As Walgreens Cuts Costs, Store Corners May Change | Healthcare and Technology news | Scoop.it

With $1 billion in costs to cut as part of its merger with Alliance Boots, Walgreen Co. (WAG) is preparing for potential store design changes and new retail locations to reduce expenses and boost under-performing operations.

The largest drugstore chain in the U.S. earlier this week hinted at such potential changes during its first quarter fiscal 2015 earnings call with executives saying the past strategy to “have the best corner or location in any geography” didn’t always work. In some cases, Walgreens may just have to renegotiate leases while others may mean a smaller store or a different location or perhaps a closure.

“We are doing lots of things to manage down all aspects of that overall cost structure including taking a hard look at those stores,” said Tim McLevish, Walgreens executive vice president and chief financial officer told analysts.

“It covers the spectrum,” McLevish added. “In some locations, we would benefit by a smaller format store … (than the current) size and scale what we have.”

Walgreens, which has more retail pharmacies than rivals like CVS Health (CVS) and Wal-Mart Stores Inc. (WMT), operates 8,230 drugstores with a presence in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Thus, the opportunities to cut costs are large, analysts say.


Walgreens opened a new store in an old bank in Chicago’s Bucktown neighborhood in 2013.

Alex Gourlay, who was CEO of Alliance Boots’ health and beauty division before last year becoming president of customer experience and daily living and the president elect of Walgreen Co., said the company had “to make even better use of the asset by having the right offer in that locality for the customers who are actually based around that store.”

“These are all strategies that we are now deploying,” Gourlay told analysts on the earnings call.

Walgreens acquisition of the remaining 55% of Alliance Boots that Walgreen doesn’t already own is expected to close next week. Shareholders will vote on that purchase Monday in New York and, should they vote in favor of the deal, the transaction will close Dec. 31.  Then, the company will operate under a new holding company called Walgreens Boots Alliance Inc. that will trade under a new ticker symbol “WBA” and be run by Italian billionaire Stefano Pessina, 73, who has led Alliance Boots, and becomes “acting CEO, pending” a search for a permanent replacement for Greg Wasson, 56, who is retiring.