WALGREENS MOVING IN DRUG CHAIN PLANNING PUSH INTO LOS ANGELES.

Byline: Brent Hopkins Staff Writer

VALLEY GLEN - Walgreens celebrated its 4,000th store opening Tuesday, but it's just getting started.

The pharmacy chain's latest opening, an 11,000-square-foot drug store at the corner of Coldwater Canyon Avenue and Magnolia Boulevard, gives it eight spots within the San Fernando Valley. But that's nothing, executives say - it should boast 70 within 10 years. Chairman and chief executive officer Dave Bernauer has long had his eye on Los Angeles, thinking his preferred vacation spot could one day become a profit generator for the chain.

``I always thought it would be great to get to L.A., but we needed to get much stronger,'' he said. ``Now, we're coming with hundreds more stores from Ventura to the Valley.''

Tuesday's event was an unusually festive one for the 102-year-old chain, which handed over a $4,000 check to the Los Angeles chapter of the American Heart Association. The AHA brought along a slew of rope-jumping schoolchildren, along with retired baseballer Jim Palmer, volleyball star Gabrielle Reece and a costumed SpongeBob SquarePants, who drew the most applause by far.

Bernauer's appearance for the ribbon snipping was also unusual - the well-spoken, polished executive rarely attends grand openings. He couldn't, as the chain opens a store every 18 hours, on average. This extremely rapid pace, combined with a high-tech inventory management system and strong reputation among consumers, has led it to dominate the industry.

Its local competitors, chiefly Longs Drugs and Rite Aid, are suffering. After missing its Wall Street expectations late February, Longs announced 170 job cuts and a round of store closures. Earlier in the same month, Rite Aid cut its sales projections for the current quarter, citing downward trends at its stores.

``You can't compare Walgreens to Longs or Rite Aid,'' said Jack Russo, a vice president for St. Louis-based investment bank A.G. Edwards & Sons Inc. ``You haven't seen good drug stores out in L.A. unfortunately. It's just like night and day, when you walk in Walgreens' stores. They're clean, well-lit, well-merchandised. There's a reason they're doing so well.''

In its most recent quarter, the Deerfield, Ill.-based chain reported sales of $7.5 billion, which made for earnings of $231.6 million, 22 cents per share. This compares favorably with the same quarter a year ago, when it sold $6.5 billion worth of goods, bringing in $185.9 million, 18 cents per share.

Its stock has suffered, however, which analysts attribute to two missed profit targets in the last year and a general weakness of the industry. After a high of $40.29 exactly a year ago, the stock slid to $26.90 on Feb. 13, climbing slightly in recent weeks to close at $27.75 on Tuesday.

``Walgreens is the Wal-Mart of the drug industry in terms of its sophistication,'' said Jay Forbes, who follows the industry for Drug Store News, a twice-monthly trade. ``It has a lead on most of its competitors, because they invested early on in technology and are very focused on taking the problems out of the supply chain.''

Using the program, known as the Basic Department Management system, each store can custom order its merchandise, tailoring it to specific market needs. Additionally, its machines can print prescription labels in eight languages, and its pharmacy can fill orders online.

By Forbes' figures, Walgreens boasts sales per square foot of $628, well above the industry average of $486. And in addition to its pharmacy business, it excels in photo finishing, convenience food and seasonal item sales.

``They are, by far, the best drug company in the industry,'' said Meredith Adler, an equity analyst for New York-based brokerage Lehman Brothers. ``They've been a new entrant to markets many, many times in the last decade, and they always take share. It's amazing how many times they've managed to become No. 1 in a market quickly.''

Next on the company's local list will be a Reseda store on Sherman Way and Canby Avenue, set for a June opening. Bernauer also talks excitedly of a $150 million, 650,000-square-foot distribution center now under construction in Riverside which would provide for the chain's hefty expansion.

``If we're not in your neck of the woods yet ...,'' he said, ``we will be.''

CAPTION(S):

2 photos, map

Photo:

(1 -- color) The animated cartoon character SpongeBob SquarePants greets children from Sherman Oaks Elementary School at the opening of the 4,000th Walgreens store at Coldwater Canyon Avenue and Magnolia Boulevard.

(2 -- color) Liz Carr of Valencia shops with her son, Jarren, 2, during the opening of the new Walgreens store in North Hollywood.

Tina Burch/Staff Photographer

Map:

Walgreens pharmacy