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PERRY REPORTS NONCASH CHARGE FOR INVENTORY ADJUSTMENT

 PONTIAC, Mich., Oct. 12 /PRNewswire/ -- Perry Drug Stores, Inc. (NYSE: PDS) has announced that it will record a noncash charge for the year ending Oct. 31, 1993, presently estimated in the range of $21 million to $25 million, principally for an inventory adjustment. As a result, the company estimates an operating loss for the full year in the range of $14 million to $18 million.
 The company began installation of state-of-the-art point-of-sale and direct store delivery inventory control systems (POS/DSD) in a few of its stores in late fiscal 1992.
 These new systems are designed to provide management with more accurate daily information on merchandise movement and attained profit margins. In 1993, as more stores were converted to the new systems, it appeared that estimated carry-forward margins may not have been reflecting actual profit margins. Accordingly, the company accelerated the conversion of its remaining stores to POS/DSD and, for the first time, undertook chainwide physical inventories instead of the periodic cycle counts of store inventories performed in prior years.
 On the basis of these physical inventories, management has determined that the estimated gross margins utilized in its previous system differed from actual margins due primarily to three reasons:
 -- A larger than anticipated negative effect on margins resulting from certain merchandising programs.
 -- The effect of cash discounts on prescription margins erroneously programmed into the pharmacy computer system.
 -- The negative impact on margins from certain revised third party prescription payor programs.
 As a result of the estimated year-end operating loss, the company will request waivers of certain financial ratio loan covenants from the three banks that provide it with revolving credit and term loans.
 Management believes these waivers will be obtained and does not anticipate any restrictions on the availability of these credit facilities. This inventory adjustment will not require the company to increase its normal borrowing needs.
 Perry, a New York Stock Exchange company headquartered in Pontiac, operates 205 traditional drugstores and seven A.L. Price deep discount health and beauty aids stores. It is Michigan's largest drugstore chain and the 14th-largest drugstore chain in the U.S.
 -0- 10/12/93
 /CONTACT: Jerry Stone, chief financial officer, 313-674-7783, or Berl Falbaum, 313-674-7772, both of Perry Drug Stores, Inc./
 (PDS)


CO: Perry Drug Stores, Inc. ST: Michigan IN: REA SU:

KE-JG -- DE022 -- 1275 10/12/93 16:22 EDT
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Publication:PR Newswire
Date:Oct 12, 1993
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