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January 28, 1998

EGGHEAD REPORTS POOR Q3, CLOSES STORES TO FOCUS ON WEB SALES

By CBR Staff Writer

On the same day it reported another disappointing quarter, software retailer Egghead Inc announced it is closing all of its 80 stores and its Sacramento, California distribution center and will focus on internet sales. The Spokane, Washington company, which has seen declining revenues and continuing losses in the retail channel, will change its name to Egghead.com Inc to reflect its new focus. On Wednesday, it reported a third-quarter net loss of $6.6m on revenue down 12.4% at $99.1m, compared to net income of $1.5m, or $0.09 per share, a year ago. While same store sales fell 14% in the quarter, Egghead is banking its future on internet sales that rose $9.3m year-over-year to $11.8m. Hits on the company’s web site increased from 300,000 in the first quarter to about 6 million in the third. Its Surplus Direct subsidiary currently has 46,000 registered bidders for its online auctions. Egghead says that revenues between the two sites are currently running about $1.0m a week. Nine-month net loss amounted to $15.2m on revenue down 19.6% at $218.6m, compared to a loss of $3.7m last year. Nine-month results include sales from the Surplus Direct unit from the August 14 acquisition date through December 27. The latest moves come almost exactly a year after Egghead announced it was closing 77 of its then 156 stores in a massive restructuring (CI No 3,091). The company has seen yearly net losses dating back to 1993.

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