drugstore.com Reports Highest Net Revenues in Company History

- OTC, Vision and Beauty Sales Outpace Industry

- Net Income of $1.3 Million and Adjusted EBITDA More Than Doubles
Year-Over-Year to $5.6 Million

BELLEVUE, Wash.April 29 /PRNewswire-FirstCall/ -- drugstore.com, inc. (Nasdaq:
DSCM), a leading online retailer of health, beauty, vision, and pharmacy
products, today announced its financial results for the first quarter ended
March 29, 2009. The company reported record quarterly net sales of $98.3
million and net income of $1.3 million, which included a one-time benefit of
$1.2 million. The company more than doubled adjusted EBITDA to $5.6 million
from $2.0 million reported in the same period of the prior year. 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.

(Logo: http://www.newscom.com/cgi-bin/prnh/20070813/AQM043LOGO)

"I am very pleased with our strong first quarter results - posting record
quarterly revenues, net income and adjusted EBITDA, and delivering another
profitable quarter," said Dawn Lepore, chief executive officer and chairman of
the board of drugstore.com, inc. "Against the backdrop of a challenging
consumer environment, we achieved OTC sales growth of over 11% year-over-year,
drove beauty sales growth of 14% and increased vision sales by 13%. All of
these results are significantly ahead of eCommerce and industry trends and we
believe we are gaining market share over both traditional brick-and-mortar
stores and eCommerce companies. Our success in the current market conditions
makes us an even more attractive partner and distribution channel for leading
health and beauty companies."

"During the quarter, we experienced strong repeat orders, predominantly of
beauty and everyday replenishment items, and drove new customer growth of 15%
year-over-year. Margins have remained solid at 28.2% as our profitability
initiatives have offset most of the impact of the increased customer
utilization on promotional offers. We believe that we have the customer base,
product assortment and partnerships to position the company to emerge
post-recession even stronger," concluded Ms. Lepore.

Net income for the first quarter of 2009 was $1.3 million, or $0.01 per share,
compared to a net loss of $2.7 million, or $0.03 per share, for the first
quarter of 2008. The first quarter of 2009 net income includes $1.0 million
in non-cash stock-based compensation expense and a $1.2 million benefit from
the resolution reached on April 27, 2009, between the company and the State of
New Jersey, regarding sales and use taxes owed by the company for the period
January 1, 2000 through February 22, 2008.

Outlook for Second Quarter of 2009
For the second quarter of 2009, the company is targeting net sales in the
range of $93.0 million to $97.0 million, net income in the range of $250,000
to a net loss of $1.75 million, and adjusted EBITDA in the range of $3.0
million to $5.0 million.

Financial and Operational Highlights for the First Quarter of 2009 (All
comparisons are made to the first quarter of 2008 and reflect the reporting of
the local pick-up business as discontinued operations)

Key Financial Highlights:
-- Gross margins increased 80 basis points to 28.2%.
-- Total contribution margin dollars increased by approximately 12% to
$19.9 million.
-- Total orders grew by 10.6% to 1.5 million, while contribution margin
dollars per order increased to approximately $13.50.
-- Fulfillment expenses as a percentage of sales decreased 70 basis
points
to 11.2%.
-- Capital expenditures decreased 67% to $1.7 million.

-- Cash, cash equivalents, and marketable securities were $36.7 million
at
quarter end.

Net Sales Summary:
-- OTC net sales grew by over 11% to $72.1 million for the quarter,
including Beauty.com growth of 14%.
-- Vision net sales grew 13% to $17.4 million for the quarter.
-- Mail-order pharmacy net sales decreased 28% to $8.8 million.
-- Average net sales per order were $67. Average net sales per order
were
$57 for OTC, grew 6.5% to $115 for vision, and decreased to $151 for
mail-order pharmacy.

-- Net sales from repeat customers [1] represented 77% of net sales.

Key Customer Milestones:
-- We served approximately 400,000 new customers, inclusive of our
strategic partnerships, during the quarter, up 15% over the same
period
in the prior year.
-- Marketing and sales expense per new customer decreased 1% to
approximately $23.50.
-- We have now served over 10.2 million customers since inception.

-- The number of active customers [2] was 2.7 million, up 10.5% year over
year.

[1] Net sales from repeat customers exclude Weil Lifestyle, LLC (Weil) related
Custom Nutrition Services (CNS) net sales and reflect only the activity of
customers making purchases through the Web sites of drugstore.com, inc. and
its subsidiaries.

