Longs Drug Stores rejects Walgreen offer

Longs Drug Stores Corp. on Wednesday said it will not enter into discussions with Walgreen Co. about its $2.8 billion bid for the drugstore operator.

Walgreen made a $75-per-share offer for Walnut Creek, Calif.-based Longs on Friday, hoping to unseat Woonsocket, R.I.-based CVS Caremark Corp.'s previous bid of $71.50 per share, worth about $2.7 billion.

CVS reaffirmed its offer on Sunday and extended the deadline to Oct. 15.

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Smallgreen's?

Drugstore retailer developing smaller, limit-inventory stores

DEERFIELD, Ill. -- To boost Walgreen's presence in urban markets such as Los Angeles and New York, Walgreen Co. CEO Jeffrey Rein is developing several designs for stores that would be about half the normal size of the 6,297 stores the company operates. Smaller stores are key to further penetrating densely populated markets with limited available real estate, Rein said. "As we look at areas where we are not, a smaller store makes more sense for us," he told Crain's Chicago Business. "This makes us more flexible and more nimble."

Walgreen's new stores—at about 6,000 to 8,000 square feet versus 14,820 square feet—would have about 17% less inventory, Rein said, mostly offering shampoo, toothpaste and other toiletries. "You have to carry products that are relevant to your clientele," he said. They would also have 22% lower facility costs and 22% fewer employees, said the company.

The smaller-store initiative comes as Walgreen throttles back broader expansion plans to soothe shareholders' concerns that the company may be overreaching in a slumping economy, according to the report. Walgreen said this month that it will curb new-store openings to 5% a year by fiscal 2011, from a prior 9% target, to save $500 million.

The company faces challenges if it is to run profitable businesses in the Northeast and Southern California, where retail rents are among the highest in the country, Crain's said. While smaller stores have fewer employees, a 7,000-square-foot shop in Manhattan, for example, must
generate sales at or above those of a typical 15,000-square-foot suburban store to make a profit.
"They are going to have to have really heavy foot traffic because urban sites are expensive stores," Erik Gordon, an associate dean at the Stevens Institute of Technology in New Jersey, who studies retail industry trends, told the publication.

Prime retail rents in cities like New York can range from $276 to $1,500 per square foot. Even at the low end, that's quadruple the average asking rate—$69.35 a square foot—for space on Chicago's Magnificent Mile. Deerfield, Ill.-based Walgreen, which has several smaller shops in downtown Chicago, generated about $8.9 million in sales at each of its stores last year, on average. The company declines to provide per-store profit figures.

Rein also must find ways to set Walgreen apart from CVS Caremark Corp., which operates more than 1,500 stores in the Northeast, the report said. That compares with Walgreen's 599 stores in the nine-state region.

Walgreen is also open to acquisitions to gain stores, Rein added, declining to give specific targets.

The company also recently accelerated to rollout of its Café W beverage-center concept, potentially offering a greater threat to neighboring convenience stores. The new stores include a "W Market" section in the front of the store that features many traditional c-store products and a 12-foot coffee/beverage counter along the front wall near the checkout.

Source: CSP

BIGresearch: Walgreens Losing Ground Among Prescription Drug Shoppers?

Wal-Mart Filling More Prescriptions Among Lower Income Shoppers

Walgreens remains the retailer of choice in the Prescription Drugs category among all adults (14.4% say they shop there most often), according to the July Retail Ratings Report from BIGresearch ( http://www.bigresearch.com). However, it appears that Wal-Mart is closing the gap and increasing share of preference in this category.

Walgreens' share decreased almost a point from July 07 (15.2%), resulting in a negative Consumer Equity Index(TM) (CEI)* of 94.35. #2 CVS saw a marginal decrease in consumer share year over year (13.2% in Jul 08 v. 13.6% in July 07), giving them a negative Consumer Equity Index(TM) (CEI)* of 97.68. Conversely, #3 Wal-Mart is growing in popularity with a two point increase in share to 10.4% (v. 8.4% in Jul 07) and a CEI of 123.71, indicating almost a 24% growth in share. *CEI measures growth in share year over year. An index of 100 is flat, while an index of 105 indicates 5% growth.

