Internet grocer Webvan Group Inc. said it will delay moving into two new cities to focus on profitability and integrate HomeGrocer.com, a recent acquisition.
Webvan will not start delivering groceries in the Baltimore-Washington and Bergen County, N.J., markets until the second half of 2001–at least six months later than the Foster City, Calif.-based company had planned. The company now delivers grocery orders in 10 cities.
“The clear message is they need to cut their burn rate down, and they need to drive the existing markets toward profitability,” said Shawn Milne, an analyst at E*Offering in San Francisco, who estimates the move will save Webvan nearly $100 million in fiscal year 2001.
If Webvan can manage to begin turning a profit from operations in its existing markets, it would be able to fund new market rollouts with existing cash, keeping it from depending on the mercurial capital markets.
“We believe that by focusing our key resources on bringing our existing operations to profitability, we will be in a better position to significantly reduce the capital needed to drive our business in 2001,” George Shaheen, the company’s president and chief executive officer, said in a written statement.
Combining its technology with Kirkland, Wash.-based HomeGrocer.com, which it agreed to buy in June, will also move Webvan toward profitability, Milne said. It will help HomeGrocer.com’s centers move to multiple shifts and become more efficient.