[2] Active customer base reflects those customers who have purchased at least
once within the last 12 months. Both the active customer base (a trailing
12-month number) and average annual spend per active customer exclude net
sales and orders generated by the company's CNS fulfillment relationship with
Weil, and reflect only the activity of customers making purchases through the
Web sites of drugstore.com, inc. and its subsidiaries.

Conference Call
Investors, analysts, and other interested parties are invited to join the
drugstore.com, inc. quarterly conference call on April 29, 2009 at 5:00 p.m.
ET (2:00 p.m. PT). To participate, callers should dial 866-250-2351
(international callers should dial 303-262-2130) five minutes beforehand.
Investors may also listen to the conference call live at
http://investor.drugstore.com/, by clicking on the "audio" hyperlink. A
replay of the call will be available through Friday, May 1, 2009 by dialing
800-405-2236 (enter pass code 11130228#) or internationally at 303-590-3000
(enter pass code 11130228#) beginning two hours after completion of the call.

Non-GAAP Measures
To supplement the consolidated financial statements presented in accordance
with GAAP, drugstore.com, inc. uses the non-GAAP measure of adjusted EBITDA,
defined as earnings before interest, taxes, depreciation, and amortization of
intangible assets and non-cash marketing expenses, adjusted to exclude the
impact of stock-based compensation expense. This non-GAAP measure is provided
to enhance the user's overall understanding of the company's current financial
performance. Management believes that adjusted EBITDA, as defined, provides
useful information to the company and to investors by excluding certain items
that may not be indicative of the company's core operating results. In
addition, because drugstore.com, inc. has historically provided adjusted
EBITDA measures to investors, management believes that including adjusted
EBITDA measures provides consistency in the company's financial reporting.
However, adjusted EBITDA should not be considered in isolation, or as a
substitute for, or as superior to, net income/loss, cash flows, or other
consolidated income/loss or cash flow data prepared in accordance with GAAP,
or as a measure of the company's profitability or liquidity. Although adjusted
EBITDA is frequently used as a measure of operating performance, it is not
necessarily comparable to other similarly titled captions of other companies
due to differences in methods of calculation. Net income/loss is the closest
financial measure prepared by the company in accordance with GAAP in terms of
comparability to adjusted EBITDA. A reconciliation of adjusted EBITDA to net
income/loss is included with the financial statements attached to this
release.

In addition, the company uses the non-GAAP measure of free cash flow, defined
as net cash provided by (used in) operating activities plus proceeds from the
sale of discontinued operations less purchases of fixed assets as disclosed on
our consolidated statements of cash flows. Management believes that free cash
flow is an important liquidity metric because it measures, during a given
period, the amount of cash generated that is available to service debt
obligations, make investments, fund acquisitions and for certain other
activities. Free cash flow is not a measure determined in accordance with GAAP
and may not be defined or calculated by other companies in the same manner.
Additionally, this financial measure is subject to variability quarter over
quarter as a result of the timing of payments related to accounts payable,
including inventory purchases, and accounts receivable. Since free cash flow
includes investments in operating assets, management believes this non-GAAP
liquidity metric is useful in addition to the most directly comparable GAAP
measure of net cash provided by (used in) operating activities, and should not
be used as a substitute for it or any other measure determined in accordance
with GAAP. A reconciliation of free cash flow to net cash provided by
operating activities is included with the supplemental financial schedules
attached to this release.

About drugstore.com, inc.
drugstore.com, inc. (NASDAQ: DSCM) is a leading online retailer of health,
beauty, vision, and pharmacy products. Our portfolio of brands includes:
drugstore.com(TM), Beauty.com(TM), and VisionDirect.com(TM). All are
accessible from http://www.drugstore.com and provide a convenient, private,
and informative shopping experience while offering a wide assortment of more
than 45,000 products at competitive prices.

The drugstore.com pharmacy is certified by the National Association of Boards
of Pharmacy (NABP) as a Verified Internet Pharmacy Practice Site (VIPPS) and
operates in compliance with federal and state laws and regulations in the
United States.

