April 12, 2001 2:30 PM PDT

Sources: Webvan center sees first profit

Webvan has turned a profit at one of its distribution centers for the first time, according to sources close to the company.

Webvan executives have told employees in a series of meetings that the company became cash-flow positive at its Fullerton, Calif.-based distribution center during the first quarter of this year, sources said.

A Webvan spokesman declined to comment Thursday, citing Securities and Exchange Commission rules. The company is in a quiet period before its earnings announcement April 26.

To save money, Webvan will probably have to trim the number of markets in which it does business, said Vernon Keenan, an analyst with San Francisco-based research firm Keenan Vision.

The profitability in Fullerton "is great for them but it's hard to say whether investors will be impressed," Keenan said. "I think eventually their strategy will work for them, if they can survive. Internet financing today is like a marathon and were only halfway through the race."

In February, Webvan ceased operations in Dallas, laying off more than 200 employees.

The report comes as Webvan faces delisting and a recent report from its own auditor expressing doubt that it could survive.

In an SEC filing last week, the company said it had enough cash to last until the end of the year. After that, Webvan will need up to $15 million to fund operations into the middle part of next year, when it expects to reach companywide profitability.

Online delivery and grocery businesses, which have very thin margins and high costs, have been punished across the board in the market downturn. On Wednesday, online convenience store Kozmo said it would close, and similar businesses such as Urbanfetch, ShopLink.com and Streamline.com have also shut down.

The Fullerton distribution center was originally a HomeGrocer center, which Webvan acquired last year.


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