By now, Eckerd Corp. should have been nearly done with a three-year turnaround. At least that was the plan when J.C. Penney Co. (JCP ) tapped former supermarket executive J. Wayne Harris to shake things up at its ailing drugstore unit in October, 2000. After making early progress, Harris today finds himself back at square one.
Penney is expected to decide soon whether to sell, spin off, merge, or retain the chain. What went wrong? Harris, 63, initially boosted sales and profits with more competitive prices and reconfigured stores. But he has been overtaken by rising competition. Supermarkets and discount store operators devoted more space to in-store pharmacies. Archrival Walgreen Co. (WAG ) expanded aggressively. Eckerd's operating profits dropped an estimated 25% in 2003, to $311 million. Company spokesperson Joan M. Gallagher says: "Despite the fact that 2003 sales and profits are not impressive, we have had a number of accomplishments under Wayne." But given the way the market has shifted, analysts say Penney's only real option is to sell Eckerd.