Long's Drug Stores

Paper Summary:

This paper looks at Long's Drug Stores which has catered to markets in the western United states since 1938. It currently has over 400 drug stores in six Western states: California, Hawaii, Oregon, Colorado, Nevada, and Washington. It examines how the company went public in 1971 and trades on the NYSE and how despite steady sales growth, the company has faced problems over the last year as the market for consumer pharmaceuticals has changed to reflect a greater number of generic drugs and an increased presence of third party health plans, which act to reduce margins by demanding favorable prices. It analyzes the resultant crisis for Long's which has been characterized by staff cuts, a 2/3 decline in quarterly revenue and the resignation of the company's Chief Operations Officer.

From the Paper:

"Long's board of directors approved a program to upgrade its supply chain practices in February of 2002. These measures were designed to enhance profitability and to increase efficiency and relied on measures designed to increase front-end sales and pharmacy margins, increase customer service, and improve operational efficiencies. Long expects to expend approximately $60 million for supply chain improvements over a four year period. As of October 31, $12 million had already been spent. (LDG 10-Q, December 2002) Long's is relying on these efforts to increase profit margins. In order to overcome its problem maintaining a staff of qualified pharmacists, Long entered into a joint venture agreement with AmerisourceBergen to operate a central prescription fill center. Hopefully, this will help alleviate the need for pharmacists."

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