Thursday, April 01, 2004

Eckerd sale to retsructure drugstore segment Retailer J.C. Penney is in the last stages of selling off its Eckerd drug store chain. There are only two bidders left, CVS Corp. and Quebec-based Jean Coutu Group. The deal waiting to be finalized is that the 2,800 Eckerd stores with be divided between the two. According to reports, the Eckerd stores in the South will be acquired by CVS, while the Northern ones will be taken by Jean Coutu. The Eckerd chain has been a disappointment for Penney, but the company looks like it will get far more than it paid for the chain in 1996. According to the Wall Street Journal ("Sale of Eckerd to CVS, Coutu, Appears Close", 4/1/2004), even drug underperformers can be hot properties these days. The drugstore business has been outpacing the rest of retailing due to a surge in drug sales and a fast-expanding inventory of nonprescription drugs. Over the past five years, drugstore revenue grew 35.5%, twice the rate of the overall retail sector. The report cites the expanded sales of expensive drugs and likely windfall for the new Medicare laws recently passed, along with the aging population. The number of drugstores is growing, with 55,000 stores, many of them belonging to the big chains (Rite Aid, CVS, and Walgreen). But, as the article points out, drugstores now claim only 42% of prescription drug sales, Wal-Mart, supermarkets, and mail-order are getting an ever big piece of the pie. Most drugstores are becoming more and more dependent on selling food, stationery, cosmetics, and other items that trespass on other kinds of retail establishments. The deal will make CVS the #1 drugstore company, and it will rid the industry of one rival, though it increases the competitiveness of Jean Coutu, the #2 Canadian drugstore chain. That company has over 320 pharmacies in Canada (mostly Quebec), and owns, under the Brooks Pharmacy name, 330 in New England, where it is the #2 drugstore chain. 6:20:57 PM

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