Christmas '93 points to promising new year

Drug Store News, Jan 17, 1994

If Christmas 1993 is any indication, 1994 will be a pretty good year for the chain drug industry.

Year-end sales for drug chains in almost every region of the United States were convincingly better than in recent years, underscoring the belief by most economists that the economy is truly gaining strength--and, equally important, that consumers are finally beginning to believe it.

Among typical comments by drug chain executives was that of D. Dwayne Hoven, president and chief executive of Revco D.S. "We're very pleased with the results of our holiday sales, which met our aggressive sales plan," he said.

Added Eugene Applebaum, chairman, president and chief executive of Michigan-based Arbor Drugs, "Our holiday sales broke all records. The company was right on plan, which was aggressive... with all segments, including pharmacy and front end."

Sales were also strong at CVS. "People were buying that extra item or two at the checkout, and the selling season was good in every market," said CVS spokesman Fred McGrail. "Sales were strong across categories, with the prescription business particularly strong."

McGrail said the chain was aggressive in its buying, and sales exceeded the chain's plans.

Even in California, which has been hit hard by layoffs and a slow recovery, Christmas was deemed a success. Said Chris Bement, executive vice president of administration for Thrifty Drug, "We did very well and were very pleased with our sales. For the month, we had increases in both sales and gross profit dollars."

This Christmas was particularly satisfying for the chain drug industry, which, by and large, prided itself on anticipating correctly that consumer demand would pick up at year-end. In post-Christmas interviews with leading drug chains around the United States, Drug Store News turned up several common themes:

* Demand for core drug store products was up in many categories, including prescriptions, cosmetics, Christmas seasonal products like lights and ornaments, and appliances. At Alabama's Harco Drug, "Christmas lights, [wrapping] paper and boxed cards were all very good," said Jim Harrison III, vice president of purchasing. Overall, he said, "We've been pretty pleased with the results."

Toys were a disappointment for Harco and other chains, but not for Arbor. Said Applebaum, "Some stores were just booming in toy categories." Quick response to demand as determined by POS data was a big plus for Arbor this year, Applebaum said, and allowed the chain to restock quickly and get product where it was turning.

Leonard Marks, vice president of general merchandising and pharmacy for London Drugs in western Canada, said the chain was "very pleased with samll electrical appliances, especially in personal care.

"The season was very successful and we were quite pleased. We've just come through a good season--we're optimistic and looking forward to 1994," Marks added.

* Chains bought more aggressively than in recent years, but they also bought intelligently. As a result, overstocks were not a big problem for most chains. "I can't remember a year when the sell-through was as good as this year," noted Andy Striefel, vice president of merchandising at PayLess Drug Stores. "Inventory levels have never been cleaner--from all categories: cosmetics, electronics, appliances, Christmas seasonal. It's a nice feeling to come through Christmas this way."

Added Alan Levin, president of Happy Harry's, "We had good sell-though. There was very little merchandise left on the 26th."

* Sales of film, gift wrap and outdoor lighting were particularly strong. Said Levin, "We went back to the well for wrap 10 days out and finished selling 50 percent more. On Dec. 26, the chain had 250 rolls left throughout the chain's 27 stores."

Film, he added, "has been running on 20 percent increases and processing has exploded."

"One area we've done amazingly well in--we've had a 38 percent increase--is photo developing," said Thrifty's Bement.

* For many chains, sales overall started soft and accelerated as the month progressed. Said Douglas Gravning, general merchandise manager for Lewis Drugs in Sioux Falls, S.D., "The season came very late." Nevertheless, he told Drug Store News, "It was very strong in our gift category and in real basic gifts this year. Soft goods did well. It was a good cleanout year. We're pretty excited."

* The busy stores in December spawned some ancillary successes in other categories. "Another thing that sold well after Christmas was Nintendo games," said one executive. "It seems a lot of people got money for Christmas. Sales were real strong after Christmas."