BIG B GETTING BIGGER: ALABAMA DRUG CHAIN PLANS 28 DRUG STORE OPENINGS IN FY 1987, FIRM WILL QUADRUPLE IN SIZE SINCE SPIN-OFF FROM BRUNO's SUPERMARKET IN 1977

Big B plans to open an additional 18 stores in southeastern locations by next February to complement its 10 drug store openings already this fiscal year, the Birmingham, Ala.-based drug chain reported in its prospectus covering a recent stock offering.

With 133 drug stores currently in operation, including 101 stores in the chain's home state of Alabama, Big B's expansion plans for the current fiscal year ending Jan. 31 will give the chain over 150 drug stores. In addition to its drug store business, Big B also operates five B-Mart combo stores, four Big B Home Health Care Centers, and a Drugs For Less deep discount store.

If Big B meets its growth projections for fiscal 1987, the chain will have quadrupled in size since 1977, when the original 38 Big B stores were spun off from the Bruno's supermarket chain.

The drug chain also plans to introduce its second Drugs For Less "deep discount" store in Birmingham, Ala. this coming September, the prospectus reports. Big B opened its first Drugs For Less store in November 1985. At approximately 10,000 sq. ft., the Drugs For Less format "contains pharmacy and offers only high turnover merchandise such as health and beauty aids, cosmetics, tobacco products, photographic processing and supplies, stationery, household items, greeting cards, and candies," the prospectus points out.

Big B's ambitious store-opening program for fiscal 1987 follows on the heels of 20 drug store openings in fiscal 1986, which the company calls the "most aggressive growth year in its history." Last year, Big B also completed construction of a new 240,000 sq. ft. office and distribution center in Bessemer, Ala. Big B said in its annual report that completion of the new warehouse facility has "made possible" the chain's rapid growth plans.

The new distribution center now handles "approximately 70% of the merchandise in the company's drug stores," the prospectus notes. Big B said it "believes that the facility affords the company greater operating efficiencies and that it has the capacity to accommodate at least twice the company's current sales volume." Big B's fiscal 1987 sales volume is likely to top $200 mil. based on first quarter sales and recent annual sales growth.

For the first quarter of fiscal 1987, Big B sales were up 20.8% to $54.4 mil. Net earnings increased over 28% during the same period to just over $1.6 mil.

Much of Big B's recent growth has stemmed from geographic expansion outside of the chain's home state of Alabama. Since 1982, Big B has opened 32 stores outside of the state, including 12 in Georgia, 10 in the Florida panhandle, seven in Mississippi, and three in Tennessee.

Big B stands to gain $16 mil. from the one mil. shares offered by the company at $16 a share. The Bruno family, which controls approximately 40% of outstanding shares, is offering another 400,000 shares of Big B. After the offering, the Brunos will control over 29% of outstanding Big B stock.

The proceeds from the offering will go first toward retiring Big B's approximately $10.6 mil. in short term debt. In addition, the prospectus states, "the net proceeds of the offering will increase the company's financial strength and flexibility and provide the equity base for anticipated future expansion. This expansion may include the construction of new stores, the acquisition of existing store locations and the acquisition of one or more drug store chains."

Big B estimates the costs associated with the projected openings of 28 drug stores and two home health care centers at $8.5 mil. for the current fiscal year. Costs associated with the opening of six drug stores during the first quarter of fiscal 1987, covering both increased inventory and additions to property and equipment, approached $2.2 mil., the prospectus shows.

The size of Big B drug stores varies between 9,000 and 13,000 sq. ft. The prospectus notes that "a typical Big B drug store is approximately 9,000 sq. ft." Average sales per store in fiscal 1986 were $1.4 mil., which generated an average gross profit per store of $416,000.

Since fiscal 1982, Rx drug sales have steadily increased as a share of total drug store sales from 27% to 33% during the first quarter of fiscal 1987. Big B attributed the above average performance of its pharmacy departments to its senior citizen discount program and to its pharmacy inventory and customer account records system.

Big B's pharmacy computer system "maintains on-line pharmacy inventory records and calculates the prices of all Rxs filled," the prospectus notes. In addition, the system "maintains customer information, including medical history and other information furnished by the customer and a list of all Rx medicine purchased by the customer from the company. Each time a new Rx is filled by the company, the patient information is updated and the Rx is analyzed in an attempt to assure its compatibility with other medication prescribed for the customer." (FOOTNOTE)

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