Current market conditions have left us no other options

Ruben Rodriguez, eToys

The web-based toy shop, which is struggling in its home US market, announced that its UK-based operations will close at the end of the month.

The firm has also abandoned plans to expand into continental Europe.

The closure notice follows a warning from the California-based company two weeks ago that overall sales for the last three months of 2000 would be a little more than half those forecast.

"Current market conditions have left us no other options," eToys international vice-president Ruben Rodriguez said on Wednesday.

Market leader

The UK site has since its launch 15 months ago become the country's number one site among women surfers, James Bidwell, eToys' director of marketing, Europe, told BBC News Online.

"An MMXI survey said we had more traffic in November than sites such as the Marks & Spencer site and Handbag.com," Mr Bidwell said. "That is a tremendous achievement. It is most disappointing we will now close."

The site's sales in the run up to Christmas 2000 were twice those in the same period a year before, he said.

Many UK etailers have thrived in the run up to Christmas, with Tesco Online expecting to set new sales highs and Amazon, one of the best known virtual stores, dispatching a record 3.2 million items in the UK.

'Not unexpected'

But, following last month's profits announcement, the decision to close eToys.co.uk was "not totally unexpected", Mr Bidwell said.

Timeline - eToys

1996: Founded by Toby Lenk, a former Walt Disney executive 1997: Site, selling 1,000 items, goes live on 1 October 1999, May: Floated on Nasdaq 1999, October: Shares reach high of $84.25 1999, October: UK site launched 2000, December: Shares fall below $1 following profits warning

"We knew the parent company was considering all options. Running a European operation represents a significant investment."

In last month's profits warning, eToys blamed the firm's disappointing overall performance on largely US-centred problems.

These included difficult retailing conditions, the "current disfavour" towards internet retailing, and "a consumer population meaningfully distracted by the presidential election and its aftermath".

Jobs lost

The shutdown means that all 74 of eToys' European staff, based in London, Swindon and Belgium, will lose their jobs.

It follows the closures by the US-based sites Urbanfetch and TheStreet of their UK operations.

In all three cases the move has come because of the need to conserve cash.

"The extraordinary volatility of the sector has made it very difficult to raise new money," Mr Bidwell told BBC News Online.

Closing down sale

All items sold on the eToys.co.uk site will be discounted by at least 50% during a closing down sale.

Shares in eToys stood $0.03 lower at $0.18 in lunchtime trading on the US-based Nasdaq exchange, valuing the firm at $24.8m (�16.6m).

The shares reached a closing peak of $84.25 in October 1999, giving the firm a stockmarket valuation of more than $10bn.