The vision:
 Walgreens wants to ‘own well’

Talk about a bold retail vision. Walgreens president and CEO Greg Wasson said the nation’s top pharmacy retailer wants nothing less than to “own well.”

He’s serious. Owning “well” — or, put another way, becoming the nation’s top retail resource for pharmacy and health-and-wellness services and products — is the kind of declaration few retail pharmacy executives would dare utter. But Wasson isn’t running just any drug store chain. He’s in charge of a re-engineered, 110-year-old retail pharmacy and health behemoth with more than 8,000 “points of care” around the United States, a clearly revitalized mission and store base, and a driving goal: to become the nation’s first fully integrated, nationwide provider of products and services for health, wellness and everyday needs.

At Walgreens’ annual meeting in January, Wasson and other top leaders laid out their vision for a company nearing the culmination point of a massive, two-year transformation. Walgreens, Wasson told shareholders, aims to be nothing less than the “first choice for health and daily living needs ... [for] everyone in America.”

It’s a far cry from the stick-to-the-retail-basics “hedgehog” strategy that defined the company for decades, and it’s as bold an assertion as declaring that the company wants to “own well.” But Walgreens has spent decades and poured billions into its pursuit of coast-to-coast market penetration, and more recently into creating a formidable presence within the U.S. workplace. “We are on the front lines of health care with [more than] 70,000 healthcare service providers and growing,” Wasson said. “We have [more than] 8,000 points of care across the country. What we are building is the most complete national network of integrated healthcare providers and locations in the country.”

If Walgreens can achieve a true integration of all those providers and locations, it will wield a powerful arsenal. Decades of aggressive organic store growth — supplemented by a series of savvy acquisitions targeting the best regional chains — have given the company a dense network of 7,670 drug stores operating in all 50 states and Puerto Rico, at least one of which is within 3 miles of more than 6-of-every-10 Americans. What’s more, the chain has paid dearly to put its stores on “the best retail corners in America,” to quote chairman Alan McNally, making Walgreens “No. 1 or 2 in 215 markets across the country,” McNally added.

The network also includes more than 100 Walgreens pharmacies in hospitals and community care centers; some 350 in-store Take Care Clinics with an expanding menu of ambulatory care services; a powerful presence in specialty pharmacy, oncology, home infusion and other high-touch medical services; and more than 380 clinics operating within the employee workplace, some 40 of which include pharmacies.

Combine that unrivaled retail health presence with the ongoing revolution occurring at the front end of the stores as Walgreens pursues its Customer Centric Retailing initiative, and you have a company poised, in Wasson’s words, to exploit “the convergence of two great industries, retail and health care. Frankly, that trend is good for us, because we are located right at the intersection of retail and health care,” he said. 

It’s no accident that more of the nation’s frayed healthcare system is moving into the retail space. Roiled by reform and hammered by unsustainable cost increases for health delivery, a growing shortage of primary care physicians and a funding crisis in state and federal coffers, the health system is turning increasingly to such lower-cost, patient-accessible providers as pharmacists and clinic-based nurse practitioners for front-line care.

Walgreens has transformed itself to align with that titanic shift. Its Power initiative to centralize dispensing functions and other efforts is aimed at freeing its pharmacists for more patient care and medication therapy management activities, and the chain has become the nation’s top nongovernment provider of flu immunizations.

With that realignment has come a reordering of priorities. Walgreens has cut its annual store-expansion rate to about 3%, from a peak of roughly 9% in fiscal 2008, and is “focused on making the 7,600 stores we already have more valuable, productive and relevant to customers and patients in satisfying more and more of their health and daily living needs,” according to McNally.

The effort has borne fruit. In line with efforts to make its stores and merchandise mix more productive, the company has whacked expenses and moved back into record-setting sales and earnings territory.

Given Walgreens’ recent strong earnings momentum and same-store sales growth, Wall Street has applauded the shift, although one retail analyst, Jack Russo of Edward Jones and Co., warned that Walgreens already has “over-saturated the U.S. marketplace” with its once-torrid store-construction program. More typical of recent comments is that of Meredith Adler of Barclays Capital, who noted that Walgreens is doing “a very good job” of managing its expenses and showing “a discipline about pretty much everything [it does] that was not there before” as the company cuts back on profit-draining 
promotions and progresses on its billion-dollar inventory-reduction campaign.

For the whole report, click here.


- 2:12 PM
jurbanek says

Walgreens might want to stop selling cigarettes in that case.

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