Walgreen Co. plans to stay on top, despite recession

Drug Store News, Feb 2, 1991 by James Frederick

Walgreen Co. plans to stay on top, despite recession

CHICAGO -- Top officers at Walgreen Co.'s annual meeting pledged to stay on guard against complacency as the nation's top drug chain maps plans for continued aggressive growth and improvement in the 1990s.

Walgreen chairman and ceo Charles R. Walgreen III and president L. Daniel Jorndt reviewed another record-setting year for the chain during the Jan. 9 meeting, and unveiled ambitious strategies aimed at keeping Walgreens on top.

Coming in the face of a declining economy, their upbeat remarks and energetic recap of the company's many strengths visibly buoyed the hundreds of shareholders who packed the meeting.

"Either you're getting better in this business, or you're getting worse," said Walgreen. "I'm convinced the key to Walgreens' success in the future will be to have the strategy--let's call it the abiding attitude--of contiual improvement."

Walgreen acknowledged the near-certainty that the country was in recession, but noted, "our sales growth continued unabated in all three of the last major recessions.

"I attribute that to our basic, consumable-type merchandise, our health care orientation, and our tried-and-true business practices," he told shareholders.

Walgreens' recent financial performance tends to confirm its strategy. Sales for the first quarter ending Nov. 30, 1990 were up 11.1 percent, with net earnings up more than 12 percent to $32.1 million. Those results came on top of Walgreens' 16th consecutive year of record sales and earnings, in which the chain topped the $6 billion sales benchmark and remained by far the chain drug industry's most profitable retailer.

Aggressive growth strategies

To maintain its momentum, the firm has pledged another $200 million in capital spending this year for expansion, remodelings, automation projects and other programs. On tap: 110 new store openings "virtually across the country," according to Jorndt, as well as construction of a $43 million, highly automated distribution center in eastern Pennsylvania--the company's ninth D.C. A total of 600 units will be added over the next five years, the chairman said, bringing total store count close to the 2,200-unit mark by the middle of the decade.

"There is much talk about over-storing, but we see as much opportunity in drug store retailing as in any business we can think of," Jorndt said. "Opportunity exists in both mature and new markets, created by expanded suburbia; regentrification of city neighborhoods; demand of older and busier consumers for smaller, quicker-to-shop stores; and consolidation within our own industry."

New-store activity will be particularly strong in Florida--which will soon surpass Illinois as Walgreens' most heavily stored state--as well as in California, where 39 new units have gotten site approval through 1993. Among those sites: the chain's first stores in the San Joaquin Valley, and several stores in the East Bay area.

Expansion will also be on overdrive in the Northeast, where Walgreens has 42 sites approved over the next three years. "We're prepared to handle a major acquisition [in the Northeast], with the experience of Medi Mart behind us," said Jorndt.

The new president also expressed satisfaction with the chain's recent bankruptcy purchase of the assets of 71 Medicare-Glaser stores in St. Louis.

"St. Louis is one of our top markets, and we got those stores for less than book value," he said. "Their top store did $4 million; our goal is to get that up to $6 million within two years."

PHOTO : Dan Jorndt and Cork Walgreen, who promised shareholders to avoid complacency, meet with press after annual meeting.