Dot: an end to operations?

Drug Store News, Jan 6, 1992

Dot: An end to operations?

LENEXA, Kan. - Dot Drug Stores may close operations within the next few weeks, two years after its takeover from Wal-Mart Stores by a small team of investor-managers. The company's financial troubles have mounted despite a massive effort to revitalize and reposition the 14-store chain in its five Midwestern markets.

Dot acknowledged its problems in a Dec. 12 letter to vendors. In that letter, Dot chairman Jerry Gaddis told suppliers: "The recent poor economic climate, the entry of new competition into our best market areas and other events beyond our control have had a significant negative impact upon our revenues and income.

"Despite cutting our costs to the bone and many efforts to obtain additional financial resources, we have made the extremely difficult decision that we are unable to continue doing business," Gaddis continued. He added that Dot would "use our best efforts" to pay vendors' outstanding claims, but said the company's secured lender Bergen Brunswig, "has a first lien on all our assets."

Gaddis noted the company has developed a plan to "systematically close stores and liquidate inventory over the next 60 days" in order to pay its debts. He said negotiations were ongoing in attempts to sell groups of the stores to one or more national drug chains. He offered one ray of hope that Dot could remain in business, noting, "the company has contacted a financing source regarding the possibility of an investment of new capital which would allow the company to continue operating in its strong markets."

Gaddis, who helped engineer the buyout, remerchandising and remarketing of the off-price drug chain, could not be reached for comment. At press time, efforts to contact Dot co-founder and head of operations Terry Files were also unsuccessful.

One vendor contacted by Drug Store News said his company had had indications that all wasn't right with Dot as early as last spring, when payments slowed. "Phar-Mor is coming in big-time, opening stores right next to them," said the vendor, "Their stock situation in the stores is not good. They worked hard to improve the stores (as reported in both May 1991 issues of Drug Store News), but since that time it's been obvious they haven't gotten a good return on that investment. Business did not pick up like they wanted it to."