eToys, Broken, Declares Bankruptcy

February 27, 2001
Saying its holiday sales failed to meet expectations and valuing its stock as "worthless," eToys announced it is closing its Web site and seeking bankruptcy protection.

An early superstar, eToys was founded in 1997 and ballyhooed itself as a hassle-free alternative to shopping in crowded toy stores. Its sales soared from $700,000 in 1997 to $150 million in 1999 but costs climbed even faster, pushing the break-even point to $900 million annually.

In December, it became clear that holiday sales projections would not be met. In early January, the company closed two warehouses and laid off 70 percent of its workers.

Though popular with consumers, eToys was squeezed not only by rising costs but also by the entry of Amazon.com, Toys "R" Us and other big players into the online toy business.

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