The financial results contained in this press release are preliminary and
unaudited. In addition, this press release contains forward-looking statements
regarding future events or the future financial and operational performance of
drugstore.com, inc. Words such as "target," "believe," "may," "will,"
"continue," "should," and similar expressions, are intended to identify
forward-looking statements. Forward-looking statements are based on current
expectations, are not guarantees of future performance and involve
assumptions, risks, and uncertainties. Actual performance may differ
materially from those contained or implied in such forward-looking statements.
Risks and uncertainties that could lead to such differences could include,
among other things: effects of changes in the economy, changes in consumer
spending, fluctuations in the stock market, changes affecting the Internet,
online retailing and advertising, difficulties establishing our brand, and
building a critical mass of customers, the unpredictability of future revenues
and expenses and potential fluctuations in revenues and operating results,
risks related to business combinations and strategic alliances, possible tax
liabilities relating to the collection of sales tax, consumer trends, the
level of competition, seasonality, the timing and success of expansion
efforts, changes in senior management, risks related to systems interruptions,
possible governmental regulation, and the ability to manage a growing
business. Additional information regarding factors that potentially could
affect the business, financial condition, and operating results of
drugstore.com, inc. is included in the company's periodic filings with the SEC
on Forms 10-K, 10-Q, and 8-K. drugstore.com, inc. expressly disclaims any
intent or obligation to update any forward-looking statement, except as
otherwise specifically stated by it.

Contact:
Investor Relations:
Brinlea Johnson
212-551-1453
brinlea@blueshirtgroup.com

drugstore.com, inc.
Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)

Three Months Ended
March 29, March 30,
2009 2008

Net sales $98,315 $92,568

Costs and expenses: (1) (2)
Cost of sales 70,552 67,183
Fulfillment and order
processing 11,024 11,000
Marketing and sales 9,410 8,314
Technology and content 5,925 5,203
General and administrative 2,896 5,394
Amortization of intangible assets 207 245
Total costs and expenses 100,014 97,339

Operating loss (1,699) (4,771)

Interest income, net 43 279

Loss from continuing operations (1,656) (4,492)
Gain from discontinued
operations, net of tax 2,985 1,807

Net income (loss) $1,329 $(2,685)

Basic and diluted net income
(loss) per share $0.01 $(0.03)

Weighted average shares used
in computation of
basic and diluted net income
(loss) per share 97,355,613 96,392,737

_________
(1) Set forth below are the amounts of stock-based compensation by
operating function recorded in the Statements of Operations:

Fulfillment and order processing $119 $185
Marketing and sales 350 315
Technology and content 245 358
General and administrative 307 1,226
$1,021 $2,084

(2) Set forth below are the amounts of depreciation by operating
function recorded in the Statements of Operations:

Fulfillment and order processing $746 $458
Marketing and sales 1 1
Technology and content 2,223 1,505
General and administrative 112 112
$3,082 $2,076

SUPPLEMENTAL INFORMATION: Gross Profit and Gross Margin
Information:
Three Months Ended
(In thousands, unless March 29, March 30,
otherwise indicated) 2009 2008

Net sales $98,315 $92,568
Cost of sales 70,552 67,183
Gross profit $27,763 $25,385

Gross margin 28.2% 27.4%

SUPPLEMENTAL INFORMATION: Segment Information:

Three Months Ended
(In thousands, unless March 29, March 30,
otherwise indicated) 2009 2008
Net sales:
OTC $72,087 $64,851
Vision 17,441 15,436
Mail-order pharmacy 8,787 12,281
$98,315 $92,568
Cost of sales:
OTC $49,927 $45,013
Vision 13,599 12,028
Mail-order pharmacy 7,026 10,142
$70,552 $67,183
Gross profit:
OTC 22,160 19,838
Vision 3,842 3,408
Mail-order pharmacy 1,761 2,139
$27,763 $25,385
Gross margin:
OTC 30.7% 30.6%
Vision 22.0% 22.1%
Mail-order pharmacy 20.0% 17.4%
28.2% 27.4%
Variable order costs:
OTC $6,448 $5,965
Vision 776 743
Mail-order pharmacy 679 929
7,903 7,637
Contribution margin:
OTC $15,712 $13,873
Vision 3,066 2,665
Mail-order pharmacy 1,082 1,210
$19,860 $17,748

SUPPLEMENTAL INFORMATION: Reconciliation of Net Income (Loss) to
Adjusted EBITDA (See Note 3 below):

Three Months Ended
(In thousands, unless March 29, March 30,
otherwise indicated) 2009 2008

Net income (loss) $1,329 $(2,685)
Amortization of
intangible assets 207 245
Amortization of
non-cash marketing - 573
Stock-based
compensation 1,021 2,084
Depreciation 3,082 2,076
Interest income, net (43) (279)
Adjusted EBITDA $5,596 $2,014

NOTE 3: Supplemental information related to the company's adjusted
EBITDA for the three months ended March 29, 2009 and March
30, 2008 is presented for informational purposes only and is
not prepared in accordance with generally accepted accounting
principles. Adjusted EBITDA is defined as earnings before
taxes, depreciation, and amortization of intangible assets
and non-cash marketing expense, adjusted to exclude the
impact of stock-based compensation expense.

