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CHAIN PHARMACIES' AVERAGE TOTAL SALES BROKE $2 MIL. MARK FOR FIRST TIME IN 1984, NACDS-LILLY DIGEST NOTES; RECORDS SET IN Rxs DISPENSED, NON-Rx SALES

Executive Summary

Chain drugstores' 1984 total sales averaged more than $2 mil. for the first time in the 16-year history of the NACDS-Lilly Digest, the 1985 edition reported. An increase of $288,251 (14.5%) over 1983 levels boosted average chain drugstore sales to $2.3 mil., according to the digest, an analysis of 1984 operating data of 1,282 chain pharmacies nationwide. "This growth rate was significantly higher than the average annual growth rate of 9.5% for the last decade," the report states. The increase was aided by a 14.3% growth in Rx sales over 1983 levels to an average of $541,386. The report attributed the rise in Rx sales to a 3.5% increase in the number of Rxs dispensed coupled with a $1.13 (10.5%) hike in average Rx price to $11.90. The price differential in Rx charge between the average chain and average independent was only 10› in 1984. The total number of Rxs dispensed in the average chain drugstore passed the 45,000 mark for the first time in 1984. Although "the Rx department generated sales of $1,155 per square foot as compared with only $199 for other merchandise" in the average drugstore sampled, the digest reports that Rx sales remained flat compared with 1983 as a percentage of total sales. By contrast, independents' Rx sales accounted for more than 60% of total sales in 1984, a ratio gain of 2% over 1983. "'Other' sales posted the largest increase in terms of both dollars and as a percent of sales in NACDS-Lilly Digest history -- a gain of over $220,000 and 14.5% respectively," the document states. The report notes that a 6.4% increase in the average size of chain drugstore Rx departments to 451 sq. ft. may explain the .6% decline in Rx sales per sq. ft. in the professional area. Cost of goods sold for the average chain drugstore increased by $220,512 (15.5%) in 1984, "with the result that gross margin declined to 28% of sales," the report continued. "This was the lowest gross margin percentage in the history of the digest." In addition, "profit retreated to 4.7% of total sales (down from 5.1% in 1983)." Nearly one-third of all chains responding to the survey reported net profits of 2% of sales or less, including 19% that operated at a net loss. "At the other end of the profit range, 21% of respondents earned a net profit between 7% and 10% of sales, and just 9% of all chain outlets reported a net profit in excess of 10% of sales." In other words, the report asserts, "three out of every 10 chain stores produced less than a 2% net profit, whereas only one out of 10 generated a net profit of greater than 10%." The digest predicted that 1989 sales will increase over 27% from 1983 levels. "The average gross margin is forecast to increase to 29.6% of sales," as Rx volume rises "at an annual rate of 1.8% and Rx prices are projected to increase at an average annual rate of 3%," the report states. Chart omitted.

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