Opportunities still knock as Walgreens enters new decade

WHAT IT MEANS AND WHY IT'S IMPORTANT In January 2009, Walgreens’ top brass faced a few hundred worried stockholders on a frigid day -- a day whose forbidding temperatures and blowing snow seemed to match the grim mood of those inside Chicago’s Navy Pier ballroom. The economy was in a panicked freefall. Bank lending and consumer spending had evaporated as the nation hemorrhaged jobs. Walgreens’ stock price was down by almost half from its all-time peak. And Walgreens itself -- after more than three decades as one of the steadiest and most predictable record-breaking profit generators in the Fortune 500 -- seemed to be reeling along with the rest of the U.S. economy.

(THE NEWS: Facing investors with renewed confidence, Walgreens charts progress of renewal efforts. To read the full story, click here)

Walgreens’ leaders did their best to convince their most loyal investors that the company had a solid plan to regain its legendary sales and earnings momentum. But in the midst of the bleakest economic outlook since the Great Depression, it was clear the company had a lot of work to do as its managers grappled with a bloated cost structure and inventory stream, a growing disconnect with America’s consumers and a slowing revenue and profit stream.

Nevertheless, Walgreens was already well along on a revitalization plan and management overhaul in early 2009. That transformation is far from complete, but when the company’s top executives took the stage at Navy Pier this year, they were clearly more buoyant and more confident about Walgreens’ direction and progress.

Addressing a far larger crowd of shareholders Jan. 13, president and CEO Greg Wasson, chairman Alan McNally and CFO Wade Miquelon could point to signs of progress on many fronts as the company continued its massive campaign to remake itself as America’s most convenient and integrated provider of health and wellness services and products. Among the most visible:

  • The Customer Centric Retailing initiative has spawned a sweeping overhaul and streamlining of the front end of the store, along with a redesign that will clearly display the full fruit of the CCR effort beginning in March.
  • The “Power” campaign has entered its second phase after a statewide rollout in Florida and Texas, offloading and centralizing many administrative tasks in the dispensary to free pharmacists up for what Walgreens promises will be a far more determined effort to involve them in patients’ health and wellbeing through in-store programs like the newly launched “Walgreens Optimal Wellness.”
  • Operating costs continue to shrink as the chain pares excessive inventory and boosts turns in stores.
  • A massive effort to integrate all the company’s “points of care” and bring Walgreens health services directly into employer workplaces has borne fruit, with some 380 worksite-based health-and-wellness centers and pharmacies now in operation, along with roughly 100 Walgreens pharmacies in hospitals, community health centers and other professional sites.
  • Expansion of specialty pharmacies and in-store clinics continues to add new customers to the rolls.
  • Regional VPs have been relocated out of Walgreens headquarters and moved across the country, so that each of them can be in closer contact with local customers and market conditions.

Many other efforts also continue as the company works to reinvent itself. The result, say its leaders, will be a more nimble and customer-focused retailer and health services provider, able to meet the needs of what Wasson acknowledges is a more “savings-minded” and “wary” consumer, while bringing to the nation’s employer-sponsored healthcare plans a new set of solutions to hold down their employees’ healthcare costs and maintain a healthier workforce.

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