Drugstore.com to buy skin-care site for $36 million

Seeking to strengthen a growing part of its business, Bellevue-based Drugstore.com said Monday it plans to buy Salu, which owns and operates the Web site SkinStore.com, for $36 million.

Drugstore said the deal is expected to become final in the first quarter of 2010 and will make it one of the Internet's largest sellers of beauty products.

Salu's SkinStore.com sells the types of skin-care products that can be found at spas and dermatologist offices. Privately held Salu, based near Sacramento, Calif., also distributes products in Australia and operates the Web site Spalook.com for Sandow Media.

Drugstore said it will pay $18 million in cash and the other $18 million in stock. Shares closed Monday up 15 cents, or nearly 5 percent, to $3.39.

As part of the agreement, Salu will continue to operate SkinStore.com near Sacramento.

Drugstore said the purchase will add to its per-share earnings in 2010, not counting between $2.4 million and $2.9 million in one-time transaction fees and integration costs. Salu is expected to post a profit of $500,000 on sales of at least $40 million for 2009.

Drugstore reported a profit of $246,000 on sales of $295.5 million for the nine months ending Sept. 27. That compared with a loss of $8.6 million and sales of $272.6 million for the same period last year.

Through its Beauty.com Web site, the company sells the types of "prestige" cosmetics that a department store might carry, as well as lower-priced cosmetics through its Drugstore.com site. Despite a tough economy, the company reported a 19 percent increase in its third-quarter sales of beauty products.

Its planned purchase of Salu would be its first since 2003, when it took over International Vision Direct to give it VisionDirect.com.

"Beauty is a cornerstone of our growth strategy. ... We can grow faster by working together as opposed to competing," Chief Marketing Officer David Lonczak said of the Salu deal.

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com