30, eToys had raised more than $525 million by selling securities to investors, and it had accumulated a deficit of $340 million over the course of its operations. If the company does cease operations, it will be one of the largest and most costly dot.com failures to date. 
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