Can A Savvy CEO Rescue This Web Druggist?
By Gene G. Marcial
Drugstore.com (DSCM ) was a Net highflier: It hit 70 in 1999 but fell to 46 cents in 2001. Now at 3.80, the Web drugstore, which sells online health and beauty items plus prescriptions, has seen sales more than double -- from $110 million in 2000 to $245 million in 2003 -- and they are estimated at $300 million in 2004. Still, Drugstore.com is not earning a penny. Nevertheless, Joan Lappin, president of Gramercy Capital Management, has bought shares. Why? The company has hired a new chairman and CEO, Dawn Lepore, the former vice-chairman of Charles Schwab (SCH ). A former Wal-Mart director and currently on eBay's (EBAY ) board, she has the marketing and tech skills to turn things around, says Lappin. Drugstore's contact-lens business -- acquired in 2003 -- has been a big drag, says Lappin. But Drugstore has ample cash -- and little debt -- and could keep it going for a spell without having to sell shares, Lappin says. So she thinks the stock is an "interesting speculation" that could hit 10 in 12 to 18 months. One big shareholder: Bill Gates's wife, Melinda, who owns 3 million shares and is a director. Morgan Stanley's (MWD ) Mary Meeker, a top Internet analyst, rates the stock "equal weight/attractive."
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
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