Duane Reade announces strong second quarter

NEW YORK Duane Reade announced on Tuesday that during the second quarter it experienced record front-end same-store sales thanks to strong sales of convenience, health and wellness, and beauty products.

"This growth is especially gratifying as the increase follows record front-end comp-store growth of 7.3 percent for the comparable quarter a year-ago," stated Rick Dreiling, chairman, president and chief executive officer of Duane Reade.

Front-end same-store sales rose 9.4 percent, while pharmacy same-store sales increased 6.1 percent. Total same-store sales increased 7.9 percent. Total net sales rose 8.3 percent to $431.9 million from $398.8 million in the year-ago period.

Net loss for the quarter narrowed to $20.1 million compared with a loss in the year-ago period of $21.1 million. The current year’s second quarter results included $4.2 million of other expenses, including $1.8 million in costs related to the previously disclosed and completed accounting investigation, $1.4 million in connection with the company’s former chief executive officer, and $0.7 million of closed store costs.

Gross margin for the quarter rose to 21.1 percent from 20.3 percent last year and reflected a continuation of the improved trend of front-end margins partially offset by reduced pharmacy margins resulting from increased penetration of lower Medicare Part D sales combined with reductions in Medicaid reimbursement rates that went into effect in July 2006.

Total debt at quarter end was $560.6 million, reflecting a decrease of $11.8 million from the balance at the end of fiscal 2006.