Revco's selloff key to revitalization

Drug Store News, Feb 19, 1990 by Bruce Buckley

Revco's selloff key to revitalization

Revco's decision to pare down its store base and refocus on stronger markets east of the Mississippi makes a lot of sense. It is also highly reminiscent of actions taken by other troubled retailing giants who have gone on to kindle smaller but hotter competitive fires in the ashes of their former empires.

Safeway is one recent example that comes to mind. Like Revco, the Oakland, Calif.-based food/drug operator was saddled by an onerous debt load following its $4.2 billion leveraged buyout in late 1986. Once the supermarket industry's highest-volume performer, Safeway today is a far smaller yet more dynamic retailer. Its return to profitability was largely the result of a radical retrenchment back to a core of 1,100-plus stores in the chain's best markets.

Revco's retreat gives the chain its best shot to follow Safeway's lead. In the go-go years of the '70s and early '80s, Revco gobled up stores with reckless abandon. No market seemed too distant or forbidding to discourage its insatiable appetite. Though not the only drug chain pursuing a "damn the torpedoes" growth strategy, Revco was the industry's top honcho in store count. Its downfall was as much a result of the oppressive weight of this far-flung empire as of some poorly conceived acquisition and financial decisions, most notably the Odd Lot purchase and an overly ambitious LBO plan.

The prevailing industry strategy today is much more conservative.

Now Revco has joined the group. It will use its limited resources to improve strong markets as well as to enhance crucial support systems. Though success is by no means assured, Revco has vastly improved its chances.

Now a quick report on my recent column suggesting a change in the traditional term health & beauty aids (H&BA) to health & beauty care (HBC). The response was small but decidedly opposed to any change.

From T. Pat McLaughlin, president of HABA West, Santa Ana, Calif., came this reply:

"Being a basic traditionalist, my vote is to keep the category as it has been--H&BA. My two main reasons for this opinion are as follows:

"1. H&BA started in the drug industry. Why let a food publication change the description. Let them stick to frozen food!

"2. I'd really be in trouble. (I would have to get) a new company name, new stationery and new license plates [See photo above]. No way!

And from pharmacist Gerald Eger, Lebanon, Ohio, this tongue-in-cheek response: "An earth-shaking issue such as this surely makes third-party reimbursement, the generic drug controversy, the budget deficit and the plight of the homeless seem so trivial!"

Ouch!