eToys files for bankruptcy

Not enough sales to save eToys

The online toy store eToys plans to file for bankruptcy protection after its run as one of the internet's prominent retail pioneers came to an end on Monday.

The California-based company, which had already laid off all of its staff and closed its European operation, will shut its US site by 8 March.

The entire management team put their hearts and souls into this

Ken Ross
eToys

The familiar tale of online euphoria and a buoyant flotation turned to ashes as the company failed to cap its mounting debts.

"The entire management team put their hearts and souls into this," said Ken Ross, eToys' spokesman.

"While we're disappointed, we're very proud of the many great things we've achieved."

As of 31 January, the company had debts of $274m. On Monday eToys said this figure could be "substantially" higher.

'Worthless' stock

eToys has also said that its stock is now "worthless". The Nasdaq stock market delisted the company's shares, which were trading at 9 cents per share, on Monday.

eToys milestones

Launched in 1997

Floated in 1999

Stock hits high in Oct 1999

UK site closes 3 Jan 2001

700 employees laid off 25 Jan 2001

293 employees laid off 5 Feb 2001

eToys to file for bankruptcy 26 Feb 2001

US site closes 8 March 2001

At the time of the company's float in May 1999, its stock had quadrupled in price and hit a high of $85.35 in October 1999.

eToys first warned at the beginning of February that it might not meet Nasdaq's minimum requirements to keep its stock listed.

At the same time, the company said that its quest to find an investor to inject further capital was unlikely to succeed.

It had already warned in January that it only had enough cash to last until the end of March.

No employees

The company continued to work with its adviser, Goldman Sachs, on exploring strategic alternatives, such as a merger, asset sale or restructuring.

However, the writing was on the wall for the e-tailer, particularly as it had laid off the remaining 293 employees that worked for the company in early February.

"Certainly the climate we faced remained extremely harsh, and in this climate a buyer did not emerge," said Mr Ross on Monday.

About 700 employees had already been made redundant in January.

Closing the UK site

The redundancies followed the news that eToys was to pull the plug on its European site, based in the UK.

The UK site's sales in the run up to Christmas 2000 were twice those in the same period a year ago, but still below forecasts.

eToys did not fare much better in the US, where poor holiday sales hit its third-quarter results.

The company had a net loss of $85.8m in the third quarter, compared with a loss of $75.5m in the same quarter of 1999.

Launched in 1997

eToys was launched in 1997 by the internet incubator Idealab, as entrepreneurs competed to apply the Amazon.com model to other industries.

After initial glitches, it built up a good reputation for customer service - even building a state-of-the-art warehouse.

Although it was one of the most popular sites over the holiday period, its sales were not enough to cover its debts.

Despite its first-mover advantage on the internet and investment in customer service, it miscalculated the costs of running a retail business and suffered as giant High Street rival Toys R Us teamed up with Amazon.