Internet Grocer Peapod Achieves Operating Profitability in Chicago

Internet Grocer Peapod Achieves Operating Profitability in Chicago Strong 1st Quarter Start CHICAGO--(BUSINESS WIRE)--April 23, 2001--Leading Internet grocer Peapod (NASDAQ: PPOD - news) today announced financial results for the first quarter ended March 31, 2001. Peapod reached operating profitability for March in its Chicago market - a significant profitability milestone achieved three months ahead of schedule. It is also making considerable progress toward reaching operating profitability in the Long Island and Connecticut markets, where it operates in strategic partnership with the Ahold supermarket chain Stop & Shop. Ahold, a leading international food provider, owns a 58% stake in Peapod.

Marc van Gelder, President and Chief Executive Officer, said, ``We are confident that Peapod can become the first Internet grocer to build a sustainable, profitable business. With everything we have learned in the past months and the positive reaction from our customers, we are confident we are moving in the right direction. We expect current positive trends to strengthen in subsequent quarters and we are focused on achieving operating profitability in our current markets before we expand into new markets.''

Driving the operating profit performance in the Chicago area are key metrics that have steadily improved over the past six months. Gross profit per order increased $14.00, to more than $45 per order, due to higher product margins and increases in average order size. In addition, operational costs were reduced $10.00 per order due to Peapod's proprietary Smart Flow(TM) yield management routing technology, as well as substantially increased efficiencies in the Company's Chicago operation. In addition to reaching operating profitability in Chicago, the Company said it is also on track to do so in two East Coast markets, Long Island and Connecticut, by mid-year. In these East Coast markets, Peapod co-brands with the Ahold-owned supermarket chain Stop & Shop. When determining operating profitability in a given market, Peapod includes corporate expense allocations for its centralized call and billing center, transaction fees and telecom expenses, while excluding marketing costs, sales incentives (now netted against revenue) and other corporate overhead.

Revenues for the first quarter of 2001 were $24.9 million compared with $24.8 million in the year-ago quarter. Excluding five markets closed since September 2000 (Austin, Houston and Dallas, Texas, Columbus, Ohio and San Francisco), sales were up 42%, representing the benefits of increased marketing in Chicago and alignment with Ahold in all of Peapod's markets.

The Company's gross profit margin of 32% in the first quarter of 2001 reflects significant improvement from 22% in the year-ago quarter and 26% in the 2000 fourth quarter, due in large part to the advantages associated with leveraging Ahold's procurement and buying power in purchasing grocery goods.

Excluding the preferred stock dividend, the Company reported a first quarter net loss of $15.5 million or $0.86 per share, compared with a net loss of $12.7 million or $0.70 per share for the 2000 first quarter. This year's first quarter performance does, however, reflect a $4.6 million reduction in the net loss on a comparable basis from the $19.3 million net loss recorded in the 2000 fourth quarter before non-recurring items.

Peapod continues to use a centralized distribution model with two formats: free-standing distribution centers serving large metropolitan areas and smaller, fast-pick centers in smaller markets. The Company implemented the McLane warehouse management system in one East Coast facility in February, resulting in increased receiving and picking efficiency in serving customers. This system will continue to be rolled out this year in all other facilities.

Van Gelder added, ``We are pleased with the progress we have made in all markets. Joint marketing, co-branding and procurement leverage with Ahold USA supermarket companies are producing results that continue to exceed Company forecasts and are creating strong brand awareness for Peapod. We are convinced we have the winning ''clicks and bricks`` strategy in the Internet grocery business. We believe Peapod is well positioned to emerge as the long-term leader in an expanding U.S. Internet grocery marketplace.''