DRUG EMPORIUM PLANNING 30% EXPANSION TO ABOUT 190 STORES BY FEBRUARY

DRUG EMPORIUM PLANNING 30% EXPANSION TO ABOUT 190 STORES BY FEBRUARY with the addition of 40 to 45 stores "principally in existing markets," the Columbus, Ohio-based deep discount chain announced in a recent prospectus. The $ 322 mil. annual sales volume company expects the growth to fuel the first national advertising campaign for the 11-year-old chain. Drug Emporium currently operates or franchises 146 stores in 26 states, making it the largest chain of deep discount drug stores in the country, the firm maintains. Of the new stores planned for fiscal 1988, 13 to 15 will be owned by the company with the remainder being franchise stores. The drug chain has increased the number of stores by an average of 43% a year since 1984 when its operations included 26 stores. The highest concentrations of Drug Emporiums are in Atlanta (16), Philadelphia (16), Columbus (6), Los Angeles (5), Washington, D.C. (4), Jacksonville, Fla. (4), Milwaukee (4), and Cincinnati (5), which account for 40% of the total. The remainder are scattered throughout the country, with the exception of the northeast, including the New England states, New York, and New Jersey. Drug Emporium's $ 322.2 mil. in sales for fiscal 1988 (ended Feb. 29) represent an increase of 33.7% over the previous year, with revenues growing at a yearly rate of 63% since fiscal 1984. The average volume per store was over $ 5 mil. last year, according to the chain. Net income reached $ 4.5 mil. in FY 1988, or 1.4% of the company's revenues, compared to fiscal 1987 when earnings of $ 1.5 mil. accounted for only .6% of sales. Franchise fees and royalties totaled $ 1.7 mil. for the past fiscal year. Among the existing 146 stores, 84 are franchised. Cosmetics, health and beauty aids and prescription drugs contribute 70% to 80% of Drug Emporium's volume, the firm said. Each store carries approximately 25,000 SKUs and averages 24,000 square feet, including warehouse space. The stores range in size from 18,000 to 30,000 sq. ft. The company purchases the majority of its stock from 100 vendors, with no single vendor accounting for more than 5% of the chain's business. Drug Emporium estimates its retail prices are 40% lower than "traditional competition." Drug Emporium allows each of its stores "a large degree of autonomy" in making purchasing and merchandising decisions, the prospectus notes. The chain eschews "a rigid merchandise mix, but encourages each individual store to modify the balance in order to best serve the customers," the prospectus adds. Stores are encouraged to buy as much merchandise as possible "on deal." Although Drug Emporium does not keep track of sales by category at point-of-sale, the chain estimates that approximately 52-58% of a typical store's inventory is health and beauty aids, 10-12% prescription drugs and vitamins, 10-12% cosmetics and fragrances, 14-16% general merchandise, 3-5% food, and 3-4% greeting cards. The firm's most recent acquisition was the December purchase of Pacific Drug Distributors for approximately $ 4.6 mil. The company is also the majority shareholder in three consolidated distributor subsidiaries: Cincinnati Drug, Bruh Drug and Roemon Drug. The 1.5 mil. share initial public offering of common stock was completed July 1 for $ 14.50 per share. The roughly $ 21.8 mil. in proceeds will be used to repay part of the $ 20.2 mil. in outstanding borrowings used to finance the purchase of inventory, the company said. The offer was underwritten by Furman Selz Mager Dietz & Birney.

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