Dot's new owners set an aggressive agenda

Drug Store News, Feb 19, 1990 by James Frederick

Dot's new owners set an aggressive agenda

LENEXA, Kan. -- Dot Discount Drugs' new owners plan to recast the 14-store deep discounter through efforts to boost convenience, image and selection in the stores and an aggressive, well-funded expansion program, Jerry Gaddis, new vp-merchandising and co-owner, told Drug Store News.

Gaddis is part of a four-person investment and management group which bought Dot from Wal-Mart Stores in a deal made final on Feb. 1. The team also includes new Dot president Ron Benjamin and chief financial officer Paul Miller, who largely financed the purchase with their own funds, as well as vp-operations Terry Files.

Benjamin and Miller are Kansas City investors and entrepreneurs who operate a number of businesses. Files, an eight-year Wal-Mart veteran, helped launch Dot and has run the division for Wal-Mart.

Gaddis is the chain drug industry veteran of the group, having served during his career as head of purchasing for H&BA and cosmetics for Gray Drug Fair, and as vp and head of specialty retailing for Medicare-Glaser.

The Dot purchase followed more than a year of negotiations between the new management team and Paul Carter, Wal-Mart's chief financial officer. "We're not a leveraged deal," he said. "We have the financing to expand," said Gaddis.

Given that, he said, Dot's new business plan is "to maximize our posture in every market we're currently operating in," and expand into new markets. "We plan to open additional stores in our current markets first." The off-pricer is also putting front-end scanners in all stores, probably by July.

The chain is also launching "a very aggressive advertising program" to boost Dot's sales and name recognition, Gaddis said.

Dot's current operating network consists of five stores in the Kansas City market, three units each in St. Louis and Des Moines, Iowa, two in Wichita, Kan. and one store in Lincoln, Neb. The chain will continue to sublease those sites from Wal-Mart, Gaddis said.

Wal-Mart opened its first off-price drug store in 1983 in West Des Moines, Iowa-Dot performed steadily but not spectacularly for Wal-Mart, which was busy developing other retail formats, such as Sam's Wholesale Club, during these years. Retail analysts have speculated that Dot has been held back by some less-than-stellar store locations, a merchandise mix that leaned too heavily on groceries at the expense of higher-margin drugs and H&BAs, and a lack of total commitment from its parent company, which was concerned about cannibalizing sales at Wal-Marts.

Nevertheless, said Gaddis, the Dot stores are "running good sales increases," with total sales of more than $100 million a year and per-store averages of more than $7 million. In addition, he said, the merchandise mix is being fine-tuned to emphasize pharmacy and health care. "We're basically a drug store--that's our niche," said Gaddis.

Along those lines, he said, Dot's new management team will emphasize selection and convenience, and instock positions on basic drug store merchandise.