September 28, 2000 11:50 AM PDT

Garden.com trimming nearly 40 percent of work force

Garden.com, the online seller of everything from plants to hoses, today said it would cut its staff by about 40 percent and hire the investment bank Robertson Stephens to assist in ongoing fundraising efforts.

The company also warned that its first-quarter revenues would fall short of expectations because of a restructuring.

Austin, Texas-based Garden.com said it expects revenues of $2.3 million to $2.5 million, well below analysts' estimates of approximately $3.3 million to $3.7 million. A net loss of 57 cents per share to 62 cents per share is expected, compared with a loss of 48 cents per share predicted by analysts surveyed by First Call/Thomson Financial.

Garden.com said it is laying off 93 employees to lower the company's operating expenses and cash burn rate. Garden.com shares have fallen 94 percent from the company's 52-week high of $24.12. Today, the shares fell 50 cents to 88 cents.

"After reviewing the funding options available to us at this time, we found that the current cost of capital was unacceptable to continue to fund the growth and operating plan we have been executing on for the past year," Cliff Sharples, Garden.com's chief executive, said in a statement. "We made the tough decision to reduce our work force, so that we could refocus our energies, leverage our critical skills and assets, and evolve our business model to more accurately reflect existing market conditions."

Garden.com is not the only online retailer to trim its staff as a cost-cutting measure. A recent report by the outplacement company Challenger, Gray & Christmas showed that job cuts at Internet companies jumped 55 percent in August from July, led by online retailers.

Other sites have gone one step further and completely shut down. This month, the online luxury goods site Miadora and home furnishings e-tailer HomePortfolio shut down their e-commerce operations. HomePortfolio said it is reinventing itself as an application service provider for the furniture business.

Despite recent layoffs, the upcoming holiday season is poised to be a lucrative one for the online retail sector. According to a recent report by Jupiter Communications, consumers will spend about $12 billion online between Nov. 1 and Dec. 31. This represents a 66 percent increase in spending from last year's $7 billion tally.

 

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