Walgreens slows expansion as it aims to slash outgoings

As part of an initiative dubbed Rewiring for Growth, the retailer will rein in its store roll-out programme to focus on areas such as improving customer service.

President and chief operating officer Greg Wasson said: “Our drugstores remain the centrepiece of our strategy. Our intent is to transform Walgreens into a more efficient and customer-focused company, serving shoppers seeking quality pharmacy, health and wellness services that are accessible and affordable.”

The savings will be made by reducing in corporate overheads. Walgreens expects to incur a one-off cost of between US$300 million and US$400 million (£189 million and£252 million) over the next two years. Capital expenditure has been cut to US$1.8 billion (£1.13 billion) in 2009, from US$2.2 billion (£1.39 billion) in the last financial year.

It will also slow its expansion plans and focus on own-brand products to improve customer value and store margins.

Walgreens’ biggest rival CVS last week revealed third-quarter profits rose 6.7 per cent, which analysts in part attributed to own-brand sales. Last month it acquired Longs Drug Stores for US$2.7 billion (£1.7 billion).

Planet Retail global research director Bryan Roberts said: “Walgreens had ambitious expansion plans, but with the shifting economic environment it’s thinking that its spend would be better placed improving existing stores.

“It should be seeking to improve its grocery offer. CVS, as well as Wal-Mart and Target, are increasingly becoming a threat.”

Roberts added that the retailer’s decision to reduce corporate overheads may lead to job cuts. “It is likely it may be thinking of job cuts or axing back office staff, but who isn’t?