SUPPLEMENTAL INFORMATION: Reconciliation of Forecasted Q2 2009 Net
Income (Loss) Range to Forecasted Q2 2009 Adjusted EBITDA Range

Range Calculated As: Three Months Ended
(In thousands, unless June 28, 2009
otherwise indicated) Range High Range Low

Net income (loss) $250 $(1,750)
Amortization of
intangible assets 215 215
Stock-based
compensation 1,100 1,100
Depreciation 3,500 3,500
Interest income, net (65) (65)
Adjusted EBITDA $5,000 $3,000

SUPPLEMENTAL INFORMATION: Reconciliation of Net Cash Provided by
Operating Activities to Free Cash Flow:

Three Months Ended
(In thousands, unless March 29, March 30,
otherwise indicated) 2009 2008

Net cash (used in) provided
by operating activities $(1,820) $167
Add: Proceeds from sale of
discontinued operations 2,973 -
Less: Purchases of fixed
assets (1,732) (5,182)
Free Cash Flow $(579) $(5,015)

drugstore.com, inc.
Consolidated Balance Sheets
(in thousands, except share data)

March 29, December 28,
2009 2008
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $25,976 $25,197
Marketable securities 10,746 12,997
Accounts receivable, net of allowances 9,346 9,108
Inventories 31,913 32,704
Other current assets 2,919 2,128
Assets of discontinued operations 2,983 5,954
Total current assets 83,883 88,088

Fixed assets, net 27,070 28,306
Other intangible assets, net 3,658 3,731
Goodwill 32,202 32,202
Other long-term assets 222 222
Total assets $147,035 $152,549

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $29,434 $31,208
Accrued compensation 3,564 4,416
Accrued marketing expenses 4,382 4,630
Other current liabilities 3,345 4,560
Current portion of long-term debt 2,835 2,998
Liabilities of discontinued operations 2,973 5,946
Total current liabilities 46,533 53,758

Long-term debt, less current portion 2,089 2,567
Deferred income taxes 955 953
Other long-term liabilities 1,105 1,071

Stockholders' equity:
Common stock, $.0001 par value, stated
at amounts paid in:
Authorized shares - 250,000,000
Issued and outstanding shares -
99,531,469 and 96,547,079
as of March 29, 2009 and December 28,
2008, respectively 864,923 864,282
Accumulated other comprehensive income
(loss) (45) 57
Accumulated deficit (768,525) (770,139)
Total stockholders' equity 96,353 94,200
Total liabilities and stockholders'
equity $147,035 $152,549

drugstore.com, inc.
Consolidated Statements of Cash Flows
(in thousands)

Three Months Ended
March 29, March 28,
2009 2008
(unaudited)
Operating activities:
Net income (loss) $1,329 $(2,685)
Adjustments to reconcile net income
(loss) to net cash (used in) provided
by operating activities:
Depreciation 3,082 2,076
Amortization of intangible assets 207 245
Stock-based compensation 1,021 2,084
Other, net (48) (6)
Changes in:
Accounts receivable (238) 359
Inventories 791 1,643
Other assets (791) 201
Accounts payable, accrued
expenses and other liabilities (4,198) (4,383)
Net cash provided by (used in)
activities of discontinued
operations (2,975) 633
Net cash (used in) provided by
operating activities (1,820) 167

Investing activities:
Purchases of marketable securities (1,700) (14,784)
Sales and maturities of marketable
securities 3,899 18,438
Proceeds from sale of discontinued
operations 2,973 -
Purchases of fixed assets (1,732) (5,182)
Purchases of intangible assets (134) -
Net cash provided by (used in)
investing activities 3,306 (1,528)

Financing activities:
Proceeds from exercise of stock options
and employee 48 423
stock purchase plan
Proceeds from line of credit - 3,500
Principal payments capital lease and
term loan obligations (755) (486)
Net cash (used in) provided by
financing activities (707) 3,437

Net increase in cash and cash
equivalents 779 2,076
Cash and cash equivalents,
beginning of period 25,197 18,572
Cash and cash equivalents, end of
period $25,976 $20,648

SOURCE drugstore.com, inc.

Brinlea Johnson, Investor Relations, +1-212-551-1453,
brinlea@blueshirtgroup.com, for drugstore.com, inc.