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CVS is using Florida as a blueprint for its redesign and renaming of...


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CVS is using Florida as a blueprint for its redesign and renaming of former Eckerd drugstores

Lower shelves, new signs and cheaper prices are what customers have started seeing as CVS remodels Eckerd Drug stores throughout South Florida.

The conversion is part of CVS's purchase of 1,268 Eckerd stores, including 147 in South Florida. By refashioning those Eckerd sites -- at a price tag of $300,000 to $350,000 per store -- CVS has launched an aggressive plan to battle Walgreens in Florida, a key market for both companies. Before the acquisition, CVS had only 13 stores in South Florida.

''We're going to make Eckerd look -- inside and outside -- like CVS,'' said Chris Bodine, executive vice president of merchandising and marketing for CVS.

With either temporary banners draped over the Eckerd name or new street-front signs, the changeover represents a major milestone in Florida corporate history.

Jack Eckerd, a World War II army pilot, started the Florida-based drugstore chain by purchasing three stores in Tampa for $150,000 in 1952.

For $3.3 billion, the chain was sold to JCPenney in 1996, but the Eckerd name has remained in place until the CVS purchase for $2.15 billion earlier this year.

Every corner of the former Eckerd stores is changing. For example, 7,000 Eckerd products will disappear, replaced by 9,000 new CVS items. CVS executives also say that the pharmacies will be open longer and customer service will improve.

It's all an attempt to reverse the year-long decline in sales at former Eckerd sites. The redesign is based on feedback from Eckerd shoppers offered during focus group meetings.

''We designed our store with our target customer in mind,'' Bodine said.

Women represent 80 percent of CVS shoppers. To endear themselves to that customer base, CVS is replacing Eckerd's high shelves with a lower design and wider aisles. Likewise, the altered product mix will have a greater emphasis on health and beauty products. And in terms of layout and cash register technology, the checkout process has been upgraded for speed.

The photo counter has been moved next to the cashier station, which provides an additional register during peak hours. And rather than several lines of shoppers, the check-out lane has been consolidated into a single line serviced by several cashiers.

''Before, the prices were a lot more expensive than the other stores and there were always lines at the checkout counter,'' said Ray Roumi, a Miami Beach taxi driver.

CVS is using Florida as the model for its conversion of Eckerd stores in other Southern states. In Florida, the remodeling is being completed in stages, with final completion scheduled for March of 2005.

''We're excited about this opportunity in Florida,'' Bodine said. ``It's our biggest state. It's our most important state.''

Meanwhile, Walgreens is also ramping up an aggressive expansion program. For example, by next August, Walgreens expects to spend about $1.5 billion nationwide on new stores, technology and distribution centers, according to a recent company letter to its shareholders.

''We'll continue to compete with CVS as we have in other markets through our customer service and innovative pharmacy technology,'' said Carol Hively, a Walgreens spokeswoman.

Iwona Jarosz, a Miami Beach resident, likes the larger CVS on Alton Road. ''It's easier to find stuff. They have more shelves,'' Jarosz said. She likes the renovated space but misses the rebate program that Eckerd featured as part of its monthly specials.

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Sales surge 20 percent at CVS

Double-digit sales and earnings increases were driven in part by the early success from the CVS acquisition of Eckerd.


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With a new CVS name, sales have jumped as much as 20 percent in the first month at former Eckerd locations in Florida.

These numbers are just one sign that last year's acquisition is already paying dividends, CVS executives told analysts on Wednesday. CVS reported a 20 percent increase in fourth-quarter sales due in large part to the acquisition of 1,268 former Eckerd stores, which cemented CVS's position as the country's largest drugstore chain in terms of store numbers.

Company executives say they have boosted sales at former Eckerd locations by expanding hours, reducing prices and making stores more customer-friendly.

''The preliminary changes we've made are moving us in the right direction,'' Tom Ryan, CVS chairman, president and chief executive, told analysts on a conference call Wednesday. ``We are encouraged by the progress. We know we're on the right track. This is no longer a voyage of discovery.''

CVS paid JCPenney $2.15 billion last July to buy 1,260 Eckerd stores in Florida, Texas and the southern states, as well as Eckerd's mail-order and pharmacy benefits management business. Jean Coutu of Canada bought the remainder of the Eckerd stores in the Northeast and Mid-Atlantic.

Analysts say the turnaround at the former Eckerd stores was expected.

''These were underperforming stores that had been neglected by the former parent,'' said Mitchell Corwin, an analyst with Morningstar in Chicago, who follows CVS. ``Any determined operator could have gotten these stores to perform better.

''There is still a lot of room there for improvement,'' Corwin said. ``They're going to have to put more money into a lot of these stores to get them up to their standards.''

The discussion of the Eckerd transformation came as CVS reported fourth-quarter and year-end earnings. For the fourth quarter, earnings increased 12 percent, boosted by a $60 million windfall from former tax reserves. Net earnings for the year increased to $959.3 million, or $2.30 per share, compared with $847.3 million, or $2.06, during the previous year.

CVS expects first-quarter earnings of 59 cents to 61 cents a share, with same-store sales rising 5 percent to 6 percent, Chief Financial Officer David Rickard said .

In the six months since the Eckerd's acquisition, CVS has:

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This is good to hear. I like CVS and am anxious to see the stores once the renovations are complete. It is odd seeing a few of the converted stores that were on kitty-corners with original CVS stores, though. Not sure why they haven't closed those down yet.

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