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LAGUNA NIGUEL, Calif. -- These investors' conferences are all weird -- the

Montgomery and

Goldman Sachs affairs and certainly this

Cruttenden Roth Growth Stock Conference

. Picture the scene: a beautiful hotel on the cliffs above an expansive beach in Southern California. There's a big pool surrounded with beach chairs and warming sun, but the sunbathers are few because everyone at the hotel is in a suit and tie. CEOs, fund managers and an occasional scraggly member of the press are all pacing the veranda, talking on cell phones and staring longingly at the surfers out in the Pacific.

And that's not the weird part.

The weird part of these conferences is the artifice of it all. Like any part of the market, there are buyers and sellers (and, of course, the hangers-on). Here, the buyers are fund managers and traders. The sellers? The CEOs. So the CEOs take the stage, PowerPoint presentation on the ready, and you'd think they would be selling something, no? And yet it is tres gauche for a CEO to say something like, "My stock is a good buy." Unheard of, even at a micro-cap conference where some of these CEOs should come into the room on their hands and knees begging.

The money managers, meanwhile, sit in their chairs quietly. Only the most uncouth would ever utter, "I'm looking for a good stock to buy," even though that is the only reason they'd be here. Unless, of course, they were here looking to short -- those guys seem to have had their tongues removed they're so quiet.

The result is a gentleman's detente -- buyers don't talk of buying, sellers don't talk of selling. And yet the transaction somehow takes place.

OK, it's no


episode, but it's still weird.

Not only does Sky Dayton, the 26-year-old CEO of



disdain bricks and mortar, he seems to dislike big corporations. At a luncheon speech Thursday, he sneered at


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for its failed attempts to enter the PC, credit card and Internet markets and


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for an unsuccessful attempt at marketing clothes.

But most of all, he sneered at top competitor



. And this from a company with a $20 billion market cap. Revenue for Earthlink's third quarter, after all, totaled $49.8 million.

Hearing Dayton tell it, you'd think AOL was a sinister cult that lures innocent, neophyte Internet users (a vast majority of the 8 million or so a year who try out the Internet for the first time) and then traps them on its proprietary pages. The evidence? Of the 25 hours on average that an AOL user spends online a month, only four hours are spent surfing the Web, said Dayton. The rest of the time is spent on exclusive AOL areas. And that is not where people want to be, he insisted, as if someone had put a gun to their heads and forced them to sidle up to AOL's personal finance page.

Other evidence? Those with strong enough wills can break those AOL cybershackles -- some 6% are estimated to flee each month, he said. (AOL, however, does not disclose its churn rate.) They then "graduate" to Earthlink, where they spend on average 40 hours a month surfing the Web. This comment led one listener at the luncheon to mutter that maybe those people need to "get a life."

The future, according to Dayton, leaves just two classes of Internet service providers. There will be the premier providers, who will need to serve at least 1 million customers for critical mass while staying nimble and scrappy. And coexisting quite happily with them will be the mom-and-pop ISPs, which will serve a local area -- he likens them to a corner drugstore that has survived very nicely. (Of course, corner drugstores across America are disappearing upon the spontaneous regeneration of


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Duane Reades

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As for retailers who think people will still walk or drive and spend the day window-shopping and browsing: Forget that. It costs too much to operate the stores, and people would much rather shop online than wander the malls. "I hear about people shopping in the middle of the night in their pajamas," he said. "Square footage means nothing on the Internet."

There is one problem with that theory, though -- one that is obvious to anyone who hangs out at the mall. Half the point of going to the mall is hitting the food court. For Internet shopping to completely take over our lives, it will have to find a way to get instant delivery of the hot-dog-on-a-stick.

Look Out Gilligan: Category Killer Coming to a Lagoon Near You



chief Michael Rose seemed to take offense at Dayton's lunchtime sneer at bricks-and-mortar businesses. After all, Rose took a little store in Maui and turned it into the


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of the tropical islands.

Rose discovered in the early '80s that residents of Maui had been paying high prices for low-quality goods. Merchants took advantage of the fact that islanders weren't about to get in a boat and sail to the mainland just to compare other stores' prices for canned vegetables or lawn furniture. So he hopped in a boat and did it for them. He went to a bigger island where there was a Costco, bought a load of goods at retail prices, returned to Maui and resold the goods with a healthy markup -- and still beat out the prices of Maui merchants.

Now his stores are much bigger, but they're still a sixth the size of the average Costco. Rose has stores in Hawaii, Guam, American Samoa, Fiji and the U.S. Virgin Islands. Last month, he opened one in Curacao in the Netherland Antilles. Next up are New Caledonia, Tahiti, Barbados and Bermuda.

And yet, for a bricks-and-mortar company, his speech had echoes of Sky Dayton's. Rose described his Bellevue, Wash.-based company as a nimble upstart gunning for the lumbering giants like Costco,





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. And on remote islands, at least, the giants can't compete. In 1995, for example, Costco and Kmart both moved in on Guam, where Cost-U-Less had been operating for three years. Last August, Costco gave up and closed its doors.

His leg up on the competition? Fresh meat. "In 1995, we decided to add perishable products," Rose said. "Kmart and Wal-Mart can't do that."

As of the first quarter of last year, Cost-U-Less was generating $568 per square foot a year with a gross margin of 17%. That compares to $211 per square foot for Kmart with a 22% gross margin and $650 per square foot for Costco with a 12% gross margin.

The islanders are grateful -- or at least they were in 1992, according to a declaration from the Twenty-First Guam Legislature "commending and congratulating" Rose. A copy of this certificate was included in the company's 1999 Cruttenden Roth information packet. It reads, "On May 1, 1992, Cost-U-Less, a 20,000-square-foot store opened its doors to the people of Guam, making available a warehouse filled with 2,400 items ranging from Spam to microwave ovens and including both computers and disposable diapers."

Just imagine how happy those British Bermudans will be: finally, canned Spam at reasonable prices.


Marcy Burstiner


Cory Johnson