<PAGE>
EXHIBIT 99.1
ETOYS EXPECTS LOWER THAN ESTIMATED
FISCAL THIRD QUARTER OPERATING RESULTS
LOS ANGELES, December 15, 2000 -- As a result of weaker-than-expected holiday
sales, eToys Inc. (NASDAQ: ETYS) today announced that it expects to report
operating results for its fiscal third quarter ending December 31 that are lower
than the estimates the company provided on October 30 of this year.
Specifically, the company's new estimates for its consolidated results of
operations for the current quarter include the following:
- Net sales are expected to be between $120 million and $130
million, rather than the $210 million to $240 million previously
estimated. This compares with net sales of $106.8 million during
the quarter ended December 31, 1999.
- Gross margin is expected to be between 21 percent and 23 percent,
rather than the 22 percent to 24 percent previously estimated.
This compares with a gross margin of 19 percent of revenue during
the quarter ended December 31, 1999.
- Operating losses are expected to be between 55 percent and 65
percent of revenue, rather than the 22 percent to 28 percent of
revenue previously estimated (in each case excluding non-cash
charges for deferred compensation and goodwill amortization and
non-cash charges attributable to preferred stock). This compares
with operating losses of 59 percent of revenue during the quarter
ended December 31, 1999 (excluding non-cash charges for deferred
compensation and goodwill amortization and non-cash charges
attributable to preferred stock).
- Cash and cash equivalents at December 31 are expected to be
between $50 million and $60 million, rather than the $100 million
to $120 million previously estimated. This compares with a cash
and cash equivalents balance of $111.4 million at September 30,
2000.
The company said it believed its revenue shortfall this quarter was in large
part attributable to a harsh retail climate driven by concerns over the economy,
the current disfavor of Internet retailing, and a consumer population
meaningfully distracted by the presidential election and its aftermath.
"We are disappointed that sales have not materialized to the degree we had
expected, but we point to the fact that the company is expected to show between
12 percent and 22 percent growth in revenue versus the same quarter last year
and that we are serving customers exceptionally well this holiday season," said
Toby Lenk, eToys' president and
<PAGE>
CEO. "Going forward and based on current operating realities, we will take
aggressive steps to reshape the company's cost structure and to best position
the company for the future."
Based on its new estimates, the company anticipates that its current cash and
cash equivalents, cash that may be generated from operations and borrowings
under the company's revolving credit facility (to the extent of availability)
will be sufficient to meet its anticipated cash needs to approximately March 31,
2001, although there can be no assurance in this regard. The company had
previously estimated this date as June 30, 2001. In order to continue operations
in 2001, the company will require an additional, substantial capital infusion.
There can be no assurance that additional capital will be available to the
company on acceptable terms, or at all. The company anticipates that, at
December 31, 2000, the book value of its inventory will be between $60 million
and $70 million.
The company further indicated that, as a result of its revised estimate for its
cash and cash equivalent balance at December 31, it currently anticipates that
it will be required to take steps to reduce its operating costs, which will
include a reduction in workforce. The company expects to announce a specific
plan for the workforce reduction in January 2001.
The company also announced that it has engaged 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 or a financial restructuring.
In addition, eToys stated that it is in the process of reviewing its financial
projections for the fiscal year ending March 31, 2001 and periods thereafter. In
light of the lower-than-expected revenue growth experienced during the current
quarter, any information previously provided by the company with respect to such
periods should not be relied upon. Specifically, the company no longer estimates
that it will achieve profitability by its fiscal year ending March 31, 2003, or
that its quarterly loss will narrow year-over-year beginning in the quarter
ending December 31, 2000 and for all subsequent quarters, as previously stated.
As of December 14, 2000, eToys had converted 7,224 shares of its Series D
Convertible Preferred Stock, with an aggregate stated value of $72.2 million,
into 36,004,597 shares of the company's common stock, representing an average
conversion rate of $2.01 per share of common stock. As of December 14, 2000, the
company had an aggregate of 159,641,126 shares of common stock outstanding.
ABOUT eTOYS.COM
Based in Los Angeles, eToys Inc. (www.etoys.com; AOL Keyword: etoys) is the
premier Internet retailer for children's products with an extensive selection of
both nationally advertised and specialty toys, software, books, videos, music,
video games, hobby
<PAGE>
products, party goods and baby oriented-products. By combining this extensive
selection, with helpful and fun ideas and award-winning customer service, eToys
offers consumers a unique one-stop source for children's products. Through its
wholly owned subsidiary, BabyCenter, Inc. (www.babycenter.com;
www.parentcenter.com), eToys offers Webby-award winning content and community,
as well as an extensive selection of merchandise for new and expectant parents.
FORWARD-LOOKING STATEMENTS
Statements made in this document that are forward-looking involve risks and
uncertainties that could cause results to differ materially from those
expressed. Such risks and uncertainties include, but are not limited to, the
company's expectation of operating losses and negative cash flow for the
foreseeable future. There can be no assurance regarding when or if the company
will achieve profitability; whether the company will be able to raise additional
capital when required or the amount of additional capital that will be required;
whether the company will require additional capital prior to the estimated date
of March 31, 2001 in order to continue its operations; whether the company will
be able to consummate a strategic transaction on terms acceptable to it or at
all; whether the company's proposed workforce reduction will positively impact
its future results of operations; or whether the company will be able to achieve
its expectations expressed herein regarding revenues, gross margins, pro forma
operating loss margins and cash and cash equivalent balance as of and for the
quarter ending December 31, 2000. Other risk factors include the company's
limited operating history, unpredictability of operating results, seasonality,
inventory risk, reliance on key vendors and distributors as well as the
competitive marketplace. Other risks are set forth in the company's Annual
Report on Form 10-K for the fiscal year ended March 31, 2000, under the heading
"Business - Additional Factors That May Affect Results," in the company's
quarterly report on Form 10-Q for the quarters ended June 30, 2000 and September
30, 2000 and in the company's other filings with the Securities and Exchange
Commission.
Contacts: Media: Ken Ross, 310-998-6993, [email protected]
Gary Gerdemann, 310-998-6823, [email protected]
Investor: Clem Teng, 310-998-6312, [email protected]
