<DEMP>
Drug Emporium Inc. Announces Fourth Quarter and Year-end 1999 Results
POWELL, Ohio--(BUSINESS WIRE)--April 22, 1999--Drug Emporium Inc. (NASD:DEMP) today announced sales and operating results for the fourth quarter and fiscal year ended February 27, 1999.
For the fourth quarter ended February 27, 1999, net sales were $226.3 million, as compared to $223.4 million reported for the same period a year ago. Net income for the fourth quarter was $552,000, or $0.04 per diluted share, as compared to $606,000, or $0.05 per diluted share during the comparable period last year. Net income for the fourth quarter of fiscal 1998 of $0.05 per diluted share included a special credit related to the recovery of various litigation expenses and settlement costs of $0.10 per diluted share. On a comparable operating basis, excluding this special credit, the fourth quarter of 1998 would have reported a loss of $0.05 per share. Operating income for the quarter was $2.4 million, verses $0.9 million before special charges for the comparable quarter last year. The increase in operating income is due primarily to lower advertising costs being recorded in the period relative to the prior year, partially offset by a smaller LIFO reversal.
For the year ended February 27, 1999, net sales were $839.4 million, as compared to $836.4 million reported for the same period a year ago. Results for the current year include sales from the acquisition of twelve Vix Drug Stores and a 1.3% increase in same store sales, partially offset by the impact of stores closed during the year. Net income increased 124% to $3.8 million, or $0.29 per diluted share in 1999, compared to $1.7 million reported for the same period a year ago. Operating income before special charges and credits for the year was $5.3 million, as compared to $8.7 million for fiscal 1998. The decline in operating income before special charges and credits is primarily due to the sale of the Company's Seattle franchise and the subsequent discontinuation of their franchise fees, higher depreciation costs, and the recording of $1.7 million in one-time charges related to store closings as a component of gross margins.
David Kriegel, Chairman and Chief Executive Officer of Drug Emporium Inc., said, ''We are pleased to report that pharmacy margins have stabilized recently. Additionally, we are also encouraged by the progress we have made relating to the integration of the Vix Drug Store acquisition. Results for the current quarter included $5.9 million in sales from the recently acquired Vix Drug Store chain, which have seen sales rise 12% in the first full month of operations as compared with the same period a year ago. This increase in comparable store sales was a direct result of increased advertising and marketing efforts at Vix under Drug Emporium's ownership. Some of the strong performance we have witnessed at Vix can also be attributed to the successful introduction of increased merchandise selection at these locations.''
Mr. Kriegel continued, ''Our enhancement plans for America's first on-line drug store, drugemporium.com, are progressing on schedule. We are completely overhauling the business processes around the site in order to make the site exceed customer expectations. In the meantime, sales continue to grow at our existing on-line store despite increased competition. This coupled with Forrester Research, Inc. projecting 43% compound annual growth of North American on-line retail spending over the next five years is very encouraging. As we continue to make improvements to our on-line store, we believe that we will share in this growth.''
Mr. Kriegel concluded, ''Our challenges for fiscal 1999 were to stabilize pharmacy margins, profitably grow our store base, reduce per store inventory levels, improve our on-line drug store and arrange for a new credit facility. We have succeeded in making great strides in each of these initiatives and look forward to another successful year. We continue to actively seek out acquisition candidates and other opportunities in a rapidly consolidating industry in order to enhance shareholder value. We are also continuing our heavy investments in technology at our brick and mortar stores to enhance operational efficiency and lower operating costs. This complements our ongoing program of remodeling and renovating our existing store base.''
Drug Emporium operates 141 company-owned stores as Drug Emporium, F&M Super Drug Stores and Vix Drug Stores. All stores operate full-service pharmacies and specialize in discount-priced merchandise including health and beauty aids, cosmetics and greeting cards. The company also franchises an additional 52 stores. The company also operates a discount priced e-commerce drugstore, drugemporium.com, which sells over 16,000 items on- line, including prescription drugs, health and beauty aids, cosmetics and vitamins.
Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Company's actual results in future periods to differ materially from forecasted or expected results. Those risks include, among other things, the competitive environment in the drugstore industry in general and in the Company's specific market area, inflation, changes in costs of goods and services and economic conditions in general and in the Company's specific market area. Those and other risks are more fully described in the Company's filings with the Securities and Exchange Commission.
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and ON-LINE HEALTH, BEAUTY PRODUCTS and PRESCRIPTION DRUG STORE:
drugemporium.com
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