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FANTLE's Rx SALES GOAL IS TO ACCOUNT FOR 20% OF TOTAL VOLUME

Executive Summary

FANTLE's Rx SALES GOAL IS TO ACCOUNT FOR 20% OF TOTAL VOLUME, the pharmacy chain's chairman, Sheldon Fantle, told a March 28 press conference in Washington. The prescription drug sales goal is one aspect of a upcoming promotional campaign that will emphasize the chain's pharmacy business. Fantle noted that prescription drug revenues accounted for only 14% of total sales last year. The chain drug store industry has placed greater emphasis in the past several years on pharmacy activity as a higher margin area of business. For example, Walgreens declared in its annual report for 1988 that its prescription sales totaled 27% of overall sales last year; the chain added that the percentage was "up from 15% just seven years ago." Rite Aid is among industry leaders for prescription sales, with Rx drugs accounting for 39.3% of overall sales, the chain said in its annual report for 1988. Fantle said he called the press conference to announce several changes "that I believe will change the way Washingtonians think about drug stores." The chain began running name awareness television ads on local Washington stations during the last week in March. By April 2, all of Fantle's 69 stores will carry the Fantle's name, the chairman said. The company initially announced its plans to change the Dart name to Fantle's last June. Part of the chain's plans includes free delivery of prescription drugs. The chairman said that "Fantle's is the only drug store chain in the country" to offer the service, although many independent retail pharmacies traditionally have offered free delivery. Fantle added that the chain "will also deliver nonprescription merchandise for a small service fee for orders that total more than $ 25." In addition, Fantle announced plans to embark on an innovative marketing program whereby patrons of Fantle's will be allowed to target 5% of their store receipts to the charity of their choice among a list of charities agreed on by the chain. Called the "Good Neighbor Fund," the program calls for a two-part sales receipt; one part can be torn off and sent to a customer's favorite charity, which can then redeem the receipts for 5% of the total sale. The "revitalization" program also includes an effort to remodel old outlets over the next three years to "resemble our prototype stores in" Centreville and Manassas, Virginia and Gaithersburg, Maryland, Fantle continued. The remodeled outlets will incorporate "a new store layout that will feature the pharmacy." In addition, "quality merchandise," including "gourmet foods and beverages," will be "displayed in boutique settings," he said. The remodeling project, which Fantle estimated would cost an average of $ 150,000 per store, will be funded from the cash flow generated by a hoped-for improvement in operations. Fantle's plans to restructure more than its stores. The chairman noted that the firm's chief financial officer and general counsel were in New York during the press conference to negotiate a restructuring of the chain's debt. Kidder, Peabody is the chain's financial advisor. Fantle acknowledged that a deferral of interest payments is "a key ingredient" to the chain's future. Last spring and summer, Fantle's sold off its leasehold interests for 11 of its shopping center locations, including 10 Home Center stores, for a net purchase price of $ 30.5 mil. The company said at that time it was looking to get out of the Home Center business in order to focus on drug stores. The former Dart Drug chain was purchased by Fantle and his backers following an announcement in late 1987. In a bit of unfortunate timing for Fantle's, the Labor Department sued Dart Drug and two former officers -- Alvin Towle and Stephen Hansbrough, formerly the respective chairman and president -- for illegally obtaining $ 3.5 mil. from the company's employee pension plan when they purchased the firm in 1984. Fantle's inherited a large debt from Dart Drug Stores -- a projected annual debt service of $ 28 mil. -- and to date has found it difficult to reverse the chain's fortunes.
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