A shopper at the Walgreens on 250 S. Wacker Dr. in Chicago. (Scott Strazzant/Chicago Tribune, File)
| By Sandra M. Jones | Walgreen stores are about to get a new look as the drug store chain expands a test to make the stores more open, more colorful and easier to shop in.
The Deerfield-based company is adding more food and wine, expanding its beauty aisles, and preparing to add electronics this summer. The retailer is also lowering the heights of shelves and installing bigger and more colorful signs to help shoppers navigate the store. The new format, called customer centric retailing, is slated to roll out to 2,500 to 3,000 stores by this fall from 700 now, said Walgreens CEO and President Gregory Wasson in an earnings conference call Tuesday. |
See also • Walgreens profit up 4.6% on record sales
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The company concentrated its first test in Houston and Dallas. Wasson
declined to reveal where the next test market will be.
“As we’ve said before, this is an ongoing process with many checkpoints along the way to allow us the opportunity to tweak and refine as needed,” said Wasson. “As we move into the next phase, we’ll continue to build sales, take work out of stores, lower inventory and most importantly, improve our customers’ overall shopping experience.”
As part of the makeover, Walgreens has eliminated about 3,500 products from each store to focus on fewer, better selling items. The move took $500 million of inventory out of the chain and lowered labor costs by cutting down on restocking work.
Walgreen relies on sales at the front end of the store, the industry term for everything that doesn’t come from the pharmacy, for almost 40 percent of its revenue.
Sales at the initial 31 pilot stores are up 2 percent, outperforming a control group of stores and suggesting that the makeover will spur revenue growth, Wasson said. Market share in the Houston and Dallas remained unchanged to up slightly as the stores changed over, a result the company said was encouraging. The cost to convert each store is about $40,000 to $50,000.
While only 30 percent to 40 percent of Walgreens stores will make the change to the new format this year, all of the 7,180 drug stores nationwide will dedicate more space to skincare and vitamins. And 5,000 stores are on track to carry beer and wine by the end of the year.
“We believe initiatives to improve both shopping experience and inventory management remain on track,” said Standard & Poor’s equity analyst Joseph Agnese, in a Tuesday report, raiting Walgreen shares a “buy.”
The details on the store makeovers came as Walgreens reported its second fiscal quarter results. Net income for the quarter ended Feb. 28 rose 4.6 percent to $669 million, or 68 cents a share, from $640 million, or 65 cents, a year-ago. The latest quarter included restructuring charges of 2 cents a share.
Sales rose 3.1 percent to $17 billion.
Sales at stores open at least one year, a key retail metric, fell 0.2 percent from the year-ago quarter.
Front-end same store sales fell 1.6 percent, dragged down by the weak demand for discretionary goods and by lower demand for cough, cold and flu products, the company said.
Pharmacy sales rose 3.2 percent as the company sold more 90-day prescriptions in stores, an offering previously available only by mail. Pharmacy same store sales rose 0.6 percent.
Walgreen shares rose 62 cents, or 1.8 percent, to $35.95 in late afternoon New York Stock Exchange composite trading.
O goodie, now I can shop for electronic, liquor, pain killers and fine china at a grocery store or I can shop for electronics, pain killers and liquor at a drug store. Why not add evening gowns and shoes?
no mention of employee morale? the answer to every question is “no” or “i don’t know.”
and if you are thinking of buying any of the cheap chinese-made “hardware” they sell, you might as well flush your money down the toilet.
why can’t walgreens sell american-made goods?
Great idea! Good stragtegic thinking. I have purchased many a small appliance at Walgreens and look forward to this upgarde. Yes, brighter interior, upgrade lighting, green appointments.
As a long time cosmetics shopper sugggestion: cut down on the off brands and refine the department. I am often overwhelmed and end up not purchasing. One table for dicounted /discontinued items for all brands.Price scanners like Target please. Electronic inventory tags like Whole Foods has installed. Leaner payroll on invenory tracking, easier to adjust prices w/o printing new tags. Take an online poll for customer suggestions for the revamp.
I prefer Walgreens to CVS. Good luck.
So Walgreens is cutting back on what they stock…customer centric retailing hey…Is that why I hardly go to Walgreens anymore. Most everything I purchased there is no longer carried. I hope these yahoos figured that into the equation! Where do they find these jerks that pass themselves as being knowledgeable about marketing!
fesvfev – I second that. All WAG electronics are cheap China junk. Basically, any durable good on a WAG shelf is from China. I wish WAG would stick with quality, Target-like and Trader Joe’s-like perishables and OTC medicines. But that is not going to happen. WAG is moving to become a smaller, more convenient Walmart (who is in bed with China) that has drive-thru drugs. Do not believe the hype. Oh, and the beer/wine is happening because CVS and Walmart both sell booze.
