Walgreens to Reduce Chain Growth

Deerfield, Ill. Walgreen Co. announced late Thursday that it would reduce its expansion plans beginning in fiscal 2009. The chain cited a need to provide more flexibility to invest in core strategies and improve shareholder value as reasons behind the slowdown.

Walgreens said it intends to reduce expansion from a nearly 9% increase in net new organic stores in the current fiscal 2008 (which ends Aug. 31) to a goal of about 6% in fiscal 2010 and approximately 5% annual increases beginning in fiscal 2011.

Previously, the company had planned a long-term store growth rate of 8%. New-store openings that are already in the pipeline are expected to result in approximately 8% organic store growth in fiscal 2009.

According to the company, it will open more than 500 net new organic stores (after relocations and closings) in the current fiscal year.

“This move allows us to improve both return on invested capital and overall shareholder value,” said Walgreens chairman and CEO Jeffrey A. Rein. “At the same time, it gives us the flexibility to invest in our core strategies.”

By moderating its organic store growth, Walgreens expects to reduce capital expenditures by about $500 million over the next three fiscal years compared to the company’s previously announced plans.