Duane Reade reports 3Q front-end, Rx sales increases
NEW YORK Total net sales increased 5.4 percent to $431.0 million during the third quarter, the company reported, up from $408.8 million in the year-ago period. Total same-store sales increased by 5.0 percent. Duane Reade opened four new stores, during the period, and finished the quarter with a total of 245 stores versus 241 stores one year ago.
Total front-end sales actually increased 6.7 percent over the prior year period, driven by continued growth in the food and beverage categories, over-the-counter products, and health and beauty care items, the company noted. The company reported a 30-basis-point benefit on the OTC switch of Zyrtec alone. In addition, the rise in the local sales tax on cigarettes in June resulted in a 1.1 percent benefit to front-end sales during the quarter—however, since it is a tax none of that reached the company's bottom line.
On the pharmacy side of the business, Duane Reade executives cited increased Medicare Part D sales and increases in average prescription prices. On the downside, the Zyrtec switch negatively impacted pharmacy same-store sales by approximately 60 basis points. Increased generic substitution also weighed on pharmacy comps during the third quarter.
Overall, however, Duane Reade reported a net operating loss of $22.3 million up from $22.1 million, in the previous year.
During the quarter, which ended Sept. 27, gross margin expanded to 31.3 percent, compared with 30.6 percent in third quarter 2007 for the New York-based retail pharmacy chain. At the same time, however, net loss increased to $22.3 million, from $22.1 million a year ago.
"We are encouraged by our results for the first three quarters of 2008 and by our continued progress despite the difficult environment," Duane Reade chairman and chief executive officer John Lederer said. "That said, we recognize that weakening external conditions have begun to have an impact on our business and we expect that this will continue in the near-term. However, we are cautiously optimistic about the outlook for the business and believe that by executing on our strategic initiatives we will continue to advance our business successfully. Be assured that we will be pragmatic and methodical in our approach and will take into account the potential challenges presented by the macro economy."