Arbor Adds Stores,
Racks Up Profits

The chain

drugstore is

reaping the rewards

of good service and

high inventories,

but will the

entrance of

Walgreen's to the

Detroit market chip

away at its

dominance?

JULIE EDGAR STAFF WRITER

I

roy-based Arbor Drugs is continuing a slow but
Mr. Marx attributed strong pharmacy sales — they
steady march toward dominance of the metro
comprised over half of the total sales — to a longer than
Detroit drugstore market.
normal flu and cold season.
The recent announcement by Walgreen Co.
But, "the real increase is coming from the strong mo-
that it plans to enter the Detroit market, how- mentum they have in place, an aging population, and
ever, caused a few jitters on Wall Street, if not what our research shows: Arbor is gaining more and more
Arbor headquarters.
customers because they are in stock with the merchan-
Arbor's share of the metro Detroit market this year dise and they're handy," he said.
reached 42 percent, up from 36.1 percent in 1995. On the
Pharmacy sales have been steadily climbing, but Ar-
other hand, Rite Aid, formerly Perry Drugs, is losing its
bor experienced the biggest jump during the latest quar-
grip on the market, falling from 31.3 to 29.4 percent this ter. Mr. Marx noted that many consumers are in managed
year.
care plans with which Arbor has
But Arbor and Rite Aid are the
contracts.
only major drugstore chains in
The happy news, however,
the metro area and, as such, are
did not buoy stockholders for
able to capture most of the larg-
long. Arbor stock dropped a full
er managed care plans. Smaller
point in value after Walgreen's
chains and independents gener-
announcement that it will open
10 stores in the Detroit area by
ally do not contract with these
plans because insurance reim-
next summer. It is back up to
bursement is generally too low to
about $19.
"Clearly, another formidable
justify the service.
From February through April,
competitor has entered the area.
The stock market and investors
Arbor (Nasdaq: ARBR) posted
record sales, reporting a 19-per-
have said, Walgreen's is com-
ing; it's not good.' But I'd be
cent increase from last year dur-
more upset if I were an inde-
ing the same period, from $175
pendent," said Daniel Poole, a
million to $208 million. Sales for
retail analyst with First Michi-
the first nine months of the cur-
gan Corp.
rent fiscal year, which began last
Like the smaller pharmacies,
August, reached $613 million.
chains like Arbor and Wal-
Since August, the company has
green's are "drawing a line in
opened 10 new stores, all in
the sand," rejecting third-party
Michigan.
insurance plans because reim-
"Our research confirms that to-
bursement for the cost of drugs
day's time-restrained working
is too low. With so few large
families seek greater convenience,
drugstore chains in the area,
a key component of our market-
insurance carriers could be
ing strategy," Arbor Chairman
forced to increase payments.
and Chief Executive Officer Eu-
"You cannot be a third-par-
gene Applebaum said in a pre-
Eugene Applebaum
pared statement. "Shopping
ty provider unless you are in
decisions in the '90s are increas-
with Arbor," Mr. Poole said.
ingly being determined by these factors: the retailer's abil- That will probably be true with Walgreen's.
ity to have the wanted merchandise in stock on an
Mr. Marx noted that Arbor is a major player, as is Wal-
everyday basis, easy-to-navigate store layouts, high green's. It is able to get good pricing from vendors because
staffing levels to move customers quickly at checkouts it buys in sufficient volume.
"Also, being that big, you have the ability to invest and
and accessible parking."
allocate dollars for technology. Arbor has all the same
Sales for all of 1995 were $707 million and are expect-
ed to reach $800 million by the end of this year and top technological advancements as its competitors," he said.
Mr. Applebaum was a 25-year-old pharmacist when he
$1 billion by 1998, said Arbor spokesperson Fred Marx.
There are some 178 stores in the Arbor chain, with five established the first Arbor Drugstore in 1963, "in the shad-
or six more stores scheduled to open by July 31, three of ow of K Mart," Mr. Marx noted.
Today, the chain employs 6,000 people. El
them in Detroit. By year's end, the company will have 13
stores in the city, along with four medical pharmacies.