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Pessina: Walgreens’ transformation well under way

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SCOTTSDALE, Ariz. — Walgreens is halfway through a transformation that includes a rethinking of its supply chain and services, Walgreens Boots Alliance executive vice chairman and CEO Stefano Pessina said at the company’s annual shareholders meeting.

Stefano Pessina_Walgreens Boots Alliance

Stefano Pessina

Walgreens is also recasting its approach to interacting with customers and patients, Pessina added, noting that 2018 will see the rollout of pilot stores with new concepts.

Also at the Walgreens Boots Alliance annual shareholders meeting, Pessina said the company had achieved much and seen much change in 2017. Over the three years since its formation, WBA has generated impressive earnings growth, he noted.

Acknowledging that acquiring stores from Rite Aid took “far longer” than expected, Pessina said WBA will continue to actively seek growth opportunities.

He described market conditions as “tough” but said Walgreens is “more than up to challenge.”

Executive chairman James Skinner said at the shareholders meeting that Walgreens has become a partner of choice, and solid results had set the stage for growth. He called the company “a solid rock to anchor with.”

WBA has become a model for mergers of like-minded companies, Skinner added.

Pessina had discussed the Walgreens transformation in a conference call with analysts on WBA’s fiscal 2018 first-quarter results. He said the effort has involved a fine-tuning of the Walgreens pharmacy and retail business models, including price adjustments on pharmacy commercial contracts to grow prescription volume and a refinement of front-end merchandising, products and services in certain categories.

The “third phase” of the transformation, he said, entails a rethinking of the Walgreens model to adapt to changing markets and changing customer behavior.

“We have made a lot of progress in defining what our stores should look like in the future. You will hear a lot more about this during 2018. We are researching and analyzing how customers are shopping our stores to understand the true profitability of each category and area of business and what our patients, payers and customers want from us,” Pessina told analysts. “We have been working hard to put in place the relationships we need to offer a range of health care services seamlessly across the group alongside a far more focused and differentiated retail offering. There is no doubt that the complete transformation will take time to achieve.”

This year will see Walgreens taking more action on the results of pilots in certain U.S. stores to test merchandising, format, supply chain and beauty concepts, as well as some new initiatives and partnerships.

“In 2018, you will see us deploy the first pilot stores incorporating all the work we have done to date in a single store format,” Pessina said in the call. “We will study the results in depth and fine-tune the format before rolling this new concept out under the ongoing store rejuvenation initiative and within our current capital plan.”


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