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Buyer: Closing Eckerd's HQ will take 5 months

The company that bought stores in 15 states reports a loss for its first quarter of owning them.

By MARK ALBRIGHT
Published January 26, 2005

The new owners of Eckerd Corp. closed the company's Largo headquarters months ago, but it will be five months before the last 400 people working there are sent packing.

Executives of Jean Coutu Group, which bought Eckerd stores in 15 states last fall, said that was the plan all along. But they never spelled out the details of the final wind-down for Largo until Tuesday, when the company revealed some delays in executing the transfer of control put off much of the projected savings from the acquisition until fiscal 2006.

The details were explained after the Canadian drugstore company reported a loss of $4-million, or 2 cents a share, for its first full quarter as the owner of 1,500 Eckerd stores spread from Georgia north to New York. The loss compared with net income of $33-million, or 14 cents a share, during the same quarter a year ago.

While the sales results of the Eckerd stores were not broken out, it was clear they dragged down the 3.5 percent comparable store sales gains reported for Coutu's U.S. operations, which include Brooks Pharmacy.

"The Eckerd stores are not performing as well as they did a year ago" before Coutu ran them, said Michel Coutu, president of the company's U.S. subsidiary. "We remain confident we can turn them around."

Coutu assured analysts that the quarter, which featured a $19-million loss on unfavorable currency exchanges, was as bad as it was going to get.

About 1,100 Eckerd headquarters workers have lost their jobs since the deal closed last summer. But big pieces of the accounting and information technology departments continue operating in Largo despite the rest of the headquarters functions being moved to Coutu's U.S. headquarters in Warwick, R.I.

Coutu's final target for the combined company's administrative staff is to go from 1,800 to about 825 people. As of Tuesday it had 875 people working at the Rhode Island campus and 400 in Largo.

Over the next few months Largo operations will be drawn down. Effective Monday, about 140 of the computer department workers whose jobs have been outsourced to IBM will no longer be on Coutu's payroll. But Coutu said Tuesday it might keep its pharmacy computer operation in Largo using rented space for as long as two more years.

There were several reasons for the delays. Among them was that the deal closed 45 days later than forecast, and the four Florida hurricanes kept local telephone companies from making needed cable upgrades for four months.

In an unrelated development, Coutu also learned it had overestimated the value of what it paid for Eckerd's prescription file by about $150-million.

Mark Albright can be reached at albright@sptimes.com or 727 893-8252.

[Last modified January 26, 2005, 00:12:14]