Kings of the coasts make waves
WALNUT CREEK, Calif. —A strong showing from RX America drove Longs Drugs to another profitable quarter, with earnings jumping 45 percent to $19.3 million. And Longs executives said they expect 2008 to be an even better year for its fast-growing pharmacy benefit management division.
Longs reported a 3.3 percent increase in revenue for the third quarter ended Oct. 25 with $1.24 billion in sales. Same-store sales jumped 1.4 percent, with pharmacy sales increasing 2 percent and front-end sales edging up 0.8 percent. The chain also opened or relocated 13 stores during the quarter to push its count to 29 for the first nine months of the year.
“We’re improving the profitability of our retail segment and better aligning our stores with our longer-term goals while we continue to pursue new business opportunities at RX America,” said Longs chief executive officer Warren Bryant. For the first nine months of its current fiscal year, Longs posted $61 million in net income.
RX America generated $79.7 million, a 6.3 percent increase over the same quarter last year. But the real growth came from its PBM business, with revenues jumping 96 percent to $19.1 million compared with just $9.7 million in the same quarter last year. Prescription drug plans produced $60.7 million in revenues, down from $65.3 million last year.
Bryant said the jump in PBM revenues was a result of new resources Longs poured into it to grow the business for the remainder of 2007 and into 2008. “Earlier this year, we put an infrastructure in place to grow our PBM,” Bryant said. “We brought in some new sales people, and we believe we’re seeing the early results of those efforts.”
Bryant said RX America is also “gaining a national reputation” as a good service provider, something that’s attracting larger employers to its PBM and could produce big growth in 2008 and 2009.
In a Nov. 15 report, Lehman Brothers analyst Meredith Adler noted that “RX America is just starting to prove itself in the larger employer market and is optimistic that its success will lead to more of that business,” something she said “bodes well for fiscal 2008 and fiscal 2009 profits.”
On the PDP side of the business, Longs said it expects to add as many as 140,000 members to its base next year as a result of competitive bids it submitted to the Centers for Medicaid and Medicare. “We see the potential to have 360,000 to 380,000 members next year compared with 240,000 this year,” Bryant said.
At the store level, Longs continues to post improved results as it remodels more stores and sees front-end sales posting modest but positive gains. Bryant said 48 percent of Longs’ store base has been remodeled to date, and 40 stores are scheduled for remodels next year along with 20 to 30 new openings or relocations.
The chain also is adding drive-through windows at new and relocated stores whenever it can and now has windows at 48 of its 508 stores. And the new stores that opened this year are smaller and average about 12,000 square feet compared with 16,000 square feet at older stores.
Longs also encountered new competition in Hawaii when Walgreens opened its first store there on Nov. 1, with plans to add three more stores in 2008. Longs executives have declined to comment on Walgreens debut in the market.
Longs reported a 3.3 percent increase in revenue for the third quarter ended Oct. 25 with $1.24 billion in sales. Same-store sales jumped 1.4 percent, with pharmacy sales increasing 2 percent and front-end sales edging up 0.8 percent. The chain also opened or relocated 13 stores during the quarter to push its count to 29 for the first nine months of the year.
“We’re improving the profitability of our retail segment and better aligning our stores with our longer-term goals while we continue to pursue new business opportunities at RX America,” said Longs chief executive officer Warren Bryant. For the first nine months of its current fiscal year, Longs posted $61 million in net income.
RX America generated $79.7 million, a 6.3 percent increase over the same quarter last year. But the real growth came from its PBM business, with revenues jumping 96 percent to $19.1 million compared with just $9.7 million in the same quarter last year. Prescription drug plans produced $60.7 million in revenues, down from $65.3 million last year.
Bryant said the jump in PBM revenues was a result of new resources Longs poured into it to grow the business for the remainder of 2007 and into 2008. “Earlier this year, we put an infrastructure in place to grow our PBM,” Bryant said. “We brought in some new sales people, and we believe we’re seeing the early results of those efforts.”
Bryant said RX America is also “gaining a national reputation” as a good service provider, something that’s attracting larger employers to its PBM and could produce big growth in 2008 and 2009.
In a Nov. 15 report, Lehman Brothers analyst Meredith Adler noted that “RX America is just starting to prove itself in the larger employer market and is optimistic that its success will lead to more of that business,” something she said “bodes well for fiscal 2008 and fiscal 2009 profits.”
On the PDP side of the business, Longs said it expects to add as many as 140,000 members to its base next year as a result of competitive bids it submitted to the Centers for Medicaid and Medicare. “We see the potential to have 360,000 to 380,000 members next year compared with 240,000 this year,” Bryant said.
At the store level, Longs continues to post improved results as it remodels more stores and sees front-end sales posting modest but positive gains. Bryant said 48 percent of Longs’ store base has been remodeled to date, and 40 stores are scheduled for remodels next year along with 20 to 30 new openings or relocations.
The chain also is adding drive-through windows at new and relocated stores whenever it can and now has windows at 48 of its 508 stores. And the new stores that opened this year are smaller and average about 12,000 square feet compared with 16,000 square feet at older stores.
Longs also encountered new competition in Hawaii when Walgreens opened its first store there on Nov. 1, with plans to add three more stores in 2008. Longs executives have declined to comment on Walgreens debut in the market.