Drugstore chain operator Walgreen Co. (WAG) Thursday unveiled a series of strategic initiatives to create shareholder value. The company said these steps will return it to strong double-digit earnings per growth, with increased revenue growth.
Walgreens said at its Analyst Day conference in Chicago that it plans to enhance customer experience for shoppers and patients, extend its presence in pharmacy, health and wellness services, broaden and deepen its relationships with employers, managed care organizations and PBMs, and reduce cost and improve productivity.
The company plans to slow its store growth to allow more time to develop management ranks and free up capital, which will enhance its flexibility to invest in core business. The company will shift its promotional focus toward essential consumer needs, while expanding its private brand products to provide value to customers and higher profit margins to stores. The company is also focused on growing its e-commerce initiatives.
Walgreens also said that it expects to expand its new initiative to transform community pharmacy into more than 750 Florida stores by the end of fiscal 2009. The program, which reduces the cost of filling prescriptions and increases the time pharmacists spend with patients, is currently available in 152 stores in Florida.
Further, the company anticipates to expand its Health and Wellness division, which now encompasses more than 600 in-store clinics and worksite health centers. By the end of fiscal 2009, more than 800 of these facilities will be there, the company noted.
Walgreens also plans to expand its independent specialty pharmacy business as part of the initiative.
In addition, the company stated that its "Rewiring for Growth" imitative targets approximately $1 billion in annual cost savings by fiscal 2011. This is expected to be achieved through strategic sourcing of indirect spend and plans to reduce corporate overhead. In conjunction with the "Rewiring for Growth" effort, Walgreens anticipates total one-time costs of about $300 million to $400 million over fiscal 2009 and 2010.
For fiscal 2009, the company projects capital investments of about $1.8 billion compared with $2.2 billion in fiscal 2008. This reflects expenditures for new stores, technology and a new distribution center in Connecticut scheduled to open in January 2009.
WAG closed Thursday's trading at $25.20, up $1.53, on a volume of 9.73 million shares.
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