Peoples Drug Stores Inc. will lay off more than 450 corporate employees right after the Christmas holidays, virtually closing down its Alexandria headquarters.
The action is part of a consolidation by Harrison, N.Y.-based Melville Corp., which purchased the 86-year-old drugstore chain for $330 million three months ago from Canadian conglomerate Imasco Ltd.
Peoples, whose operations had remained independent under Imasco's ownership, will become a subsidiary controlled by Melville's Rhode Island-based CVS drugstore chain.
"Melville made a multimillion-dollar investment, and they felt that a consolidation was the best way to increase return on investment," said David Eisenberg, Peoples's president and chief executive.
CVS executives, including its president, Harvey Rosenthal, declined comment.
The closing of the longtime Peoples headquarters here is similar to what happened at Kay Jewelers Inc., whose corporate offices in Alexandria will be shuttered by the end of the year. Kay was bought this summer by Britain's Ratners PLC, which moved Kay's operations to its Ohio-based subsidiary, throwing 400 people here out of work.
Peoples's corporate division will become a CVS regional office staffed by 80 people to run the Peoples drugstores here. CVS has 800 stores in the East, Midwest and California with a $2 billion annual sales volume; the Peoples branches generate $1 billion in sales. Peoples's headquarters had been in Alexandria for 16 years, and before that the chain ran its operations from the District.
The roughly 12,000 employees at Peoples's 500 stores throughout the mid-Atlantic region, including 165 at Washington-area stores, will remain in place. Eisenberg said no mass store closings are planned for the area and said he knows of no plans to close individual stores.
Eisenberg, a 37-year Peoples veteran who will also be out of work, said Melville is offering generous severance benefits for employees and said the company will help them find new jobs. Between 20 and 30 people at corporate headquarters have been offered jobs in Rhode Island, he said.
"Of course, people are dismayed, especially with the local employment scene being so tight, but Melville is doing the best job it can," Eisenberg said.
In addition to the executive staff, warehouse buying, marketing, accounting, legal and human resources departments are among those to be eliminated. Local buying, distribution and point-of-sale operations will remain in the area in smaller forms.
Some employees reached at Peoples headquarters said the layoffs, which they were informed about over the past two weeks, were expected after the company was sold but were still disturbing.
"It seems as if these layoffs are coming one after another at all these companies in Washington, and with all the scariness in the economy, I'm fearful about finding a job," said one employee who did not want to be named. Another said employees, many of whom have worked at the company for decades, were told not to talk about the subject to the media and to refer calls to CVS officials.
Along with the consolidation, all Peoples stores are slated to be remodeled beginning in January to more closely resemble CVS stores. Product mix also will focus on health and beauty aids and pharmacy operations, rather than the wider range of merchandise sold now.
The only thing that won't be changed is the well-known Peoples name -- at least for now.
"I am 99 percent sure that the name will be around for a while, since Melville conducted focus groups here and found it really entrenched in the minds of customers," said Eisenberg. "But I can't tell you it will remain Peoples forever."