Eckerd conquers acquisition pangs in '97

Drug Store News, Oct 20, 1997 by Peter Malbin

CLEARWATER, Fla. -- the past 12 months, Eckerd has grown from a $5-billion chain to one that will record sales of almost $10 billion this year, thanks to its acquisition by J.C. Penney and the subsequent merger of Penney's Thrift drug division into its operations.

As a result, Eckerd now operates in 25 states and holds the No. 1 or No. 2 market-share position in 33 of the 40 major markets in which it operates.

Nearly 200 members of Thrift's corporate staff, and some regional Fay's executives, have since become firmly entrenched at Eckerd's Clearwater, Fla., corporate headquarters. "We have also strengthened our headquarters staff," said Frank Newman, Eckerd's chairman, president and chief executive officer. "We increased our knowledge base by integrating a number of executives from Thrift. It has been great to see the contribution everyone has made."

At the time of the merger, Thrift operated stores under the Thrift, Kerr Drug and Treasury banners and had recently acquired the 272-store Fay's chain. The company had not yet begun to make any significant changes at the Fay's stores when J.C. Penney agreed to merge Thrift into Eckerd. One major task for Eckerd will be completed this fall, when the Eckerd banner will fly over all the acquired stores. The chain moved quickly to integrate the Thrift operations, confronting one of the most aggressive and comprehensive store-conversion processes in chain drug history during the past seven months. By the end of November, some 300 former Fay's stores, 700 former Thrift and Kerr stores and 114 Revco stores will have been converted to the Eckerd format and will bear the Eckerd name.

"This was a huge integration," Newman said. "We had to handle every piece of merchandise in every one of those stores. The planograms and adjacencies [in the various chains] were different. Stores were relayed and remerchandised. Interior signage was changed, and new interior decor was required in most cases."

But, before the conversions could begin, many decisions had to be made, including merchandise mix. The chain took a "best of breed" mix approach, identifying the best-selling items at the different chains and incorporating them in the mix.

Despite the acquisition by J.C. Penney and the resulting leap in sales and store count, Newman said, "Our strategy is the same as it was"--namely, to be the best convenient alternative, the best provider of pharmacy and related health care and the lowest-cost operator in the industry.

"We're still comfortable with that as the challenge to set for ourselves," Newman said.

This past year, Eckerd Health Services PBM continued its rapid growth by securing, among many others, state of Florida and Lockheed Martin Corp. business.

"Our PBM has been strengthened by the combination with Thrift's," said Newman. "We have significantly furthered our objective to have the strongest PBM in the industry in terms of size and volume. We're head and shoulders above everyone else in the industry."

Next year, Eckerd will open 250 new stores, and, in 1999, Eckerd will open 300 stores. Capital will be equally split between relocations and new stores.

As for expanding to additional markets next year, Newman said, "We don't comment on new markets until we're ready to open."