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Target Q3 earnings decline as Canadian segment sees lower-than-expected results, but U.S. segment shows strength

BY Alaric DeArment

MINNEAPOLIS — Target Corp. posted sales of $17.3 billion in third-quarter 2013, a 4% increase over the same period last year, and a $341 million profit, down by 46.4% from a year ago, the mass merchandise retailer said Thursday.

The results from the quarter reflected a earnings-per-share dilution of 29 cents related to the chain’s new Canadian segment. Same-store sales in the U.S. segment grew by 0.9%, near the low end of the company’s fiscal 2013 guidance, while total sales were $16.9 billion, up 2% from third-quarter 2012’s $16.6 billion.

The Beauty Concierge program, which the chain recently rolled out to 95 new stores for a total of nearly 300 throughout the chain, has helped sales in the beauty and personal care category, exceeding sales goals in cosmetics, skin care and hair care. Need-based categories like food and health care have seen growth that outpaces the overall same-store sales growth for the chain. As the holiday shopping season approaches, the company expects a highly competitive, promotional environment.

"Target’s third-quarter financial results reflect continued strong execution of our U.S. segment in an environment where consumer spending remains constrained," Target chairman, president and CEO Gregg Steinhafel said.

In a conference call with investment bank analysts Thursday morning to discuss the results, Steinhafel said the company expected better results from the Canadian segment in 2014. "While initial sales and profits in Canada have not met our expectations, we remain confident about the long term," Steinhafel said. He also noted that Canadian stores opened early on had seen much stronger sales than those more recently opened. "It’s still very, very early, but we like what we see in some of those early-cycle stores," he said. Target expects to reach its goal of 124 Target Canada stores in operation by the end of the year.

The chain’s digital channel has seen strong growth as well. Cartwheel, part of its mobile app, has nearly 3 million users, most of whom access it exclusively on their mobile devices and, according to the company, have saved $14 million since it was launched about six months ago. Meanwhile, digital traffic has seen double-digit growth, while mobile traffic has seen growth in the triple digits, EVP merchandising and supply chain Kathryn Tesija said during the call.

In late September, Target rolled out a subscription service that allows customers to order baby items on a regular schedule, and the company plans to expand the service to include such items as coffee, paper towels, toilet paper and personal care products. A newly improved baby products section, which the chain was recently testing in the Chicago area, will also be rolled out to 20 stores around the country. Meanwhile, Target Ticket, an online DVD rental and movie streaming service, has seen millions of page views and new account signups that exceeded the company’s expectations, Tesija said.

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Walgreens opens nation’s first net-zero energy store

BY Michael Johnsen

EVANSTON, Ill. — Sporting two wind turbines, nearly 850 solar panels and a geothermal system burrowed 550 ft. into the ground, Walgreens on Thursday celebrated the official opening of what the retailer believes to be the nation’s first net-zero energy retail store, anticipated to produce energy equal to or greater than it consumes.

“As we celebrate the grand opening, we begin a one-year effort to operate a retail store that will generate more energy than it consumes," said Mark Wagner, Walgreens president of operations and community management. "Using the best technologies available, we believe we can accomplish our goal of having the first net zero energy retail store in America,” he said. “Currently, we have facilities that utilize wind turbines, solar installations and geothermal technologies. This is the first time we are bringing all three of these technologies, and many more, together in one place. Our purpose as a company is to help people get, stay and live well, and that includes making our planet more livable by conserving resources and reducing pollution.” 

Illinois Governor Pat Quinn said, “I am proud that an Illinois-based corporation like Walgreens is taking the lead in the use of green technology, which will be a model for all retail operations across the country. The best energy sources are free, renewable and have little environmental impact — and that’s exactly what Walgreens is doing in Evanston.”

Walgreens plans to generate electricity and reduce its energy usage in the store by more than 50% through several technologies, including:

  • Nearly 850 rooftop solar panels, generating enough energy to power 30 Illinois homes for a year;
  • Two 35-ft.-tall wind turbines, using Lake Michigan breezes to generate enough power to offset annual greenhouse gas emissions from 2.2 passenger vehicles;
  • Geothermal energy obtained by drilling 550 feet into the ground below the store, where temperatures are more constant and can be tapped to heat or cool the store in winter and summer;
  • LED lighting and daylight harvesting;
  • Carbon dioxide refrigerant for heating, cooling and refrigeration equipment; and
  • Energy efficient building materials.

