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Flu program, overhaul fuel WAG results

BY DSN STAFF

DEERFIELD, Ill. —A well-orchestrated flu shot campaign and the early fruits of a massive retail overhaul program helped propel Walgreens to record earnings results in first quarter 2010.

Net income jumped 19.6% over the same period last year in the quarter ended Nov. 30, 2009, to $489 million. That included a charge of 3 cents per share in restructuring and related costs associated with the company’s “Rewiring for Growth” initiative, Walgreens reported.

Same-store sales were up 4.9% in the quarter—a respectable gain in the current economic climate—with front-end same-store sales up 2.7%. Powering a 6.1% rise in same-store prescription sales was a 12% jump in the number of prescriptions filled by Walgreens pharmacists, compared with the same period a year ago. Total sales rose 9.5% over prior-year levels, to $16.4 billion.

“We remain confident we can continue to generate strong cash flow, which provides us the financial strength and flexibility to continue investments in our core strategies while returning cash to shareholders,” Walgreens president and CEO Greg Wasson said.

In September 2009, the company launched its largest immunization campaign in history, administering more than 5 million flu shots by the end of November, compared with 1.2 million in the entire previous flu season. The program attracted “many new patients” to Walgreens pharmacies, the company noted.

“Our seasonal flu shot program was one of the best-executed initiatives in my 30 years at Walgreens,” Wasson said. “We see big opportunities to deliver preventive services, including pharmacist-delivered immunizations and vaccinations, as we continue to expand our capabilities.”

To that end, Walgreens announced Jan. 4 that the once-scarce H1N1 vaccine now is available daily at all of the more than 7,100 Walgreens pharmacies and 350 Take Care Clinics throughout the country, at a cost of $18.

Wasson said Walgreens continues to focus on three core strategies in fiscal 2010: leveraging its 50-state network of drug stores, clinics and corporate pharmacies; enhancing customer satisfaction; and driving cost reductions and productivity gains.

Walgreens opened or acquired 172 new drug stores in the first quarter for a net gain of 150 units after relocations and closings. Walgreens also completed the rollout of its Customer Centric Retailing format in 400 stores in Texas during the quarter. “Customer response to the initiative, designed to improve the overall shopping experience and increase both the number of customer visits and basket size, has been positive,” Walgreens noted. The company also is adding its new beer and wine selection to most stores and now has nearly 1,600 stores with the products.

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Walgreens taps veteran to head CCR

BY DSN STAFF

NEW YORK In a high-stakes campaign to fire up its front-end appeal, reaffirm its relationship with America’s consumers and rejuvenate its same-store sales, Walgreens has gone to its bench.

Walgreens has named one of its veteran operations people, Mike Arnoult, to the key post of VP in charge of Customer Centric Retailing. Until last month, the post was held by Chong Bang, who left the company in mid-December to oversee merchandising at Toronto-based Shoppers Drug Mart.

Unlike Bang, Arnoult is more a seasoned operations manager than a merchant. His appointment is a clear sign that Walgreens has moved beyond the conceptual and launch phase of CCR, and is ready to begin the next phase of the massive project: the expansion of a CCR-based store design across Walgreens’ coast-to-coast network of 7,147 drug stores.

Nevertheless, Arnoult inherits a critical challenge at the retail behemoth. CCR encompasses Walgreens’ massive effort to pull together a sprawling marketing and merchandising operation and focus its efforts more sharply on meeting and anticipating customer demands. Within two or three years, it will transform the chain’s front-end presentation and go-to-market strategy coast-to-coast with a leaner, more condensed merchandise mix; a sharper focus on health, wellness and patient education in the aisles; improved departmental adjacencies and signing; and — Walgreens merchants hope — a better overall shopping experience.

Bang took CCR all the way from conception to realization, streamlining assortments, cutting hundreds of redundant SKUs, and applying new rationale to categories, adjacencies and promotional strategy at the front end. He also oversaw the test and launch of a new Walgreens store prototype, based on CCR principles and a better read of consumer needs.

Arnoult will now take the CCR rollout from a 400-store pilot in Texas to nationwide completion. Given the chain’s aggressive plans for 2010 — nearly 3,000 stores scheduled for a CCR redesign by the end of the year — he’ll need to bring all his proven management skills to bear to coordinate local-market remodeling activities with Walgreens’ operations and merchandising teams.

“We’re evaluating the findings from the Texas stores and doing some tweaking,” company spokesperson Tiffani Washington told Drug Store News in December. “We’ll continue the rollout [of the CCR-based store overhaul program] starting in January.”

Arnoult brings to his task a strong resume in store, district and regional management. His 20-year career at Walgreens includes stints as store manager, district manager and store operations VP, followed by a year as head of online merchandising. He’s a 1990 graduate of Marquette University with a B.A. in communications.

“His ability to build relationships and collaborate across the organization will be invaluable,” Walgreens asserted.

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Bartell to cease filling Medicaid prescriptions at 15 locations

BY DSN STAFF

NEW YORK The Medicaid storm is still intense in Washington as Bartell Drugs has announced that — as of Feb. 1 — it will no longer fill Medicaid prescriptions at 15 of its 57 stores. Limiting access to pharmacies with its payment cuts could spell an increase in other healthcare costs — costs that represent the majority of health expenditures.

As stated in the article, the decision stems from a court decision in Massachusetts in September 2009 that reduced the industry pricing standard.

Bartell stated that — unlike most other insurance providers, including other states — the Washington State Department of Social and Health Services has made no effort to offset this significant reduction, resulting in sizeable reductions in payments to pharmacies.

The intent, according to Bartell, is to return to the established level of compensation prior to the Sept. 26, 2009, court action. As it currently stands, Bartell simply can’t afford to fill the Medicaid prescriptions.

While Bartell currently is the only pharmacy retailer to take such action, it certainly isn’t alone in the battle.

In March 2009, Walgreens threatened to stop serving Medicaid patients in 44 of its stores in the state. The company at that time stated that it operates 111 pharmacies throughout the state, but the 44 pharmacies in question represented more than 60% of its total Medicaid business in the state. However, in May 2009, Walgreens stated that it would continue to serve Medicaid patients when the state agreed to make smaller cuts than it had planned.

But will the court decision in Massachusetts now prompt other pharmacies to follow in Bartell’s footsteps? Perhaps, but if you ask Doug Porter, the state’s director of Medicaid, he will likely say no. In a recent Seattle Times article, Porter was quoted as saying that Medicaid recipients should not worry about other companies following suit and he is “convinced pharmacies can weather this change.” As reported by the Seattle Times, several pharmacies and industry trade groups filed suit in U.S. District Court in Seattle trying to force the state to return its reimbursement rates to those it was paying before the Massachusetts settlement. A hearing is scheduled for Jan. 15.

Last year, the pharmacy groups filed another lawsuit, after an earlier attempt by the state to cut its reimbursement rates. That suit was withdrawn when the state agreed to make smaller cuts than it had planned.

“We are deeply concerned about the health of our patients. Pharmacists are on the front lines of our healthcare system protecting patients by ensuring safe and appropriate medication use. Commercial healthcare payers and Medicaid programs in some states have already adjusted pharmacy reimbursement necessary to maintain patient access to the essential care provided by pharmacies. If Washington Medicaid does not do the same, it can result in reduced access to medicine for our neediest and most vulnerable patients ultimately leading to expensive emergency room visits and hospitalizations,” stated Jeff Rochon, Pharm.D., CEO, Washington State Pharmacy Association, in an NACDS press statement issued in September.

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