KIRKLAND, Wash. -- HomeGrocer.com here is seeking to raise $226 million in its initial public offering, enough to finance expansion into 12 new markets.
by the end of this year. The company, which said it would go public on the Nasdaq exchange in December, said in a recent Securities and Exchange Commission filing that it expects to offer 22 million shares priced between $10 and $12 a share. The company is seeking $226 million in proceeds.
The IPO is expected to be priced the week of Feb. 28, with New York-based investment banks Morgan Stanley Dean Witter and Donaldson, Lufkin & Jenrette lead underwriters.
HomeGrocer said it incurred net losses of $48.4 million from inception to Oct. 2, 1999, and that expansion will likely accelerate losses.
"Many of our first-time customers cite word-of-mouth and the visibility of our distinctive trucks in their neighborhoods as the foremost factors attracting them to our [Internet] storefront," the company said in its Form S-1 filing. "Hence, sales in our markets increase gradually as word-of-mouth spreads and more people see our trucks."
The company also said it hopes its experiences in the last 18 months will enable it to grow faster in newer markets than it has in Seattle, where it has operated since June of 1998. It said it would rely on superior customer service and efficient warehouse and delivery systems to separate it from its on-line and store-based competitors.
HomeGrocer warehouse employees assemble orders by use of wrist-mounted display devices that direct the "personal shopper" to the warehouse location of the items. A finger-mounted bar-code scanner confirms the proper item was selected and placed in the correct customer's tote. A routing and scheduling system for deliveries determines efficient routes and ensures on-time service, HomeGrocer said.
The company intends to build its brand name through advertising and promotions, including a partnership with Seattle-based e-commerce giant Amazon.com. Amazon.com is HomeGrocer's largest shareholder, having made a $42.5 million investment for a 35% share in HomeGrocer in May.
The service will compete with store-based food retailers, including warehouse clubs and convenience stores, as well as other Internet-based services.
"The principal competitive factors that affect our business are convenience, quality of products and service, breadth of product selection, price and customer loyalty to traditional and on-line grocery retailers. We believe that we compare favorably to other on-line grocery retailers with respect to each of these factors," the company said in its SEC filing. "However, many traditional grocery retailers may have substantially greater levels of customer loyalty and serve many more locations than we currently do. Consumers are often familiar with the layout of a specific traditional store and may be resistant to learning other layouts or shopping techniques. If we fail to effectively compete in any one of these areas, we may lose existing and potential customers."
