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Drugstore chain Walgreen will start selling beer and wine as profit falls on non-pharmacy sales

By Thomas Frommherz for CEOWORLD Magazine Updated:September 30, 2009

Walgreen Co. (NYSE: WAG), the second-largest U.S. drugstore chain, confirmed Tuesday that it will start selling beer and wine in a majority of its 7,000 stores.

Separately, Walgreen also is starting a national push to get people with chronic conditions to obtain 90-day prescriptions rather than 30-day prescriptions.

Shares of Walgreen Co (WAG.N) rose 5.4 percent to $36.05 in premarket trading on Tuesday, after the drug store chain posted a slightly smaller quarterly profit, weighed down by weak sales of summer merchandise and costs behind its strategy to makeover its stores and streamline its overall operations.

Deutsche Bank analyst Bill Dreher said profit margins were stronger than he expected due to increased prescriptions for generic drugs, although discounts and weaker front end sales canceled out some of that improvement.

The company also said patients who receive 90-day orders of prescription drugs through the mail will also be able to pick up their orders at Walgreen pharmacies. CVS Caremark has a similar program.

For the full year, Walgreen earned $2 billion, or $2.02 per share, down from profit of $2.16 billion, or $2.17 per share, in 2008. Revenue rose to $63.34 billion from $59.03 billion.

The company is looking to save money by cutting back on store openings and carrying fewer products, and boost sales by improving the layout of its stores. Walgreen said it plans to start selling beer and wine at stores over the next year to 18 months, and the company is rolling out its Customer Centric Retailing initiative at 400 stores in Texas.

The drugstore chain opened 35 test stores this spring that have shown positive results, Wasson said, without providing specific details. The format is on its way to 400 stores in Texas and will arrive at stores nationwide next year. The new Walgreens also will have fewer impulse items, such as Chia Pets, and more consumer staples, such as toilet paper and toothpaste.

The store makeover was needed to compete with CVS Caremark Corp., which has moved aggressively into Walgreens’ home territory in the Chicago area, and to battle the growing pharmacy businesses at Target Corp. and Wal-Mart Stores Inc., said Brendan Langan, director of retail insight at Management Ventures Inc., a Cambridge, Mass.-based research firm.

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