drugstore.com Expects to Reach Profitability Target in 2003

CEO of Leading Online Drugstore Tells Investors Company Saw Strong Fourth Quarter

Source: Drugstore.com

BELLEVUE, Wash., Jan 7, 2002 - In a presentation today at the Morgan Stanley Internet, Software and Networking conference in Scottsdale, Arizona, Kal Raman, President and CEO of drugstore.com, inc. (Nasdaq:DSCM) will announce strong preliminary fourth quarter results and an accelerated plan to achieve positive EBITDA in 2003, approximately one year earlier than previously forecasted.

drugstore.com, inc., the leading Internet retailer of health, beauty, wellness and pharmacy products, experienced a strong fourth quarter performance with sales approximating $43 million or about a 19 percent increase over the same period in 2000. Raman also reported that the drugstore.com Web store added 225,000 new customers in the fourth quarter of 2001 to bring the customer base to approximately 2.4 million. Further, drugstore.com, inc. reduced its cash use to $9.7 million, ending the year with $79 million, which it continues to believe will be sufficient cash to reach break even.

"As our preliminary fourth quarter results are showing, drugstore.com is well-positioned to reach profitability earlier than originally forecasted," says President and CEO Kal Raman. "We have been able to increase our sales, increase our customer base and lower our cash use, while maintaining a commitment to both our customers and investors. We believe drugstore.com will turn EBITDA positive in 2003 and, in fact, will be EBITDA positive for the fiscal year ending December 2003 when excluding the impacts of non-cash marketing charges."

Today's presentation is available on www.drugstore.com under corporate information and will be webcast at 12pm PST.

drugstore.com, inc. will distribute more detailed financial results for 2001 during their 4th Quarter earnings and investor conference call hosted by Kal Raman, President and CEO of drugstore.com at 8 a.m. EST on January 28, 2002. The company's earnings announcement will be distributed via Business Wire and posted on the drugstore.com(TM) Web site. The conference call will be broadcast over the Internet and will be accessible live and through replays on the drugstore.com Web site under Corporate Information (www.drugstore.com).

drugstore.com, inc. (Nasdaq:DSCM) is the leading online drugstore and information site offering A Very Healthy Way to Shop(TM) for health, beauty, wellness, personal care, and pharmacy products. The drugstore.com(TM) online store provides a convenient, private, and informative shopping experience that encourages consumers to purchase products essential to healthy, everyday living. The Web store offers thousands of brand-name personal health care products at competitive prices; a full-service, licensed retail pharmacy; and a wealth of health-related information, buying guides, and other tools designed to help consumers make informed purchasing decisions. Consumers can personalize their shopping experiences with shopping lists, e-mail reminders for replenishing regularly used products, and private e-mail access to pharmacists and beauty experts for questions.

drugstore.com, inc. has been awarded the Verified Internet Pharmacy Practice Sites (VIPPS) certification by the National Association of Boards of Pharmacy (NABP) as a fully licensed facility exercising the best safe pharmacy practices in compliance with federal and state laws and regulations.

drugstore.com, inc. has formed strategic relationships with Amazon.com (NASDAQ:AMZN), Rite Aid Corporation (NYSE, PSE:RAD), WellPoint Health Networks Inc. (NYSE:WLP) and General Nutrition Companies, Inc. (NASDAQ:GNCI).

The historical 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. Words such as "expects", "believes", "anticipates" and similar expressions are intended to identify forward-looking statements. 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: drugstore.com's limited operating history, the unpredictability of future revenues and expenses and potential fluctuations in revenues and operating results, risks related to business combinations and strategic alliances, consumer trends, the level of competition, seasonality, the timing and success of expansion efforts, risks related to systems interruptions, possible governmental regulation, and the ability to manage a rapidly growing business. Additional information, regarding factors that potentially could affect drugstore.com's business, financial condition and operating results is included in drugstore.com's filings with the Securities and Exchange Commission, including in the prospectus dated March 15, 2000 relating to drugstore.com's public offering of common stock, in the prospectus on Form S-3, effective October 2, 2000 and in our periodic filings with the SEC on Forms 10K and 10Q.

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