Duane Reade to open first Express store in Manhattan

NEW YORK Duane Reade, which is driving strong front end sales through its bolstered in-store convenience offering, is now taking convenience to a new level with the opening of a new convenience store format in Manhattan.

The retailer is testing the new concept, dubbed Duane Reade Express, at 52nd and Broadway. It is expected to open within the next week.

The 3,000-square-foot store will consist of a condensed store format specifically designed to meet the front-end convenience needs of shoppers, explained Rick Dreiling, chairman, president and chief executive officer, during its third quarter conference call with analysts. It will carry a limited assortment of its most frequently purchased items in convenience, general merchandise, and health and beauty.

The new concept will not have a pharmacy but it will have a pharmacy kiosk enabling shoppers to request prescriptions they can pick up at a nearby Duane Reade or have delivered to their home or office.

“We are excited about this test concept and believe it will provide an improved level of convenience and will be a natural complement to our larger, full service stores,” said Dreiling.

In addition, Duane Reade expects to open three additional DR Walk-in Medical Care clinics by the end of the year. Through its partnership with Consumer Health Services, Duane Reade currently has four such physician-staffed clinics in operation.

Recently, the company expanded the serving offering at its Diabetes Resource Center, a training and educational facility that debuted earlier this year, to include monthly support groups and additional class schedules. Now, the retailer is planning to open its second center in Brooklyn by the end of the year. In addition to diabetes, the new center will address obesity and hypertension.

“This service expansion is indicative of our ongoing commitment to improving the health and wellness of New Yorkers and the many communities that Duane Reade serves,” said Dreiling.

The news came as Duane Reade posted record front-end same-store sales thanks in part to strong sales across most major merchandise categories, including convenience foods and beauty, and solid performance of its Dollar Rewards customer loyalty program.

Total sales for the third quarter ended Sept. 29 totaled $408.8 million, up 6 percent from last year’s $385.7 million. Total same-store sales increased 7.8 percent. Front-end same-store sales rose by a record 9.9 percent on top of a 5.7 percent increase in the prior year. Pharmacy same-store sales rose 5.3 percent.

Net loss for the quarter totaled $22.1 million, compared with a net loss of $18.7 million in the year-ago period. This current year’s quarter includes $4.1 million of other expenses, including $2.7 million of close store costs and $1 million of costs incurred in connection with the company’s former chief executive officer.

During the quarter, Duane Reade opened four new stores and closed seven. At the end of the quarter, the company operated 241 stores compared with 249 stores in the previous year.

In addition, the company confirmed its full year adjusted FIFO EBITDA expected range of $76 million to $80 million. Citing the success of its turnaround plan as well as solid growth in same-store sales for the first three quarters of 2007, the retailer boosted the expected range of its full year total same-store stores increase to 7.5 percent to 8 percent.

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