Big B buoyed by profit hike

Drug Store News, June 24, 1991

Big B buoyed by profit hike

BESSEMER, Ala. - Buoyed by its second consecutive quarter of strong earnings following a loss in fiscal 1991, Big B announced the reinstatement of its 4-cent quarterly dividend at the company's annual meeting May 28.

The decision to restore the dividend was based on two strong quarters of sales and profits as well as a positive outlook for the remainder of the year, according to company president Anthony Bruno.

Net profits in the first quarter ended May 11 rose sharply to $1.9 million compared with earnings of $395,000 for the same period last year, Bruno told shareholders. Sales were up 8 percent for the period to $132.7 million, he said, despite the closing of six underperforming stores during the quarter.

Three of those closed units were reopened as bargain stores, a new format being tested by Big B, Bruno said. In addition, one new store was opened in Lewisburg, Tenn., to bring store count to 305 units in Alabama, Georgia, Florida, Mississippi and Tennessee.

The jump in earnings was due largely to improved gross margins as Big B stabilized its pricing following a period of intensive price competition, particularly in the tough Atlanta market. In the final quarter of fiscal '91, the network of former Reed drug stores Big B acquired two years ago from Peoples Drug Stores broke into the black for the first time as efforts to consolidate operations and establish the Big B name in Atlanta finally bore fruit.

Those efforts were aided by the closing of several underperforming units in Atlanta near the end of the lease terms, Big B announced. In fiscal '91 the chain also acquired eight units from Revco, as well as the Rx files from 23 additional Revco units, while retaining over 75 percent of Revco's customers in nearby Big B units.

The rise in profitability over the last two quarters was also due to reduced warehousing costs, Bruno told shareholders. Big B consolidated its Atlanta warehouse into the newly enlarged, highly automated, 440,000-square-foot distribution center in Bessemer in January, giving its cost-cutting and inventory control efforts a major boost.

"This new facility will clearly make our distribution operations more efficient and more profitable," Bruno announced in the company's annual report. "This new facility is capable of handling well over 600 stores and will be able to supply our expansion stores for many years. . . [and] enabled Big B to close the Atlanta distribution center which was antiquated and inefficient."

Store expansion will be limited this year as the company pours cash flow into repaying the debt incurred from the Reed acquisition. "Currently we plan no more than five store openings, all of which will be conventional drug store units," Bruno announced.