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AAFES expands its reach

BY Michael Johnsen

DALLAS Fueled by sales at each of its retail outlets, the Department of Defense actively is expanding its Army & Air Force Exchange Service outlets, the military retailer recently announced.

The organization has completed 123 major facility projects over the past five years, including six in 2009, exceeding $1.1 billion in capital expenditures.

“With a slumping economy, shoppers have been asking more questions about capital improvements,” stated AAFES SVP real estate Mike Gividen.“We want our customers to know we are investing in our facilities more than ever before.”

As a nonappropriated government entity, funds to build new or replacement AAFES facilities come entirely from the sale of merchandise and services. While the majority of earnings generated are returned to Air Force Services and Army Morale, Welfare and Recreation programs for quality of life efforts, historically about one-third is reinvested into exchange operations to build new facilities or update existing stores.

“There is a direct correlation between patronage at the exchange and resulting capital improvement projects,” said Gividen. “AAFES shoppers are essentially AAFES’ shareholders and our goal is to be our customers’ first choice. As such, we have a responsibility to properly re-invest in our facilities to provide a pleasant, first-class shopping experience.”

By the end of 2010, AAFES will have opened the doors to five new shopping centers, including the world’s largest exchange – a sprawling 490,000-sq.-ft. multi-use retail development at Fort Bliss, Texas. In addition to the new facilities, AAFES plans to remodel 24 exchanges in 2010.

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CVS Caremark gets aggressive with PBM.

BY Antoinette Alexander

WOONSOCKET, R.I. —If you ask Tom Ryan, it’s more about the offer and the outcomes than it is about the price that is driving CVS Caremark’s PBM business these days. And that has the CVS Caremark chairman, president and CEO optimistic about the 2011 selling season.

“While it is still early, results to date are encouraging, and we are optimistic. The clinical strategies and value proposition are resonating with clients and consultants,” Ryan told analysts during the company’s first-quarter conference call on May 4. Ryan noted that CVS Caremark’s PBM business—which posted a 2.6% boost in revenues during the first quarter—has a fair amount of new prospects for 2011 and is in a “net positive position to date.”

With a Bloomberg BusinessWeek report published just days earlier that indicated CVS Caremark is challenging competitor Medco with aggressive pricing for 2011 health plan contracts, it came as no surprise that pricing was top-of-mind for a few industry analysts.

CVS Caremark declined to comment for the Bloomberg BusinessWeek article, but Ryan told analysts during the May 4 call that “from a pricing standpoint, we think the market is similar to what it has been in the last five to 10 years. It is competitive and aggressive, and, at the end of the day, clients want the right service and they want the right clinical programs that are going to lower their overall healthcare costs. So it is a balance between pricing and service.” Ryan reiterated that CVS Care-mark’s PBM business leverages a range of tools to reduce pharmacy and overall healthcare costs to clients.

Its Maintenance Choice program now stands at 494 plans, representing 5.6 million lives. Lives switching from voluntary mail plans to Maintenance Choice typically see a significant increase in 90-day utilization and substantial savings for clients and their members, as well as better adherence and better generic penetration, Ryan said.

With regard to the retail side of the business, Larry Merlo, EVP of CVS Caremark and president of CVS/pharmacy, told analysts that the company expects the second half to benefit from, among other factors, merchandising initiatives at the front end.

“We are in the process of rolling out our ‘urban cluster program,’ and that group of stores represents about 20% of our base. And we are improving the category assortment, hours of operation and the checkout experience,” he added. “At the same time, we are also doubling the consumables space in about half of our stores to take advantage of quick shopping trips.”

For the first quarter, net revenues increased to $23.8 billion, up from $23.4 billion in the year-ago period. Same-store sales rose 2.3%, pharmacy same-store sales rose 3.7% and front-end same-store sales slipped 0.7%. Net income attributable to CVS Caremark totaled $771 million, versus $738 million last year.

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Reporters Notebook

BY DSN STAFF

Supplier News

Nicole by OPI is unveiling four new nail lacquer shades inspired by the hit show “Gossip Girl.” As part of the tie-in, the Warner Home Video’s DVD release of “Gossip Girl: The Complete Third Season” will feature an exclusive $1-off, in-pack coupon for the new nail lacquers.

The new Nicole by OPI nail lacquer shades include a shimmering green (Nicole … Spotted!); a rich blue (Too Rich for You); a sparkling silver (Scandals, Secrets and Sparkle); and a cool blue (Party in the Penthouse). The new nail lacquer shades will be available at select Target stores in July, and at select Walgreens, Ulta and other retailers in August.

Added Extras has launched a new Hello Kitty-branded beauty collection exclusively at Target. The 38-SKU line includes lip gloss, nail polish, cosmetic bags, press-on nails, hair care and bath and body products. The prices range between $1.99 and $9.99.

Ultimark Products is reviving the Prell shampoo brand with the help of singer-songwriter Alexa Ray Joel—daughter of musician Billy Joel and supermodel Christie Brinkley—who will be the new face of Prell. In the mid-1980s, Brinkley was advertised as the “Prell Girl.” The deal marks Joel’s first ad campaign and includes the original song “Hideaway,” which she wrote and performed for the commercial. Ultimark has partnered with The Emerson Group to distribute Prell throughout the United States.

Executive News

Ulta has appointed former Office Depot executive Chuck Rubin to serve as president and COO. Rubin, who also will serve as a member of the board, assumed his new role on May 10. Following a transition period of up to four months, Rubin will become CEO. Lyn Kirby will continue as CEO through the transition period, and there after will provide guidance and counsel as a member of the company’s board of directors through March 17, 2011.

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