Peoples is not for sale: Bloom

Drug Store News, Dec 11, 1989 by Susan Ball

Peoples is not for sale: Bloom

Denies published reports questioning chain's future under Imasco

WILLOWDALE, Ontario -- Imasco Ltd. has "no interest in selling" Peoples Drug Stores, its U.S. drug store retail division, David R. Bloom, chairman and ceo of Imasco Drug Retailing Group, told Drug Store News.

Bloom contends that a story by a Reuters reporter who interviewed Purdy Crawford, Imasco's chairman, president and ceo, on Nov. 24 took some of Crawford's comments about Peoples out of context. The article, which subsequently appeared in a Canadian newspaper, The Financial Post, was headlined, "Imasco may unload Peoples," and said Imasco "may sell the rest of its U.S. units unless profit improves in 1990." (Peoples sold about 325 stores this year in the Southeast and Midwest and is focusing on its 500-plus stores in its strongest markets in Eastern and Mid-Atlantic states.) The Reuters story was picked up by some U.S. newspapers.

"There's no truth to it. We are pleased with Peoples' progress and expect it to finish the fiscal year on plan," Bloom said. He added that Imasco expects further improvement in performance of the Alexandria, Va.-based chain in 1990 and predicted that Peoples' profitability will eventually "equal or be better than its principal competitors."

He said that he and David Eisenberg, recently promoted to president of Peoples, had received "corrective letters" from Crawford assuring them of Imasco's continued confidence in Peoples. Crawford was traveling at press time and couldn't be reached for comment.

"It was a wide-ranging interview on Imasco and its future prospects," said Peter McBride, Imasco vp-public affairs. "After Mr. Crawford said he was pleased with the results Peoples had achieved and expected continued improvement, the reporter asked a `what if' question--`but what if Peoples didn't make an appropriate contribution [in 1990].'"

The reporter quoted Crawford as saying, "If that doesn't happen, we'll assess that."

The Reuters reporter, Gary Regenstreif, based in Ottawa, told Drug Store News that Imasco had indicated about a year and a half ago, when it established a three-year turnaround plan for Peoples, that it might consider other options if the plan did not result in improved earnings growth. "Imasco is very earnings oriented," Regenstreif said. "I asked if selling [more than 300] stores was enough. It seemed an obvious question."

Peoples' operating earnings for the third quarter ended Sept. 30 were $1.761 million (U.S. dollars), versus a loss of $5.386 million in the comparable period last year. For the nine months, its operating earnings were $6.286 million, compared with a $10.477 million operating loss in the year-earlier nine-month period. Its comparable-store sales increase was 9.1 percent for the quarter and 8 percent for the year to date.

The chain has completed chainwide pharmacy computerization and has installed scanning in about 25 percent of its core stores and plans to equip at least 50-60 stores a year with scanning. A rigorous store-remodeling pace has resulted in the completion of its priority remodels.

There has been some speculation among industry observers that an LBO might be in Peoples' future. One drug store retailer, a close observer of Peoples, said, "An LBO makes sense, because they're cutting overhead to the bone and being very aggressive on sales, to make Peoples look better."

Another source told Drug Store News he felt that Peoples, which has downsized greatly, doesn't hold dealmaking profit potential for an investment banker, and that any industry outsiders interested in laying claim to the retail drug market would probably look instead at a Walgreen or a Rite Aid.

Kimberly Walin, a Prudential-Bache analyst, said, however, that "Five hundred stores is a big chain. But investors would have to make sure that the present management is willing to do a management-led buyout.

"The thought of a further sale is not out of the question," she continued. "Obviously, they're (Imasco) not opposed to getting rid of underperforming retail divisions."