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NY to Sue CVS and Rite Aid

BY CSA STAFF

Albany, N.Y. Monday’s announcement that New Jersey and Rite Aid had reached a settlement on claims that Rite Aid sold expired goods has now been updated on Tuesday with news from New York that it, too, will sue not only Rite Aid but CVS for selling expired food, medicine and baby formula.

The office of N.Y. Attorney General Andrew Cuomo reported earlier this month that the national pharmacy chains were selling expired products.

Investigators later returned and bought expired goods in 39% of CVS stores and 22% of Rite Aid stores statewide. Across New York City, 50% of CVS stores and 40% of Rite Aid stores were still selling outdated goods.

Rite Aid Corp. agreed Monday to pay New Jersey up to $650,000 to settle a suit similar to the one Cuomo announced Tuesday.

CVS spokesman Mike DeAngelis said the company is removing expired products.

“The findings are unacceptable, and we will immediately retrain those stores on our procedures,” said Cheryl Slavinsky, a Rite Aid spokeswoman.

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Costco leads way in successful sector

BY CSA STAFF

There were times when Costco was attacked, for not opening clubs quickly enough, for not cutting labor costs, for not making assortment changes. But times have changed and Costco is getting its share of hard-won appreciation.

Characterizing it as a share only just scratches the surface. The entire warehouse club sector has proven the most resilient in retail in the current difficult economic times in the United States. Sam’s Club and BJ’s, too, have proven resilient, and consumers, at least those willing to spend money, have demonstrated a preference for the warehouse club format recently.

Although BJ’s and Sam’s beat Costco’s adjusted comparable-store sales at 5.7% and 4.7%, respectively, versus a little over 4%, Costco’s total sales advanced 13% versus 12.3% at BJ’s and 7.6% at Sam’s. On a dollar basis, Costco’s net sales were up about $1.92 billion, while BJ’s were up about $248 million and Sam’s about $789 million.

In terms of operating income—Sam’s doesn’t break out earnings—Costco was up 37.3% versus 25.5% at BJ’s and 4.3% at Sam’s. In dollar terms, operating income at Costco gained $109.4 million versus $5.9 million at BJ’s and $16 million at Sam’s. The dollar figures particularly demonstrate Costco’s sector leadership.

As might be expected during a period when people are cautious about spending, food and consumables categories are having a big impact on Costco’s results. In a third-quarter conference call on May 29, evp and cfo Richard Galanti noted, “The basic categories of food and sundries…is about half of our sales, and fresh foods is about 13% of our sales. So we’ll call it roughly 60% of our sales. Those are the categories that are having comp numbers greater than the company overall.”

Only tobacco in the food and sundries category had comps that tracked negative. “Otherwise, all subcategories within food and sundries were up year-over-year. On average mid-to high-single-digits,” Galanti said, adding, “Fresh foods, as I mentioned, continues to be good. All subcategories within fresh foods are just fine.”

Categories such as food and television may get a lot of attention at Costco, but food provides particular opportunities, in this economy and in other circumstances in the future. “Keep in mind your most leveragable margin opportunities are in fresh foods,” said Galanti. “In your bakery, your raw materials are a fraction of the total sales dollar. Your labor and electricity and depreciation are another fraction. If you sell one more dozen of something, you make a bunch of money on it.

“Given that many of our—as an example, bakeries—are higher volume to start with, as people are in theory coming to us more because of food or we’re adding members because of food, I think that you probably get the biggest bang for your buck on those members,” he said.

Recent success at Costco is the result of no departure from the basic formula. While there has been refinement, Costco’s insistence on playing from strength has helped it advance, even as the economy slows.

Robert Plaza, an analyst at Zacks Investment Research, said many observers have knocked Costco in the past for not managing quarter to quarter and now are confronted with their own shortsightedness. “About one quarter a year, Costco will produce comp-store sales that disappoint the market, but they know their knitting,” he said. “They’re managing for five and 10 years down road. Now that market has come to them.”

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Trend Tracker: Personal Postage

BY CSA STAFF

Consumers have a new way to further personalize greeting cards thanks to licensed postage from Seattle-based Premier Postage.

Earlier this year, the company executed an agreement with the Major League Baseball Players Association to produce a line of stamps featuring 36 of today’s most popular players. Licensing agreements also exist with the Daytona 500 (pictured), Indianapolis Motor Speedway, Orange County Choppers and Professional Bull Riders.

Postage is a relatively new category for licensing. Premier works with Pitney Bowes, an authorized member of the USPS-approved Customized Postage Program. A sheet of six stamps costs $9.99.

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