Wal-Mart is also improved among consumers with household incomes greater than $50,000. 8.2% say they shop there most often for prescriptions (v. 6.3% in July 07), giving third place Wal-Mart a CEI of 131.73. This is a significantly higher rating than the leaders in the category: Walgreens (94.53) and CVS (100.31).

Over the past year, CVS and Wal-Mart have been battling it out for the number 2 position among consumers with household incomes less than $50,000. However, Wal-Mart surpassed CVS in July. This coupled with Walgreen's two-point nose dive in consumer preference share, gives Wal-Mart a piece of the lead among this consumer group.

Prescription Drugs (Shop at Most Often) - HH Income Less Than $50K
           Share           Share          Share
Store        Jul 2007        Jul 2008       +/-       CEI
Wal-Mart     12.0%           13.8%           1.8      115.43
CVS          13.9%           12.2%          -1.8      87.36
Walgreens    15.8%           13.8%          -2.0      87.37
Source: BIGresearch, Retail Ratings Report, Jul 08

"The current economic environment appears to be helping Wal-Mart increase their share among lower income shoppers," said Pam Goodfellow, Senior Analyst at BIGresearch. "Wal-Mart's growth seems to be at the expense of Walgreens and CVS."

Source: MarketWatch

Brockton, MA Walgreens Trades for $9.4M

UBS Sells Retail Bldg. for $715

PSFNew York-based Splendido Real Estate, Inc. acquired the Walgreens at 880 N. Montello St. in Brockton, MA from institutional investor UBS Real Estate Investments, Inc., for $9.45 million, or $715 per square foot.

The 13,204-square-foot retail building was built in 1925 in the Route 24 submarket.

The property was not on the market at the time of sale. Splendido Real Estate, Inc. approached UBS Real Estate Investments, Inc. directly and exercised its 1031 exchange option in the transaction.

Source: CoStar

Walgreens Plaza Goes for $11M

DANVERS, MA-Danvers Realty LLC is selling a Walgreens-anchored plaza here for approximately $11.1 million. The property at 107 High St. totals 21,487-sf property of retail space, filled in by Walgreens at 14,937 sf with the remaining 6,550 sf going to a full-service, Beverly National Bank. The buyer of the property could not be disclosed at this time.

"We are pleased to be able to work once again with the seller for whom we originally arranged financing several years ago when it completed a 1031 tax-deferred exchange and purchased this first-class asset," says Casimir Broblewski, managing director of Fantini & Gorga, in a statement. F&G brokered the deal with the help of ICA Realty, which managed the 1031 exchange.

The property is located by the intersection of Route 128 just north of Salem. The suburban Boston location provides a mix of rental and single-family homes in a range of high density areas, ideal for a retail strip mall's client base. Walgreens, located across the US, is a popular brand and has moved in the market well, recently in Florida and nearby Stoughton, MA where Linear Retail Group purchased a Walgreens-anchored plaza for $12.6 million.

Walgreens is a Chicago-based pharmacy that has retail stores throughout the US.

Source: GlobeSt.

Walgreens to Cut Expansion Plans

Pharmacy chain Walgreens has announced plans to curb its expansion beginning in 2009.

The company’s future plans involve cutting its expansion from 9 percent in 2008 to 8 percent in 2009 to 6 percent in 2010 and ultimately to a level of 5 percent expansion in 2011. The new expansion goals reveal a deviation from the company’s previous plans of annual long term expansion of 8 percent. Because of stores already on the development track, the firm cannot decrease its openings through 2009. The company expects that the current year will yield approximately 500 new stores, a net figure factoring in closings and relocations.

Walgreens expects to save around $500 million in capital expenditures by reducing its expansion plans. The new growth plans come as a result of regular review the company undertakes of its expansion and expenditures. The cuts will provide the firm flexibility to invest in other areas of the business.

“This move allows us to improve both return on invested capital and overall shareholder value,” Walgreens chairman & CEO Jeffrey Rein noted in a release. He also indicated that the curtailment of expansion provides the firm flexibility to invest in other strategies important to the overall operation of Walgreens.

