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NORTHWESTERN's SALES TO PAY'N SAVE STORES ACCOUNTED FOR NEARLY ONE-THIRD

Executive Summary

NORTHWESTERN's SALES TO PAY'N SAVE STORES ACCOUNTED FOR NEARLY ONE-THIRD of the drug whsle. subsidiary's nearly $200 mil. sales in FY 1985, Pay'N Save noted in its proxy to shareholders covering the just-enacted leveraged buy-out by the Trump Group. According to the proxy, Northwestern sales were $196.9 mil. in fiscal 1985 (ended Feb. 2), including intersegment sales of $60 mil. The retail chain's internal business with its whslr. subsidiary translates into 30.5% of Northwestern's total sales for the year. The proxy notes that Northwestern customers "include certain of [Pay'N Save's] retail business segments, with intersegment sales made at cost plus a markup." However, not counting its intersegment business with Pay'N Save stores, Northwestern showed a 23% sales improvement in FY 1985. Not including intersegment sales, the whslr. posted volume of $136.9 mil. in FY 1985, up from the $111.6 mil. in sales Northwestern registered prior to its acquisition by Pay'N Save last February. However, in spite of the increased business, Northwestern's operating losses grew from $604,000 in FY 1984 to just over $1 mil. in FY 1985. The proxy indicates that all of Pay'N Save's business segments were under pressure in fiscal 1985. Although sales from its drug store operations were up 4.6% for the year, operating earnings from drug stores slipped 36.7% to $22.7 mil. Hardest hit was the chain's home center operations with sales declining 8% to $296 mil. accompanied by a net loss of nearly $1.3 mil. Apparel and auto specialty segment earnings were also off from fiscal 1984, the proxy shows. Overall, Pay'N Save corporate net earnings fell 50.8% to $14.8 mil. in fiscal 1985 on a 14.2% sales increase to $1.39 bil. The proxy statement may be the last public book at Pay'N Save provided by the company. On May 1, Pay'N Save shareholders voted in support of a leveraged buy-out plan by a New York investor group led by Julius and Eddie Trump for $23.50 a share.

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