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NACDS recognizes legislators fighting organized retail crime

BY Drew Buono

ALEXANDRIA, Va. Two new pieces of legislation that were recently introduced into the Senate and House respectively titled, The Combating Organized Retail Crime Act of 2008 and the E-Fencing Enforcement Act of 2008, are aimed at fighting organized crime in retail settings like drug stores.

In response to these pieces of legislation, the National Association of Chain Drug Stores thanked Sen. Dick Durbin, D-Ill. and Rep. Bobby Scott, D-Va. for their leadership in introducing their respective bill.

“Your legislation will stem the growing problem of organized retail crime by providing much needed clarity within the U.S. criminal code to prosecute such criminal behavior as a federal felony, including the facilitation of such illegal activities,” said NACDS president and chief executive officer Steve Anderson. “Organized retail crime is responsible for over $30 billion in losses annually, resulting in increased costs for merchants, higher prices for consumers, and lost tax revenue for state and local governments.”

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Duane Reade sees total net sales rise 4.5 percent

BY Antoinette Alexander

NEW YORK Manhattan-based pharmacy retailer Duane Reade narrowed its net loss for the second quarter as sales of food and beverages, OTC medications and beauty products helped drive front-end same-store sales up 5.6 percent.

“We are pleased with our second quarter results and with the consistently solid performance of the business, especially in light of the challenging economic environment,” stated John Lederer, chairman and chief executive officer. “We have remained focused on refining the merchandise mix, upgrading customer service and meeting the needs of our unique and diverse customer base. These efforts yielded solid results in the reporting period, including strong comparable store sales increases, continued margin expansion and the eighth consecutive quarter of year-over-year adjusted FIFO EBITDA growth.”

Net retail store sales, which exclude pharmacy resale activity, rose 3.8 percent to $432.1 million from $416.3 million in the year-ago period. Total net sales rose 4.5 percent to $451.4 million. Same-store sales increased 4.7 percent, with front-end same-store sales rising 5.6 percent. Pharmacy same-store sales rose 3.6 percent.

Net loss for the quarter was $12.1 million compared with $20.1 million in the year-ago period. The improvement was due in part to reduced interest expense of $3.3 million in the quarter.

At quarter end, the company’s total debt, including capital leases but excluding the liability associated with the issuance of the redeemable preferred stock, was $554.8 million, reflecting a decrease of $1.1 million from the balance at the end of fiscal 2007. Availability under the company’s revolving credit facility at quarter end was about $71.4 million.

During the quarter, the company opened four new stores and closed five locations. As of June 28, the pharmacy retailer had 241 stores.

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CVS Caremark posts record 2Q numbers

BY Antoinette Alexander

WOONSOCKET, R.I. CVS Caremark posted record revenues, operating profit and earnings for the second quarter.

“This was another quarter of strong financial performance across our business,” stated Tom Ryan, chairman, president and chief executive officer. “We delivered solid improvement in sales and gross margins and continued to exercise disciplined expense control. That enabled us to hit a record operating profit margin this quarter. At the same time, we’ve further advanced our new PBM/retail model and our clients have expressed growing enthusiasm for our unique new product offerings.”

Net revenues for the quarter rose $437 million to $21.1 billion, up from $20.7 billion in the year-ago period.

Revenues in the retail segment rose 4.6 percent to $11.8 billion in the quarter ended June 28, while same-store sales in the company’s CVS/pharmacy division climbed 3.1 percent compared with the year-ago period. Pharmacy same-store sales rose 3.7 percent and were negatively impacted by about 280 basis points due to recent generic introductions. Front-end same-store sales increased 1.8 percent. The company estimates that the Easter shift, which shifted more holiday sales into March, had a negative impact of about 110 basis points on front-end same-store sales.

Revenues in the pharmacy services segment rose 1 percent to $10.7 billion. Retail network claims processed during the second quarter increased 2.7 percent to 136.3 million compared with 132.7 million in the year-ago period. The boost in retail network claims was driven primarily by increased enrollment in the Medicare Part D business. Mail service claims processed decreased 18.9 percent to 15 million compared with 18.5 million in the year-ago period primarily due to termination of the Federal Employees Health Benefit Plan mail contract effective Dec. 31, 2007.

Earnings from continuing operations for the quarter rose 13.8 percent to $823.5 million, or 56 cents per share, compared with earnings from continuing operations of $723.6 million, or 47 cents per share, in the year-ago period.

For the quarter, CVS Caremark opened 49 new retail pharmacy stores, closed eight retail pharmacy stores and relocated 39 others. As of June 28, the company operated 6,308 retail pharmacy stores, 56 specialty pharmacy stores, 19 specialty mail order pharmacies and seven mail order pharmacies in 44 states and the District of Columbia.

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