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Osco Pharmacy

LONGUEUIL, Quebec -- Less than two months after closing the deal, Brooks Pharmacy successfully has worked into the fold 80 Osco stores it acquired from Albertson's. Brooks executives told investors earlier this month that the former Osco stores are now operating under the Brooks banner and are being supplied from the chain's distribution center in Dayville, Conn.

With the addition of those stores Jan. 22, Brooks achieved a 33 percent sales gain in its third quarter ended Feb. 28. Sales in the three-month period totaled $344.2 million (Canadian $540.4 million), compared with $257.8 million in the year-ago period, according to financial results reported earlier this month by the Jean Coutu Group, its Canadian an parent company.

Slightly more than 30 days of sales from those 80 units were consolidated in the Brooks/Coutu results. All Brooks promotions now are executed simultaneously at the Osco locations. "What we've worked mostly on is finding ways to supply the additional selection of goods that were carried by the Albertson's [Osco] stores previously," Michel Coutu, president and chief executive officer of Brooks, commented on a conference call following the earnings report. He said those Osco stores would maintain their product assortment even in categories not currently carried by Brooks for at least the next six months.

The Brooks chief executive officer remarked that the only thorn to prick Brooks in the Osco-store conversions has been the former Osco's positioning in food.

"They were promoting very heavily under cost [items such as] soda and milk and other food products," Coutu noted. "We haven't taken a position on these goods at this point, so there's a little bit of a diminution there." However, other categories throughout the Osco stores aren't priced as sharply as they are at Brooks, but may be after a category review. "This will improve our sales up front in the Osco stores," Coutu said.

On the conference call, Coutu noted that Brooks' sales per square foot increased to $574 for the nine months ended Feb. 28, up from $527 per square foot in the year-ago period. As for the larger-box Osco units--typically 14,000 square feet, compared with Brooks' average of about 8,500 square feet before the acquisition--sales are trending between $450 and $500 per square foot, Coutu told analysts. He said Brooks' near-term goal is to hit more than $600 per square foot across the chain.

Jean Coutu Group's net earnings reached $23.9 million in the quarter, a 32.1 percent increase. Sales totaled $585.7 million (Canadian $921.6 million), an increase of 24 percent. Brooks reported that same-store prescription sales rose 14.5 percent, while front-end same-store sales increased 3.3 percent. If two down categories were backed out of the analysis--cough/cold and tobacco--Coutu told analysts the same-store front-end sales growth would have been up 4.8 percent.

Brooks opened two new stores in the past quarter, one in Barre, Vt., and the other in Wickford, R.I.

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