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LONGS PLANS TO ADD AT LEAST 29 STORES BY 1986

Executive Summary

LONGS PLANS TO ADD AT LEAST 29 STORES BY 1986 with approximately 22 earmarked for California and Arizona expansion, the company noted at a N.Y. Society of Security Analysts meeting in NYC May 21. "This year, in our fiscal '85 year, we're expecting to open at least 12 stores," Longs VP-Administration and Treasurer William Combs stated. "It is possible we may open one or two more. For next year, that is for fiscal '86, we anticipate opening at least 17 stores." While the drug chain is continuing to build on its presence in California, which now has 142 stores, it has begun to expand outward into Arizona (11 stores) and Hawaii (16 stores) and will enter Colorado with "two or three" stores in early 1985. Noting the breakdown of expansion by state, Combs said for fiscal 1985 two stores will go into Arizona, and the balance targeted for that year into California. For fiscal 1986, two stores will go into Arizona, two or three into Colorado, one or two into Hawaii and the balance into California. Longs also has six stores in Nevada, one in Oregon and one in Alaska. Noting that both Eckerd and Payless entered the Denver market several years ago and pulled out within one or two years, Long said his drug chain would not be entering the Denver market. Although other chains are aggressively expanding into other businesses, such as auto parts and deep discount stores, Longs is taking a wait and see approach. Asked when Longs might expand to another business, President and CEO Robert Long responded: "We don't have a specific time table on that. We have enjoyed the luxury, thanks to financial analysts in the investment community, of being able to go back and analyze some of our competitors' mistakes." Long said the company would go into another business based upon its geographic area and strengths in various of its departments. The company was also asked about its perception of the deep discount drugstore business "either as a threat to traditional drugstore business or as an expansion opportunity for Longs." Long noted that the firm has run into competition with Revco's discount distribution. "In Phoenix, Revco has one of their prototypes," Long stated. However, he said, "because of physical proximity we haven't really been effected [by deep discount] in Arizona to the amount in California." Long also referred to the chain's "unique redistribution system." Longs redistribution concept involves a center which is not stocked on a regular basis with particular items. Instead, individual stores determine what they want to purchase and if there is a significant savings involved, Longs consolidates the orders, purchases the products and reships them out to the stores. Longs Exec VP Richard Scott said "about 10% or 11%" of the chains' sales are currently being shipped through its three redistribution centers, located in Northern California, Southern California and Hawaii. The percentage "could build to probably 18% or 20% without getting into very much, if any, staple merchandise at all," Scott added. He said gross profit margins could improve by three or four tenths percent.

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