Walgreens to Cut Expansion Plans

Pharmacy chain Walgreens has announced plans to curb its expansion beginning in 2009. The company’s future plans involve cutting its expansion from 9 percent in 2008 to 8 percent in 2009 to 6 percent in 2010 and ultimately to a level of 5 percent expansion in 2011. The new expansion goals reveal a deviation from the company’s previous plans of annual long term expansion of 8 percent. Because of stores already on the development track, the firm cannot decrease its openings through 2009. The company expects that the current year will yield approximately 500 new stores, a net figure factoring in closings and relocations. Walgreens expects to save around $500 million in capital expenditures by reducing its expansion plans. The new growth plans come as a result of regular review the company undertakes of its expansion and expenditures. The cuts will provide the firm flexibility to invest in other areas of the business.“This move allows us to improve both return on invested capital and overall shareholder value,” Walgreens chairman & CEO Jeffrey Rein noted in a release. He also indicated that the curtailment of expansion provides the firm flexibility to invest in other strategies important to the overall operation of Walgreens. Rein further noted in the release that the company will still seek to expand and place a premium on high value site selection for future stores. Despite the cuts, Walgreens still anticipates meeting its goal of 7,000 stores nationwide by 2010. The cuts in expansion come about a week after Starbucks announced a similar halt in its domestic expansion, as reported by CPN. Walgreens currently operates 6,297 drugstores nationwide and in Puerto Rico. An eight-property portfolio of Walgreens stores in six states recently sold for $35 million.