Longs completes five-year turnaround

Back in February 2002, things were looking bleak for Longs Drug. The venerable 64-year-old chain was coming off another lackluster year and faced growing competition from such larger chains as CVS and Walgreens.

So, faced with antsy shareholders, the Longs’ board of directors cleaned house and eased out most of its top executives over a six-month span. Then it adopted a five-point turnaround plan, set aside $50 million to overhaul its archaic supply chain and brought in new president Warren Bryant from Kroger to spearhead the turnaround.

One of his first orders of business was to come up with a new look for Longs’ aging store base. Most of its stores were big boxes built in the 1970s and 1980s and looked ancient compared with Walgreens sleek new corner lot stores with drive-through windows.

The answer was a concept store dubbed “Total Visual Appeal” with wider aisles, better lighting and a new “racetrack” layout that was user-friendly. The concept was an instant success and is considered the key reason for Longs rebound in sales. Longs has remodeled 48 percent of its store base to date and should have close to 60 percent done by the end of 2008.

Longs’ executive team also has done plenty of work behind the scenes to centralize buying and distribution. At the time Bryant arrived, some stores were still making their own purchases from vendors, a holdover from the old days when store managers were given near total autonomy.

Since then, the chain has centralized its buying and opened a larger distribution center in 2006, which allows the chain to self-distribute most of its general merchandise. The new DC—and a remix of merchandise—has pushed front-end sales from a decline of 6.1 percent in early 2003 to positive gains in 2007 for the first time in nearly a decade.

And it took several new executives to make all this happen. Retail veteran Todd Vasos came on board during the 2002 transition year, and as senior vice president and chief marketing officer, he has helped lead the remodeling effort and remerchandising on the front end.

On the pharmacy side, Longs hired former Duane Reade executive Bruce Schwallie in 2002 as executive vice president of business development and managed care. Schwallie is now leading RX America, Longs’ PBM, through a remarkable growth spurt. It generated $79.7 million in its most recent quarter with PBM revenues jumping 96 percent to $19.1 million compared with just $9.7 million in the same quarter last year.

And since the arrival of Bryant and his team, Longs has topped the 500-store mark for the first time, created a smaller store format with drive-through pharmacies and re-established itself as a regional power-house on the West Coast. And with more than $74 million in earnings for fiscal 2007 and even better prospects for 2008, it appears the turnaround is just about complete.