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Aetna, Take Care sign national contract; rapid clinic growth is predicted

BY Antoinette Alexander

CONSHOHOCKEN, Pa. Take Care Health Systems, a subsidiary of Walgreens, has signed a national contract with Aetna to become part of its national network of providers.

The move not only further broadens Take Care Health’s base of patients covered nationwide, but, according to at least one industry observer, fosters clinic growth over the coming years.

“This is yet one more step that should support rapid clinic growth over the next five years,” stated Goldman Sachs analyst John Heinbockel in a research note. “This growth could, over time, visibly contribute to Walgreens’ top- and bottom-line growth rates.”

Aetna serves more than 15 million medical members and, in Heinbockel’s view, gives Take Care “added credibility and name recognition,” as well as a larger customer base to target.

“Take Care Health is serving a critical need in the U.S. health care system by providing access to quality, affordable health care, while integrating with the medical community to deliver patient-first care,” stated Peter Miller, president and chief executive officer of Take Care Health, which currently has 56 health clinics in operation. “Americans have embraced the concept. We have seen nearly 200,000 patients with consistently high patient satisfaction rates since opening our first centers in November 2005.”

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Fred’s Inc. reports 4 percent increase for 2Q

BY Michael Johnsen

MEMPHIS, Tenn. Fred’s Inc. last week reported second-quarter sales of $424.6 million for the period ending Aug. 3, representing an increase of 4 percent. Comparable store sales for the quarter increased 0.8 percent versus the same period last year.

“Sales in July were below our expectations. Softlines, pharmacy and stationery were not as strong as we had planned, while pets and domestics were ahead of plan for the month,” commented Fred’s chief executive officer Michael Hayes on the results.

“Helping to offset slower sales, we had lower-than-planned markdowns on back-to-school supplies,” Hayes added, “and the shift to generic drugs, as we have said before, should have a largely neutral-to-positive effect on our bottom line because of the increased margin on generics.”

In July, Fred’s opened three new stores and one pharmacy. Through the first half of fiscal 2007, Fred’s has opened 16 new stores and nine pharmacies and has closed 16 stores and four pharmacies. For the full fiscal year 2007, the Company plans to open a total of 30 to 35 new stores, 15 to 25 new pharmacies, and expects to close 20 to 25 stores.

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Duane Reade announces strong second quarter

BY Antoinette Alexander

NEW YORK Duane Reade announced on Tuesday that during the second quarter it experienced record front-end same-store sales thanks to strong sales of convenience, health and wellness, and beauty products.

“This growth is especially gratifying as the increase follows record front-end comp-store growth of 7.3 percent for the comparable quarter a year-ago,” stated Rick Dreiling, chairman, president and chief executive officer of Duane Reade.

Front-end same-store sales rose 9.4 percent, while pharmacy same-store sales increased 6.1 percent. Total same-store sales increased 7.9 percent. Total net sales rose 8.3 percent to $431.9 million from $398.8 million in the year-ago period.

Net loss for the quarter narrowed to $20.1 million compared with a loss in the year-ago period of $21.1 million. The current year’s second quarter results included $4.2 million of other expenses, including $1.8 million in costs related to the previously disclosed and completed accounting investigation, $1.4 million in connection with the company’s former chief executive officer, and $0.7 million of closed store costs.

Gross margin for the quarter rose to 21.1 percent from 20.3 percent last year and reflected a continuation of the improved trend of front-end margins partially offset by reduced pharmacy margins resulting from increased penetration of lower Medicare Part D sales combined with reductions in Medicaid reimbursement rates that went into effect in July 2006.

Total debt at quarter end was $560.6 million, reflecting a decrease of $11.8 million from the balance at the end of fiscal 2006.

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