Rein further noted in the release that the company will still seek to expand and place a premium on high value site selection for future stores. Despite the cuts, Walgreens still anticipates meeting its goal of 7,000 stores nationwide by 2010.

The cuts in expansion come about a week after Starbucks announced a similar halt in its domestic expansion, as reported by CPN.

Walgreens currently operates 6,297 drugstores nationwide and in Puerto Rico. An eight-property portfolio of Walgreens stores in six states recently sold for $35 million.

Source: Commercial Property News

A new look for Walgreens

ORLANDO , Fla. (Jul. 1) Walgreens’ pursuit of growth in recent years has caused the company to open in-store clinics, create a new offering of health services and even pursue acquisitions. Now, the company best known for operating 15,000 square foot stores located at the intersection of Main and Main also is bringing new thinking to store designs and prototype development.

“One size does not fit all,” Don Whetstone, senior director of merchandising strategy and development said last week at the Retailing Smarter conference sponsored by the University of Florida’s David F. Miller Center for Retailing Education and Research. Whetstone is a 27-year Walgreens veteran who now leads a newly created organization responsible for the development of an expanded portfolio of store formats and strategies to better meet the needs of key markets and trading areas.

Walgreens will continue to rely on the familiar 15,000 square foot corner drug store with approximately 26,000 products across 150 departments located on a two acre parcel, but work is underway on the development of alternative formats and new store designs. As in other segments of the retail industry, smaller formats are seen playing an important role in Walgreens future expansion, especially as the company pursues growth in high density markets with limited real estate opportunities.

“A smaller format will facilitate our continued expansion in markets in the Northeast and California,” Whetstone said. “We find ourselves having to become more flexible to shoehorn into some of these areas.”

He offered as an example a Walgreens store on Castro Street in San Francisco that is one third the size of the company’s average store but it produces twice the annual sales. “We have to take that concept and learn from it and be able to take it places like Boston,” Whetstone said.

In addition to smaller formats in urban areas, Walgreens also has developed a store prototype designed to operate profitably in small markets that offer top line sale potential below the typical $8 million the average new Walgreens store generates during its first year of operation.

According to Whetstone, the company has created a store design that functions with 17 percent less inventory, 22 percent less labor, 24 percent less facility costs and half the advertising pages of a typical store without compromising the customer experience.

In addition to new store designs and smaller formats, the coming years could bring sweeping changes to the appearance of Walgreens conventional stores. “Even our prototype needs a facelift every now and then and we are working on that now,” Whetstone said.

Walgreens converted a warehouse three miles away from its Deerfield, Il headquarters into what Whetstone called the Innovation Center. It is a place where merchants and store designers are able to experiment with fixtures, signing, presentation and product adjacencies.

The result was the development of a new design that is now in place at four Chicago area stores and two other locations elsewhere. The design features a softer, more feminine color palette, lower fixture heights, a crisp clinical look in the pharmacy department and a racetrack layout that Whetstone concedes will probably not be used going forward.

Walgreens is still assessing customer feedback and Whetstone shared one telling comment from a woman who visited the new cosmetics department and said, “it looks like it’s been designed by a woman instead of a bunch of old guys.”

Walgreens has abundant opportunities ahead of it to change consumer perceptions of its store designs. The company currently operates 6,727 locations and one third of those stores are less than five years old. Through the first three quarters of its fiscal year, Walgreens has opened 420 stores and is on track to achieve its full year goal of opening 550 stores.

“We open a store about every 17 hours,” Whetstone said.

Long-term term, plans call for 7,000 stores by 2010. Looking ahead to 2012, the company has revised its terminology somewhat to talk about having 10,000 points of care, inferring that much future growth with come from sources other than retail stores.

Source: Drug Store News

Baby Boomers, Entitlements Fuel Walgreens Growth

The prescription needs of aging baby boomers and speedy approvals are fueling record new-store growth this year at Walgreens, executives said at the company’s third quarter conference call. But expansion will slow to more normal levels next year. Record quarter sales of $15 billion (up 9.6% over last year) will only grow as baby boomers hit their senior years, said Chairman and CEO Jeffrey A. Rein. Net earnings for the quarter rose 2% over the previous year to $572 million. Total comp-store sales rose 3.4%.

