Duane Reade forges ahead with store transformation
NEW YORK Duane Reade’s chairman and CEO John Lederer expressed cautious optimism during its first-quarter conference call with analysts on Tuesday as the company forges ahead with its transformation initiative amid a rough economy.
As previously reported by Drug Store News, the Manhattan-based pharmacy retailer is in the midst of transforming its store base using consumer research it compiled last year as the underpinnings for the go-forth strategy.
Duane Reade is rebranding its stores and has a new brand mantra, “Duane Reade equals New York living made easy,” to articulate its desire to become the destination of choice for beauty, wellness and convenience needs. These core offerings are supported by a new concept segmentation that is sub-branded: “How I look, how I feel and what I need now.” In addition, the company recently revamped its Web site to reflect the company’s new look and feel.
While Lederer acknowledges that the economic environment remains challenging, the results appear to be paying off as adjusted EBITDA rose 7.8% to $19.7 million, same-store sales rose 1.1%, and gross margins continued to expand.
“It was a period in which there were significant external challenges; however, in light of these challenges and weakened consumer demand we continued to perform well and continued the positive momentum of our business,“ Lederer told analysts.
Net retail store sales rose 2.8% to $426.7 million from $414.9 million in the year-ago period. Total net sales rose 4.1% to $444.5 million. Total same-store sales rose by 1.1% as front-end same-store sales, which were negatively impacted by a shift in the Easter holiday, decreased 0.8%.
Pharmacy-same-store sales rose 3.5%.
Net loss improved 18% to $17.2 million from $21 million.
Gross margin on net retail sales, which excludes pharmacy resale activity, increased 32.2% from 32% in the year-ago period, reflecting higher front-end selling margins resulting from an improved mix of higher margin categories includes of private label products and reduced inventory shrink losses.
In addition to addressing the quarter’s financials results and reaffirming its previously announced 2009 cost savings plan of $7 million to $10 million, Lederer also discussed plans to open a new 14,000-sq.-ft. store in Manhattan’s Herald Square during the summer.
“I bring that [store] to your attention because it is in the middle of Midtown and it has some incredible traffic counts. It is in a very hustle and bustle area and we are going to show some new innovation in that store in terms of categories and we are going to show the consumer where this brand is headed,” said Lederer.
Economy puts Publix under pressure
LAKELAND, Fla. The economic forecast continues to look overcast as more and more pressure is placed on corporate profit margins — Publix, one of the Sunshine State’s leading grocers on Friday reported a 6.3% decline in earnings on sales growth of 2.2%.
“The economy continues to affect our results and stock price,” stated Publix CEO Ed Crenshaw — the company’s privately-held stock sold only to Publix employees fell $0.65 to $15.55 with the announcement. “We look forward to an improving economy,” Crenshaw said.
Publix operates 1,005 supermarkets, 720 of which are in Florida, a state that relies heavily on tourism. It’s not so much that fewer tourists equals fewer shopping trips to the local supermarket, as it is fewer tourists equals fewer tourism jobs — jobs that help feed the local economy.
The Florida unemployment rate is currently 9.7%, according to the Bureau of Labor Statistics for March, compared to 8.5% nationally. And that unemployment is expected to continue to pressure supermarket sales.
“The industry is at the beginning (of) its sales challenges rather than toward the end,” Pali Research analyst Robert Summers stated in a recent research note. And that means that grocery sales are expected to “drop further and remain negative longer than they did during the last downturn.”
And while all the media attention currently surrounding the possibility of an H1N1 flu pandemic certainly doesn’t bode well for tourism, news reports regarding Florida’s inadequate supply of antivirals may actually prove to be a boost of sorts for Florida pharmacy operators, should that need arise. According to reports, Florida only has 120,000 courses of Tamiflu in its stockpile, compared with the 1.7 million courses the federal government recommended the state purchase to prepare for a pandemic. Federal stockpiles are designed to supply flu medicine to 15% of any given state’s population.
CVS/pharmacy pays tribute to caregivers with contest
WOONSOCKET, R.I. CVS/pharmacy is paying tribute to caregivers and celebrating the role they play in America by honoring 10 caregivers for their commitment to others as part of its For All the Ways You Care contest.
CVS/pharmacy will present the grand prize winner and nine finalists with more than $100,000. The winning stories were selected from more than 4,200 submissions.
The grand prize winner is Pat Pumphret of Winthrop, Mass. Pumphret, who will receive $25,000, was nominated by a friend with an essay titled, “A Place to Live, A Place to Die,” which recounts Pumphret?s 30-plus years as a provider and foster parent for severely disabled and chronically ill children. For these needy children whose parents are unable to care for them due to such issues as addiction or mental illness, Pumphret offers a place to live and thrive outside of hospitals and nursing homes, ensures they get the care they need from doctors and therapists, and provides the love and warmth of a family.
“Pat’s story is one of courage and heart,” stated Larry Merlo, president of CVS/pharmacy. “Her dedication to these children despite the challenges it may bring to her own life is truly extraordinary. We’re proud to honor Pat and the For All the Ways You Care contest finalists, and hope their stories provide inspiration to caregivers across America.”
In addition, Lisa Kanode, a CVS/pharmacy lead pharmacy technician for Midlothian, Va., was named the winner of the company’s For All the Ways You Care employee contest and will receive $10,000.