FOGDOG QUARTER GETS BITTEN BY $14.7M LOSS

Byline: Vicki M. Young

NEW YORK — Although its losses widened in the first quarter, sporting goods e-tailer Fogdog Sports showed signs of strength in the period with a 1,233 percent surge in revenue, a continuing partnership with Nike and the strongest cash position among its online competitors.
Fogdog last week reported a $14.7 million loss for the quarter ended March 31, versus a $2.5 million loss a year earlier. Excluding noncash charges in both periods, the losses came to $9.8 million for the most recent quarter and $2.2 million in the year-ago period.
Sales rocketed to $4.7 million from $353,000 last year. The company also reported that revenue in the latest quarter increased 6 percent from the fourth quarter of 1999.
Tim Harrington, Fogdog’s chief executive officer, said in a phone interview Friday that he is “ecstatic about the numbers,” and explained some of the initiatives in the quarter that have helped drive traffic to the site and increase sales.
According to the chief executive, Fogdog has shifted a portion of its online media spending to couponing and promotions. “We thought it was better to go with those [marketing categories] that can drive traffic to the site and increase online spending,” Harrington pointed out.
Customers who send e-mails to friends about the site can accumulate points to be used for discounts on Fogdog purchases.
Other initiatives boosting first-quarter sales were free shipping in January and a standard $3.99 shipping charge in February, which is still in effect.
Fogdog added four specialty shops during the quarter — targeting nutrition, cycling, fishing and walking — and now operates 22 of them on the site. The company plans to add between five and 10 more specialty shops this year.
“The average consumer participates in between four and seven sports,” Harrington noted. “We try to provide good experiences in our [specialty] shops because the customer will come back and buy from the other shops.”
Sara Farley, research analyst at PaineWebber, wrote in a research note last week that “the online sporting goods market has become a game of survival of the fittest, much like that in many e-tailing arenas. Fogdog is very well positioned to be the winner here with its revolutionary approach to the industry, rather than just moving the current off-line model to the Internet.”
According to Farley, Fogdog is continuing to execute its business model and strategy on various fronts: opening specialty shops, effectively spending marketing dollars and developing its strategic relationship with Nike, which is also an investor in the site.
Farley has rated the company’s stock a “buy.” Shares of Fogdog added 5/16 to close at 4 in Nasdaq trading Friday.
Citing an example of well-spent marketing dollars, Farley noted that Fogdog purchased $7 million in TV commercials during the first quarter, for the balance of the year, instead of what “could be double or triple that number by yearend.”
The opting out of certain underperforming online agreements is part of Fogdog’s measured approach, Farley said, which has helped to grow the brand and give the company “higher repeat customer rates, which grew to 24 percent in the quarter, up from 14 percent in the fourth quarter.”
Fogdog’s average order size during the first quarter totaled $72, up from $70 in the fourth quarter. The company lowered its customer acquisition cost to $62 per person, from $66 in the fourth quarter.
While Fogdog expanded its number of brands to 800 during the most recently completed quarter, up from 600, it’s not happening for free; Farley said the company is likely to need a cash infusion next year.
“With $60 million in the bank and a burn rate of $10 million to $12 million per quarter, the company will need a cash infusion sometime in the first quarter of 2001,” Farley projected.
“Given current market conditions and investors’ disenchantment with B2C companies, Fogdog will have to show continued strength in its business model over the next several quarters, as well as a clear path to profitability,” he said..”
For his part, Harrington said his firm has “sufficient cash reserves” to meet its plan to drive customer-acquisition initiatives. Although analysts are expecting a shakeout among both the brick-and-mortar firms and pure plays, Harrington stated that Fogdog will survive.