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Wasson: Walgreens’ store growth more balanced

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DEERFIELD, Ill. — Walgreen Co. has been taking a more measured approach as it extends the reach of its store network, focusing mainly on organic growth, improved efficiency and greater customer appeal.

"We’re now balancing the pace of new store openings with other growth opportunities," president and chief executive officer Greg Wasson explained when reporting Walgreens’ fiscal 2009 fourth-quarter and full-year results.

"We’re determined to grow market share through continued organic store growth, increased comparable sales and pharmacy file buys," Wasson said in a statement. "We’ll also continue evaluating potential acquisitions that reinforce our core strategies."

In the fourth quarter ended August 31, Walgreens opened 149 new drug stores, down from 162 in the third quarter and 199 in the fiscal 2008 fourth quarter. The company said it expects organic store growth of 4.5% to 5% in fiscal 2010 and 2.5% to 3% annually starting in 2011.

Walgreens had a net gain of 554 new drug stores, including 70 acquisitions, in fiscal 2009. As of the close of the fiscal year, the retailer operated 6,997 stores in 50 states, the District of Columbia and Puerto Rico, compared with 6,443 a year earlier.

The drug chain is slated to celebrate the opening of its 7,000th store on October 1 in Brooklyn, N.Y. Currently, Walgreens has 7,042 stores in operation, which it said is the most in the nation. 

In its fourth-quarter report, Walgreens noted that it continues to make progress with its Customer-Centric Retailing (CCR) strategy, designed to foster cost reduction and productivity in stores while enhancing the customer experience.

Based on positive results from its 35 CCR test stores, Walgreens said it’s now rolling out the format in 400 stores in Texas, which is due to be completed this fall. The CCR rollout will continue in other markets after the holiday season, according to the company.

The CCR initiative is expected to help Walgreens’ top and bottom lines by making its stores easier and cheaper to run and, at the same time, easier and more engaging for customers to shop. The strategy includes improved store formats (such as a more open layout with better sight lines), redefined roles for some product categories (with more space and items for such segments as skin care and cosmetics) and leaner assortments (including SKU rationalization) based on the items that customers want and need most.

Walgreens also is sharpening the coordination of in-store merchandising with vendors via its Retail Synergy Program. One key element is an RFID-based marketing intelligence system from Goliath Solutions that tracks the effectiveness of in-store displays at a granular level. Walgreens began upgrading the system earlier this year.

On Tuesday, Walgreens also said it has enhanced the customer experience with the relaunch of The web site offers new convenience features, product merchandising, integrated health content and a new mobile version. Also, seven online Health Shops bring together products, services and news and information on allergies, diabetes, flu, heart health, blood pressure, weight loss and pregnancy, the company said.


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