Peoples Drug Stores Inc. has floated a $30 million offering of convertible debentures that will allow the Washington drug store chain to pay off its bank borrowings and should produce significantly higher profits.

The debenture offering was completed Thursday when Peoples held its annual stockholders' meeting at which President Sheldon W. Fantle outlined an ambitious seven-year growth plan.

What Fantle labeled a "1-2-3 plan" calls for Peoples to expand to 1,000 stores, increase volume to $2 billion and produce a 3 percent net profit margin by 1990. In the fiscal year ended Sept. 30, 1983, Peoples' 564 stores produced sales of $688 million and profits of $10.4 million or about 1.5 percent of sales. eople's profits are expected to jump as a result of the offering by a syndicate headed by Wertheim & Co. of 8 3/4 percent convertible subordinated debentures. Proceeds of the offering will provide additional working capital and will be used to repay $28 million in higher interest bank borrowings on which Peoples' last year paid $6.8 million in interest.

The debentures, which come due in 2008, can be converted into People's common stock at any time at a price of $30 a share.

Fantle told shareholders that People's plans to open approximately 46 new stores and complete the remodeling of another 77 units this year.

The board also declared a regular quarterly cash dividend of 9 cents a share, to be paid April 1 to shareholders as of Feb. 25.