A Giant CVS Is Getting Bigger

In one of the larger retail acquisitions we’ve seen for a while, CVS is buying Longs Drugs for $2.9 billion, adding over 500 stores to its 6,300-unit portfolio.

What intrigues us about the deal is that CVS is pulling the trigger to beef up its store base on the West Coast. What? There is an area of the country where CVS doesn’t already have a major presence?

We were surprised to see that CVS has no stores in the San Francisco area (unless we’re somehow too stupid to figure out the company’s website).

One thing the deal seems to emphasize is how well some of the major players in this sector of retail are doing in spite of the economy. Do you see this continuing or will the downturn catch up with them as well?

10 Responses to “A Giant CVS Is Getting Bigger”

  1. 1 Eric August 13, 2008 at 8:03 am

    I like CVS because their stores have wall to wall carpeting.

  2. 2 Jeff G August 13, 2008 at 8:13 am

    A little over 10 years ago CVS had only 1400 stores and was a small regional family company out New England. CEO Tom Ryan has really stepped it up. Since then they have opened or acquired over 500 stores per year. Personally I am not worried about their growth rate, they are a very well managed company.

  3. 3 Brad August 13, 2008 at 8:35 am

    It’s remarkable that they are buying and building at the rate they are. In suburban New York it seems that they are just too close and too numerous.

  4. 4 Caffeinated Charlie August 13, 2008 at 10:05 am

    Brad — Your description of CVS stores being too close and numerous reminds me exactly of how some would describe Starbucks at this point!

  5. 5 TeenyTiny August 13, 2008 at 10:32 am

    Sounds like this acquisition will likely put someone out of business, like RiteAid, or, if CVS bites off more than they can chew….CVS.

  6. 6 TeenyTiny August 13, 2008 at 10:50 am

    Right, look what happened to Centro Properties Group, they bought New Plan Excel Realty Trust around $13 bucks, and now the stock is worth 28 cents, up from a low of 21 cents. Whoppeee! Penny stock status! Acquisitions can sometimes lead to dispositions, and fast: they now have all of their shopping centers on the block. So much for bigger is better, there are a litany of acquisitions where they can’t even afford to change out all the signs to the new company after they borrow the money to buy the company. Gee, capitalism at its finest, so much for the invisible hand.

  7. 7 JobHungerRetailRE August 13, 2008 at 11:04 am

    Great, another set of people due to fall to layoffs to include in the ever increasing pool of retail real estate people out of work. Say welcome to the Long’s Real Estate Department, and don’t forget to sign up for unemployment insurance, while it lasts.

  8. 8 E August 13, 2008 at 11:25 am

    Don’t know what to make of it. Seems you can’t pass a chain like Duane Reade, Walgreens, or even CVS, without one-all of them having a banner outstide that’s part obit (in the case of Rite Aid here in NY), part huckstering —

    “Former (store X) Customers can fill their prescriptions here – Come inside!” I wonder what proportion of store revenue is Rx driven, and if that’s fueling this “growth.”

    It’s like that old joke, you want a steady job, go into the funeral business, because everybody dies. Everybody at some point in the life cycle needs prescriptions, so the view is that it’s a can’t-lose business.

    “Can’t lose” is a matter of perspective. Saturate the market with your own stores, become your own competition, bad news. To paraphrase Abe Lincoln’s commentary screening patronage candidates at a rate of 20 people for every job available at the start of his presidency, “…there are too many pigs for the teets!…”

  9. 9 StalloneFan August 14, 2008 at 1:22 pm

    Yo Adrian, can’t wait to get to the new CVS to buy my muscle enhancers.

  10. 10 joe August 14, 2008 at 3:37 pm

    Word just hit the street that Walgreen has pulled the plug on all store development where leases are not executed!! The pullback is expected to last through 2011!!!! CVS will truly be on top with a three year halt to store growth at Walgreens!!!

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