As far as Moore Medical Corp.’s stock price is concerned, not much has changed since the end of 1993, when the American Stock Exchange listed its market price as $13-5/8 per share. As of early September 1998, Moore’s stock was trading at $13-1/2-nearly the same price paid five years earlier.
But little else about Moore remains unchanged, even from one year ago. The cataloger’s wholesale drug distribution business, established in the 1940s, is gone, and with it, 60% of the company’s net sales, reported at $289 million for the year ended Jan. 3. Gone too are 60-70 employees-about 20% of Moore’s work force.
But the company remains optimistic that the liquidation of its wholesale drug distribution business will allow Moore to devote all its resources to its more profitable medical and surgical supply business. “Our medical supply sales grew 15% in the first half of 1998,” says John Murray, director of business development for New Britain, CT-based Moore. “Our goal is to continue to grow at that rate, or faster. But profitable growth is more important to us than growth for growth’s sake.”
The company’s profit margins illustrate the difference. Although 1998 second-quarter sales, at $30 million, are more than 60% lower than last year’s second-quarter sales, 1998′s second-quarter income of $709,000 is 167% higher than last year’s. Meanwhile, earnings per share rose from $0.09 for the second quarter of 1997 to $0.24 for the second quarter of 1998.
Ironically, given that Moore was once known for its line of generic pharmaceutical supplies, Murray blames the low margins of pharmaceuticals for the demise of its wholesale drug business. “Drugstores bought generics from us when we had them for a lower price,” he explains, “but when generics got to be a bigger part of the marketplace and our larger competitors sold them, we could no longer compete on price,” especially as Moore had only 1% of the $11.5 billion pharmaceutical market. “The large distributors to drugstores are not catalogs. It’s generally not how the stores do business. They buy from sales reps, and most of our competitors were selling one- to two-year contracts, effectively keeping us out of the picture.”
Potential sale canceled Murray says the board of directors considered other options before deciding to liquidate the wholesale drug business. “By 1997, the company had been going sideways for three or four years,” he notes. “In the spring of ’97, the board decided to put the company on the market, and after talking to some suitors, it became clear that there was great value in the medical and surgical supplies business but little value in the pharmaceutical business.”
But now that Moore has shed its less valuable drug division, “the company is no longer for sale,” Murray insists. “Our intention is to keep this business and grow it,” he says.