"In spite of the current environment, nothing will slow the impact of nearly 80 million baby boomers moving into their chief prescription-use years," Rein said. "This is a very good business to be in for the long term." Walgreens will open 550 new drugstores this year, with a net increase of more than 500, expanding its drugstore base by approximately 9% in fiscal 2008. This is higher than its more typical 8% growth, boosted by swifter-than-normal entitlement processes, and is unlikely to be repeated.

“Many of these sites were [contracted] approximately 24 to 36 months ago,” Rein said. “In future years we will see this growth [level] go down.” The company remains on track to meet its goal of operating more than 7,000 drugstores by 2010. In May, Walgreens announced plans to open its first stores in Alaska in 2009, giving the company a presence in all 50 states.
As of May 31, Walgreens operated 6,727 locations in 49 states, the District of Columbia and Puerto Rico.

Source: GlobeSt.com

Foxborough development signs on six tenants

VinCo Properties Inc. announced Thursday it has signed six tenants for its 10,000 square feet of retail space in Foxborough, Mass.

Supercuts, Sharon Credit Union, Tanorama, Reliable Dry Cleaners, Foxy Nails, and Mamouzellos Pizza have signed leases for space ranging from 1,000 square feet to 2,400 square feet at Chestnut Green, a mixed-use 93-acre campus.

The new tenants join Walgreen's, The Learning Experience, Waxy O'Connor's Irish Pub and Restaurant, and Babel's Paint & Decorating Store. American Commercial Real Estate, which is managing the retail portion of Chestnut Green, brokered the deals.

The retail and commercial office will be complete in the fall of this year.

Boston-based VinCo announced in March it had closed on a $21 million financing package with Wells Fargo that allows for the final phase of office and retail construction at Chestnut Green.

Source: Boston Business Journal

Walgreen March Sales Rise 10.6 Percent

DEERFIELD, Ill. - Drugstore operator Walgreen Co. said Wednesday its March sales climbed 10.6 percent, helped by the earlier Easter holiday.

Sales for the month increased to $5.11 billion from $4.62 billion in the prior-year period.

Pharmacy sales, which make up 64.5 percent of total monthly sales, rose 6.9 percent. Same-store pharmacy sales edged up 0.8 percent, hurt by generic drug sales.

Same-store sales rose 4.4 percent for the month.

Same-store sales, or sales at stores open at least a year, is a key indicator of retailer performance because it measures growth at existing stores rather than newly opened ones.

For the fiscal year to date, sales are up 10.4 percent to $34.53 billion. Year-to-date same store sales are ahead 5 percent.

Walgreen (nyse: WAG - news - people ) operated 6,271 drugstores as of March 31.

Source: Forbes

Walgreens Rolls Out Clothing Line

This sure sounds like an interesting move. Walgreen Co. has rolled out its own line of clothing, Casual Gear, that will show up at its drug stores starting April 1. With times tough in the retail world I wonder if we’ll see more of this–companies diversifying their base of products in attempts to keep sales up. Still, even if diversification is a smart strategy, this seems to stretch the limits of that concept.

Does it make sense for a drug store to make a push into apparel? On the other hand, there was probably a lot of skepticism when drug stores starting turning over aisle space to food and other sorts of general merchandise. And that’s worked out pretty well for them. Also, it’s not like Walgreen is talking about entering the world of high fashion. It’s talking about t-shirts and things like that. In fact, a lot of drugstores already do have small selections of clothes–especially in tourist markets.

So who knows. Maybe this will be the start of a brand new trend.

Walgreens, which stumbled last year when it posted its first quarterly profit decline in a decade, is seeking to boost profits by expanding its in-house brands, which range from nuts to trash bags and now clothing. The collection of cotton capris, sweat pants, quilted vests and T-shirts for men and women, will be priced at $7 to $15.

While two-thirds of Walgreens sales come from prescription drugs, sold at counters in the back of the stores, the big margins are in selling “front-of-the-store” general merchandise that the company develops itself, products known as private label. The strategy is similar to what grocery stores and department stores have been doing for years: make more in-house brands and profits will follow.

Source: RetailTraffic