I find it amazing that whatever the subject of any article, people immediately take the time to ***** about it. fesvfev and Mary, here’s some advice, if you don’t like Walgreens, don’t shop there. I’m sure they couldn’t care less about you not stopping by when they start offering more inventory that includes categories that consumers desire and while making it more convenient to buy them. Walgreens consumers have never been the smart shopper type, rather the convenience shopper type. So if someone wants to buy an off brand dvd player, and they’re not the shop around type, there’s a Walgreens on every corner. Sad, however, is that it’s really hard to find mom-and-pop, independently-owned drugstores anymore. Or pet shops, or hardware stores, etc.
amazing how they have higher profits, and can afford to make over stores, and yet the service they provide is beyond crappy. every time i check out at a crapgreen’s, the cashier is eating, talking with friends, or on her phone. I’ve written to their corporate HQ about this, and it never changes. Three times I’ve had cashiers eating cheetos, taking my money, (gross) then handing me change. This last time was the last straw — I avoid walgreen’s at all costs and only buy from cvs, target, or jewel/osco.
Electronics at Walgreens? Is this some ploy to actually make Best Buy look enticing to shop at?
I guess this is Chicago will finally get Wal-Marts within the city limits – Walgreens will slowly mutate until you can’t tell one from the other, then Wal-Mart will buy them out.
Yes while they add these items they are removing jobs. Example is the one at Wells and North Avenue. They got rid of the cashiers and put in all self checkouts. Needless to say I go elsewhere now.
“Walgreens has eliminated about 3,500 products from each store to focus on fewer, better selling items.”
Yes they have and I have started to shop online for the products they don’t carry anymore. It seems every month another product is dropped.
I think it’s about time they look into making changes for the better! I like Walgreens and when I moved away from chicago, I missed them until I moved back to a larger city where they are located. They’ve had the same layout for years and very few changes. I like it this way though. I’m always open to change however, and better color schemes, less harsh lighting would be welcome!
Now that Walgreens is not the #1 store anymore, they decided to make changes at the last minute. 1) Start back selling liquor at some of their stores, now that CVS and Target are selling the stuff; 2)Cleaning the store more often; 3) Printing out coupons; 4) Mini-clini; 5)Self-check registers
They are lucky that Walmart only has one store in the city. Just think what will happen when more stores will be built, in due time.
How many articles about Walgreens selling liquor again are you going to publish? Are they paying you to write these?
So when will the incongruity of a pharmacy selling tobacco and tobacco related products cause WAG to eliminate tobacco from their stores? For that matter, why are pharmacies permitted by law to sell tobacco products?
Maybe it’s because I grew up with them, and they are a local company, I like Walgreen’s. Do I wish they sold more “Made in the USA” items? Of course, I do. But I hope that nobody is naive enough to think that the ratio of U.S. to China goods is much different at Walgreen’s competitors.
Ben:
“why are pharmacies permitted by law to sell tobacco products?”
Actually, “pharmacies” are not “permitted by law,” to sell tobacco, rather they are not prohibited by law from selling tobacco. For the same reason they’re not prohibited by law from selling greeting cards or super-glue.
SharonD | March 23, 2010 2:09 PM | Reply
Ben:
“why are pharmacies permitted by law to sell tobacco products?”
Actually, “pharmacies” are not “permitted by law,” to sell tobacco, rather they are not prohibited by law from selling tobacco. For the same reason they’re not prohibited by law from selling greeting cards or super-glue.
Thank you, Sharon. Looks like another liberal, government-control freak dip stick Obama support. Ben, go to be bed. It is getting late.
Jefferson – Is English your first language? I’d never be able to tell from your comment. Looks like you’re another “conservative,” half-wit, illiterate, inarticulate, partisan hack dip stick fascist supporter.
See what I did there?
Funny thing is, I somewhat agreed with your sentiment until you exposed yourself as a partisan clown who needs to reduce concepts to labels so your simple mind can grasp rather elementary concepts.
Walgreens FTW!!!!!
Great – now we can buy goods which have been touched, coughed on & breathed on by really sick people as they go in for their drugs – fab idea! I know Target & grocery stores also have Pharmacies but Walgreens, to me, was always a Pharmacy, not a store to by food, electronics & whatever & that is what a majority of their customers go in their for.
I support Walgreens’ latest move. I will continue to support and shop at Walgreens because they DON’T HAVE A LOYALTY CARD that tracks your purchases. I never have and never will shop at CVS for that reason.
Does Walgreens sell ANYTHING that can’t be had cheaper elsewhere? And is there a Walgreens that doesn’t have a pharmacy wait time of less than two hour? Maybe 15 or 20 years ago, not any more.
If they really want customers, why not try attracting them reasonable prices and offering good service? If you want to pay up to four times as much for something, shop Walgreens! But if you’re going to wait hours for your scripts anyway, go to Walmart (much as I dislike that chain) and save money — even with insurance. At least at Walmart you get something for the long wait…better prices.
rbyteme – I rarely wait more than 15 minutes for prescriptions at the Walgreens on Milwaukee in Jefferson Park.
well, as long as the homeless standing in front begging (on walgreens propety) are gone with whatever else they are not selling, then count me in. i cannot stand the walgreens on broadway/ridge in chicago – the homeless camp out front and harrass the customers.
3,500 fewer Products to stock ?? Probably gives the chain another excuse to reduce store personnel and service levels as well. Been in a Walgreen’s lately where you’ve seen (other than a Manager) someone over 18 who’s been working there for more than 2 weeks ?? Walgreen’s can repackage themselves as many times as they want, but if you want more than chips and a pop, give someone else your business (and hard-earned dollar). This drugstore chain is just a shell of its’ former self.
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