New owner seen carrying on Thrifty revamping.

Changes already afoot at Pacific Enterprises retail unit

To turn around the unprofitable Thrifty Drug chain, its new owners must revamp the stores' merchandising strategy, industry sources say. This process could include test marketing, stocking merchandise in line with specific neighborhoods' needs and even rethinking ice cream counters' positioning within the stores.

Leonard Green & Partners, a Los Angeles-based investment group, late last month agreed to buy five of Thrifty's six subsidiaries -- Thrifty Drug, Big 5 Sporting Goods and three smaller retailing chains -- from downtown Los Angeles-based Pacific Enterprises, which is also Southern California Gas Co.'s parent company.

Thrifty's sixth subsidiary, Pay 'n Save, is being sold separately to Pay Less Drug Stores Northwest Inc., a subsidiary of Troy, Mich.-based K mart Corp. The entire Thrifty Corp. operation will fetch an estimated $275 million for Pacific Enterprises.

Thrifty Drug is an unprofitable chain and has been Thrifty Corp.'s primary problem, said PE spokesman Tom Sanger. PE has not broken out Thrifty Drug's losses, but the entire Thrifty Corp. operation lost $53 million last year and $28 million in first quarter 1992.

PE expects to complete the sale of Thrifty Corp. within 90 days, Sanger said.

Meanwhile, Thrifty Corp.'s management has already developed a plan for turning around Thrifty Drug, Sanger said. "Everything we know indicates that he (Green) is in accord with these plans," and plans to carry through with them, he said.

Thrifty's top management consists of Chairman and Chief Executive William Yingling, who was brought on board in August 1991, and Joe Coulombe, founder of Trader Joe's Co., who was brought on board as executive vice president of Pacific Enterprises and co-chairman of Thrifty Corp. last March.

The turnaround plan calls for continuing the Yingling/Coulombe strategy of reorienting Thrifty Drug stores to its traditional drugstore roots, Sanger said. Previous President Eve Rich had focused on women as primary target customers and tried to steer Thrifty Drug merchandise away from a traditional drugstore's offerings, he said.

Also, part of the planned strategy allows store managers to stock merchandise targeted toward customers in their specific neighborhoods, Sanger said.

Thrifty Drug's management might also perform some limited test marketing of new merchandising strategies in a few stores and, if successful, carry them into other Thrifty Drug stores, an industry source said.

Even the placement of Thrifty's ice cream counters, a main draw of the stores, might be reviewed, the source said. The counters are currently at the front of the stores, but ice cream customers aren't then drawn to where most merchandise is situated, the source said.

Dave Stewart, professor of marketing at USC, said Thrifty Drug's new owners can best make the stores profitable by capitalizing on the Thrifty name, which has been well-known in California since the chain first opened in 1929.

But the chain has some disadvantages to overcome, Stewart said. For openers, many of its stores are in areas with impoverished populations, he explained.

Also, because Thrifty Drug carries non-traditional drugstore items such as hardware and appliances, the chain competes with large discount retailers such as K mart and Atlanta-based Home Depot Inc. But Thrifty Drug can't compete with them on price, Stewart said.

Scanning the other Thrifty retail chains, Big 5 is one of the most successful sporting goods retailers in the country, Sanger said, so there probably won't be any changes at that chain.

Another Thrifty sporting goods chain, Gart Bros., is adopting many of Big 5's marketing strategies and there's no indication that will change, Sanger said. The chain is composed of 50 sporting goods stores in the Rocky Mountain states.

Meanwhile, Thrifty's Bi-Mart, an Oregon-based chain of membership discount stores, has been improving operations recently and there are no course-change plans, Sanger said.

K mart plans to change the name of most of the Pay 'n Save stores it's buying from Thrifty to Pay Less and incorporate them into the Pay Less chain, said K mart spokeswoman Mary McGeachy.