CORPORATIONS: Wonder Boy Makes Good

There is little logical reason why the Rexall Drug Co. should prosper. The nation's biggest drug chain (11,158 franchised stores), it breaks most of the textbook rules. Its distribution system is as old-fashioned as a Stanley Steamer. It has two-thirds of its stores scattered where only one-third of the population lives. It invests only 2½% of product sales in advertising, well below many of its competitors. But last week greying, handsome President Justin Whitlock Dart, 51, announced that the firm's first-half sales were up 8%, net profit 26%. This year's volume should come close to $180 million and earnings should pass $5,000,000, the best in Rexall's 38-year history.

Rexall's progress spelled a personal comeback for Justin Dart, ex-wonder boy. When he took over Rexall in 1943 at 36, Dart became the hottest shot in the conservative drug business—until Rexall earnings dipped sharply in 1947. Dart owned up frankly to the board: "I know I look bad now. But before I look better, I'm going to look worse." Sure enough, things got worse.

In 1949 Rexall lost $1,250,000, and its stock plunged from a postwar high of $35 to $4. "Jus"' Dart, onetime All-Big Ten football guard (Northwestern '28 and '29), had fumbled by selling off too many of Rexall's outmoded, wholly owned stores before he could open enough modern Rexall franchise stores to replace them.

He snapped back by funneling cash from these sales into profitable projects. Dart established Riker Laboratories to manufacture ethical drugs; it now brings 15% of Rexall's profits. He invested heavily in the manufacturing division, now another 15% earner that turns out almost 4,000 different kinds of Rexall cosmetics, vitamins and patent medicines, including 77 billion tablets a year at its St. Louis plant alone. He buttressed the company's Rexall Division, which distributes 5,000 Rexall trademarked products, earns half of Rexall's profits.

By shucking off all but 159 of Rexall's 540 wholly owned stores, Dart also strengthened the company's ties with its franchised U.S. and Canadian druggists, who no longer had to compete with them. The franchisers are Rexall's lifeblood, and Dart has carefully courted them. He urges them to visit the Los Angeles headquarters (1,000 will this year), rolls out the red carpet. When the junketeering Rexallite marches into the lobby, he is surprised to see his name posted in two-inch-high plastic letters on a welcome sign and hear it blared through a public-address system.

A photographer takes his picture with Rexall's top brass, and the company often persuades the druggist's home-town paper to run it. Dart also gives the druggist an incentive to push Rexall products more vigorously than competing brands by selling at such low wholesale prices that the druggist can often get a bigger markup on Rexall products than others.