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Валгрин Ко. Message Board

  • pmcmurrell pmcmurrell Nov 1, 2001 8:22 AM Flag

    "Take No Prisoners Expansion"?

    Rite Aid [RAD] did not fail by buying out other drugstores. It was other investments and expansions, but you have to study RAD history to know that. The reason RAD is doing better now is that they sold at a big loss some of those other businesses, and now they are working on improving the drugstores left.

    Not buying out other drugstores does assure a nice, new drugstore for Walgreens. Frequently, the competition folds and is never heard from
    again. And, the folded drug stores do not become some other kind of drug store. This has been the history.

    Is this "taking no prisoners philosphy" good? Does it mean the ma and pa drugstores have owners [RPH's] who get into the unemployment line. Often, maybe that is the case. Not "winning friends and influencing people" per Dale Carnegie! But, Rite Aid did show success in buying out the competition! CVS has done this too, and it has worked. Not in every case, but you have to close some.

    When you close an old store, does it mean that you no longer have a drugstore in the area? No, it may mean that you are building a new one in a better location two or three blocks away.
    This can be true of Walgreens too. They closed a successful drugstore in Oak Park on Lake Street, but they built a new one on Lake Street not far away in River Forest. Result, old customers went there, and the new drugstore is much more successful. This is a common thing for both WAG and CVS. CLOSING DRUGSTORES can be VERY WISE and PROFITABLE!

    As to not having debt, tell it to George Bush. He is saying, "Have faith in America!" Is a policy of not borrowing cheap money patriotic?
    Is it wise? I had a discussion with Kelly [met him at the Maywood Racetrack], and Kelly was CEO of a major food company [connected to Swift]. He said, "Always borrow the money when it is cheap!" Why, even if you don't use it, you can buy back the debt cheap when interest rates rise (and they will rise, because the budget is not going to be balanced). But, if you can get DOUBLE DIGIT returns with some assurance, aren't you depriving people of jobs by holding back expansion? If you are a CEO and can forsee profitable use of cheap money, you should go with your forecast and make a reasonable plan. Executive decisions make MONEY! If your forecast is wrong, you can have major problems.

    While Walgreens has grown mostly through internal generation of cash, this philosophy could go astray! It certainly does not help the economy in a recession. True, cash can be king, and one needs not "play the tune" of the lender. But not all debt causes financial enslavement. Reasonable debt is better!