Washington's three major drugstore chains, their sales slumping as supermarkets take an increasing share of the business, have been talking for some time about plans to spruce up their stores. But now the results of the refurbishings are slowly beginning to show.
Dart Drug Stores Inc. became the latest to unveil renovation plans when it filed a stock offering document with the Securities and Exchange Commission last week. Peoples Drug Stores Inc. and Rite Aid Corp. already have programs under way to update the stores in their chains.
Financially troubled Dart, which recently came under the control of former Peoples Drug chairman Sheldon W. Fantle, plans to recast its image from a major discounter with no-frills service to a more upscale chain that places a greater emphasis on service.
A major target of the remodeling will be to put an emphasis on the stores' prescription business. "Interior layouts will be changed in most stores to feature the pharmacy as a major focal point," Dart said in the SEC filing.
This change is designed to increase the stores' prescription revenue, which Dart officials say now accounts for about 10 percent of the company's sales. That's less than half the percentage rung up by an average drugstore chain.
Dart also plans to set up a series of "boutiques" within its stores to emphasize such lines as cosmetics, school and office supplies, gourmet food and photographic supplies.
Dart unveiled its plans as Peoples Drug issued a policy statement describing the changes now being made at its stores.
On the basis of a consumer survey completed last year, Peoples concluded that its customers wanted more convenience. As a result, Peoples has drawn up a store plan that it hopes will make it easier for shoppers to locate the traditional drugstore merchandise and, with a new computerized checkout system, make it easier for them to pay it as well.
Peoples also has eliminated much of the general merchandise, such as trash cans, toys and cookware, that it has sold in recent years.
Peoples hopes to improve its pharmacy services by, among other things, adding a consulting area where patients can obtain advice from the pharmacist in privacy.
The proposed changes come at the same time that Rite Aid is engaged in a two-year remodeling campaign of the Gray Drug Fair stores that it bought last year.
The Rite Aid stores will be smaller than the typical Drug Fair stores, with some of the extra space to be given back to shopping center developers or leased out to other retailers.
Like Peoples and Dart, Rite Aid also plans to increase its emphasis on health and beauty products.
Dart's proposed changes represent a big shift from the no-frills way in which the 84-store has done business for most of its four-decade history, most of it under its founder, Herbert Haft.
Haft sold the stores in 1984 to Dart's management team, which kept the same marketing philosophy. But feuding among the management and a downturn in sales hurt the company's finances.
Despite a restructuring plan last summer that helped reduce the company's heavy debt by half, the chain found itself in increasing trouble as suppliers cut back shipments.
To bail Dart out, Fantle and his son, Jeffrey, invested $8 million in the chain late last year, in return for a 20 percent stake in the company and -- more important -- complete management control.
Fantle now hopes to raise an additional $6 million through the new stock offering outlined in the SEC document. The new shares will be offered to existing Dart Drug stockholders, with investors entitled to receive the same percentage of new shares as they have of outstanding shares.
Should stockholders decline the right to buy new shares, Fantle said he would buy their share of the new stock -- a move that could increase his stake in the company to as much as 32 percent.
Beyond the money Dart hopes to raise through the stock offering, the company said it plans to sell its 17 large stores that include home center departments, which sell lumber, masonry and other construction goods.
Meanwhile, Dart said it would reduce the size of the remaining Dart drugstores by about 16 percent, subleasing the space to others.
The exact timing of the remodeling campaign will depend on the company's ability to raise more cash and increase its revolving line of credit.
Dart said it is negotiating with two Washington banks for $30 million in revolving credit, up from the $20 million line of credit it now has with Security Pacific National Bank of Los Angeles.
Fantle's remodeling plans come as no surprise to those who closely followed his actions when he was chairman of Peoples. There, he placed heavy emphasis on the prescription business.
"We all knew he had to do something considering the competition," said Steve Ellwanger, managing editor of Chain Drug Review.
"Rite Aid is a powerhouse, Peoples is on the mend and coming back with a new orientation," Ellwanger said. "Dart has to pick out a niche and either go after the general merchandise business for which Dart has been famous or do an about-face and emphasize the pharmacy -- which is what Fantle appears to be doing."