Former Revco units will boost Perry earnings: Robinson

Drug Store News, August 20, 1990

Former Revco units will boost Perry earnings: Robinson

PONTIAC, Mich. - Perry Drug Stores is looking for a big boost in sales and earnings as it consolidates 40 former Revco drug stores in Michigan and continues its store renovation program.

Perry chairman and ceo Jack Robinson told financial analysts the company was looking for sales of $720 million to $730 million next year, following the incorporation of 35 of the Revco units purchased earlier this year and the closing of the remaining five.

Speaking to about 75 analysts, stock brokers and portfolio managers in Detroit in July, Robinson also predicted that Perry's profits would rise more quickly than sales in fiscal 1991. In addition, he said, "we are hopeful that we will be able to reinstate dividends in about a year."

Perry earned $7.1 million on sales of $670 million in fiscal 1989, and earnings momentum is still showing evidence of a successful turnaround after two years of losses in fiscal 1987 and 1988. Since the end of its last fiscal year in October, 1989, it has added four new stores and closed or sold 10 drug stores in Wisconsin, Chicago, Michigan and Indiana. In May, the company also sold its A. L. Price deep-discount drug store division to former F&M and Revco D.S. president Bill Edwards.

Perry plans to open another four to six units this year, and accelerate its expansion plans to 20 stores a year. The chain opened its 14th store within the Detroit city limits July 25 to considerable fanfare, bringing total store count to 206 units in Michigan and 23 in the greater Chicago area.

With its improving earnings picture, Perry is attracting more attention from Wall Street. Merrill Lynch analyst Fran Blechman Bernstein in July raised her investment rating for Perry from "neutral" to "above average."

"The earnings growth outlook for Perry has been accelerated by the recent acquisition of 40 stores from Revco, and by the disposition of its deep discount drug store division and the closing of unprofitable stores," Bernstein wrote in a July 19 report. "Although the turnaround of Perry Drug Stores has taken longer than expected. . . accelerated growth is now [a] prospect."

Bernstein estimates that Perry's earnings could increase 20 percent or more annually over the next three to five years.