Engineering estimates — which can vary due to such factors as weather, store operations and systems performance — indicate that the store will use 200,000 kilowatt hours per year of electricity, while generating 220,000 kilowatt hours per year. 

“We are investing in a net-zero energy store so we can bring what we learn to our other stores and share what we learn with other companies," said Thomas Connolly, Walgreens VP facilities development. "Because we operate more than 8,000 stores, anything we do that reduces our carbon footprint can have a broad, positive impact on the nation’s environment.”

The store is seeking platinum certification through the U.S. Green Building Council LEED program, Net Zero Certification through the Living Building Challenge and has received GreenChill platinum certification through the U.S. EPA. GreenChill’s Store Certification Program was designed for supermarkets. This is the first time a GreenChill certification is being awarded to a small-format store, such as a convenience store or pharmacy.

The project is the latest of many green initiatives for the company. Walgreens currently operates two stores that have achieved a LEED certification level of gold; 150 stores utilizing solar power; a store in Oak Park, Ill., using geothermal energy; a distribution center in Waxahachie, Texas, that generates energy though the use of wind; and 400 locations with electric vehicle charging stations. Walgreens stores use 25 watt fluorescent lamps (lowest wattage in the industry), LED cooler and freezer lighting and energy management systems in more than 5,000 locations. In addition, 15 Walgreens distribution centers have achieved net zero waste, which means revenues from recycling exceed waste expense.

The Evanston location also showcases the new Walgreens “Well Experience” store format with features that include an enhanced, state-of-the-art pharmacy designed to encourage greater interaction between pharmacists and patients.

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SSM Health Care–St. Louis and Healthcare Clinic to launch patient-care collaboration in January

BY Michael Johnsen

ST. LOUIS — SSM Health Care–St. Louis and Healthcare Clinic at select Walgreens will launch a collaboration in January 2014 that will improve access to care and increase care coordination for patients, the companies announced Thursday.

With the collaboration, patients who currently see an SSM Health Care primary-care physician and visit a Healthcare Clinic at select Walgreens in the St. Louis region will benefit from enhanced information sharing between the two organizations. With patient consent, Healthcare Clinic nurse practitioners will be able to access information — such as allergies and medications — through sharing of an electronic health record going live later in 2014. SSM Health Care physicians will receive their patient’s discharge reports through this information sharing platform, so they are aware of the clinic visit and can provide any necessary follow-up care.

Healthcare Clinics are professional walk-in health centers located in more than 400 Walgreens drug stores across the country. Clinics are open seven days a week, including evenings and weekends, giving patients the option to access a variety of healthcare services at their convenience and without an appointment.

“SSM Health Care believes in building relationships with physicians and other providers that enhance our ability to improve our community’s health,” said Shane Peng, interim president of physician and ambulatory services, SSM Health Care. “Our affiliation with Healthcare Clinic at select Walgreens will improve patient access to coordinated, affordable, quality care.”

SSM Health Care also has more than 2,500 staff physicians, including more than 100 primary-care providers, who can manage care over time for people with chronic illnesses. The collaboration will give SSM Health Care physicians another treatment option to offer their patients for non-emergent and after-hours care that maintains coordination of care between providers.

“Given the challenges facing today’s healthcare system, Healthcare Clinic at select Walgreens is ideally positioned to provide greater patient access to quality, convenient and affordable care,” said Alan London, chief medical officer, Consumer Solutions Group, Walgreens. “The collaboration with SSM Health Care aims to improve coordination of care for patients throughout the St. Louis community.”

“This innovative collaboration with Walgreens enables SSM Health Care to expand our reach in the communities we serve,” said Gaurov Dayal, president healthcare delivery, finance and integration and EVP of SSM Health Care. “Health care across this country is undergoing significant transformation, and working in partnership with other likeminded organizations such as Walgreens is a critical element to becoming a leading provider of population-based health services.”

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