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Perry Drug Stores Inc. has eaten humble pie, and Michigan's largest drug store chain now seems ready to again accept its role as operator of the neighborhood drug store.
Although it took Perry a long time to learn that motor oil and prescription drugs don't mix, the lesson hasn't been wasted.
Through a drastic series of actions over the past year, Pontiac-based Perry has remade itself. Gone is the Auto Works division, a retail auto parts chain that was a constant drag on profits and corporate attention. Gone are several top officers and a top-heavy layer of management, swept aside to make Perry more responsive to the market.
And the shabby look of some Perry stores will soon be gone, the product of a company that has recommitted itself to its core business: retailing prescription drugs and health and beauty aids.
"We did have one foot in the pot hole, but we're bullish on Perry for the future," said Jack Robinson, founder, chairman and CEO of drugstore chain.
Robinson knew his company had struck a pot hole last year when it lost $7.9 million on sales of $726 million -- the first time in its 31-year history that it had lost money.
And Robinson rid the company of what ailed it most: the Auto Works division.
Nurtured from a mere section in drug stores in 1976 to free standing stores in 1983, the division kept demanding more capital and corporate attention.
Perry incurred heavy debts to build the chain of 252 auto parts stores in eight states from 1976 through fiscal 1987 ended Oct. 31. During that time, competition in the drug store business ate away at Perry's market share.
The company went on an auto-store buying binge. And Perry paid too much for some of the stores it bought, according to Prudential-Bache Securities, a New York City investment banker for Perry.
Purchases included: Fleenor's Inc. in 1983, a chain of 50 auto stores in the Midwest for $3.25 million and $900,000 in common stock. Fleenor's was only marginally profitable at the time of the sale, Prudential-Bache said in a report.
In September 1984, Perry made two acquisitions in St. Louis: The Jana Corp. and three discount Pappy's Auto Parts stores. Jana Corp. operated...