drugstore.com inc. Reports Solid Revenue Growth and Record Gross Margins in the Third Quart...( - Highest Gross Margins in Company's...),Health

- Highest Gross Margins in Company's History of 28.6%, Up 190 Basis Points

Year-Over-Year

- Beauty.com Grows 32% Year-Over-Year

BELLEVUE, Wash., Nov. 5 /PRNewswire-FirstCall/ -- drugstore.com, inc. (Nasdaq: DSCM), a leading online provider of health, beauty, vision, and pharmacy products, today announced its financial results for the third quarter ended September 28, 2008. The company reported strong quarterly net sales of $87.8 million, up 8.5% year-over-year, driven by over-the-counter (OTC) order growth, and a net loss of $3.6 million, or $0.04 per share. The company achieved record gross margins of 28.6%, up 90 basis points sequentially and 190 basis points over the prior year period, and adjusted EBITDA of over $3.6 million, up 20% sequentially and up 76% over the prior year period. Adjusted EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation, and amortization of intangible assets and non-cash marketing expense, adjusted to exclude the impact of stock-based compensation expense.

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"We posted a solid third quarter, with strong beauty growth, record gross margins, and adjusted EBITDA improvement of 76% over the prior year period to surpass $3.6 million," said Dawn Lepore, chief executive officer and chairman of the board of drugstore.com, inc. "Overall beauty revenues increased over 20% from the prior year period, aided by 32% growth in our Beauty.com business. Importantly, we are also continuing to see the benefits from our focus on our profitability initiatives as OTC margins
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