Smith shifts Thrifty Payless priorities

Drug Store News, Jan 9, 1995 by Allene Symons

WILSONVILLE, Ore. -- The sudden ouster last month fo Thrifty PayLess chief executive Tim McAlear took many in the industry by surprise. But the rapid hiring of Bi-Mart president and chief executive Marty Smith as chairman/chief executive officer, along with PayLess veteran Gordon Barker as president and chief operating officer--have been hailed by many vendors, analysts and industry insiders.

On McAlear's departure, a company source would only say, "The board decided that a change of leadership was appropriate at this time." But personal factors and some personality issues were also cited by sources close to Thrifty PayLess as a factor. Some policies advanced by McAlear are expected to be reversed.

McAlear's departure appears unrelated to Thrifty PayLess' performance since the merger. A report released concurrent with the McAlear announcement stated that for the 1994 fiscal year and fourth quarter ended Oct. 2, operating earnings for both companies combined were approximately $106 million and $46.7 million, respectively. For the five months since the April 20 merger of the two chains, operating earnings were $89.9 million, slightly higher than expectations.

Said one retail analyst: "The earnings look very good, frankly." Another remarked that McAlear's departure "does not have to do with the operating performance of the company, or the direction that McAlear had laid out in terms of the overarching vision of Thrifty PayLess."

For the same five-month period ending in October, comparable-store sales were up 3.5 percent overall and 13.5 percent in pharmacy. A contributing factor to pharmacy's growth has been expanded hours and customer service in the Thrifty stores.

At a recent company meeting and dinner for some 500 vendors, many suppliers told Drug Store News they think the executive change is positive. Several called it an apparent return to more stability and focus.

Some policies advanced by McAlear reportedly will be reversed. Among them: McAlear's decision to scrap the identity of Thrifty Drug Stores. The Thrifty logo will now be retained, at least in Southern California, according to sources. Thrifty's huge private label line will also be maintained, reversing an earlier decision.

Among other McAlear policies which reportedly will be changed: A change in advertising strategy to increase the number of featured circular items, which had been reduced in recent months. Andy Striefel, senior vice president of merchandise, remarked at a recent vendor meeting that the chain would also "pay more attention to better pricing" and added that this means "not necessarily the lowest prices," although a possible lowering of retail price levels is also in the wind.

Lori Nelson, senior vice president of marketing and advertising, has left the company.

Both employees and vendors anticipate a different management style, one less personal and idiosyncratic.

Smith elaborated on his retail experience and philosophy in an interview with Drug Store News.

DrSN: How do you describe your management style?

MS: "I try to get other people to come up with the right answers. It's easy to give directions and orders to get things done. But I've found after 31 years it's much easier if people understand why you want them to do something.

"I wouldn't exactly say my management style is quiet, but I'm not the band leader. My strong suit is that I can get more out of ordinary people than most people can and as a result I get stronger people."

DrSN: Could you give an example?

MS: "Most people wouldn't be able to walk away from a $400 million business on one day's notice to takeover a $4.7 billion business--and not be worried what was happening at the $400 million business. And I haven't had one worry. I have excellent people and they know what to do."

DrSN: You have been with BiMart for three decades and Gordon Barker has been with PayLess 25 years. What kind of working relationship do you anticipate with him?

MS: "I've known Gordon for 25 years as a fellow competitor and grew to respect and admire his abilities. You learn a lot about your business by looking at your competition. Gordon was and is a great competitor. I'm glad we're on the same team."

DrSN: PayLess introduced upscale prototypes with boutique strategies in the past two years. On the other hand, a lot of stores in the Thrifty and PayLess chains are older. How do you view the melding of such a wide range of Thrifty and PayLess images?

MS: "PayLess and Thrifty's business is broader than [boutique drug stores]. We have to capitalize on their inherent strengths. Pharmacy is a driving force, then comes OTC and HBA, and then a lot of peripheral merchandise. The demand for other products is broader than one might think. Some of these locations are more important to the communities they serve."

DrSN: How do you assess the challenge ahead?

MS: "First, have all the pieces in place to make sure the sales you've forecast take place. Then control expenses and be sure that anybody in charge of expenses is in control of them.