It’s inevitable that when you walk into a drugstore during the month of March, you’ll find Shamrock paraphernalia, large white stuffed bunnies in pink bowties, and enough candy to make Willy Wonka look like a third-rate contender. For years, seasonal items have been the bread and butter of drugstores, but national chain Walgreen Co mixed it up in its second quarter by revamping its approach to seasonal merchandise.
For the quarter ending February 28, Walgreen Co. reported a profit of $669 million, up 4.6% from $640 million a year earlier, in part due to a $500 million reduction in inventory, both seasonal and discretionary. As a result, despite weaker general merchandising sales, the company’s strategy to remain profitable worked.
“They were still able to grow gross margin despite softness in sales, which shows their strategic initiatives are working,” said Caris & Co. analyst Ann Hynes.
President and CEO Greg Wasson said the company would continue to tweak its approach to inventory management, adding discretionary and seasonal items back into the mix piece by piece. “We made a strategic decision to buy less seasonal inventory, which led to fewer markdowns and helped strengthen our margins.
Wasson continued, “This is an ongoing process with many checkpoints along the way to allow us the opportunity to tweak and refine as needed. As we move into the next phase, we’ll continue to build sales, take work out of stores, lower inventory, and most importantly, improve our customers’ overall shopping experience.”
One of the improvements to the national drugstore chain is a restructuring of its healthcare division. Its prescription sales, which were 63.3% of the sales in the quarter, rose 3.2%. The integrated approach of “Pharmacy, Health and Wellness Solutions,” which reaches out to employers, managed care organizations, pharmacy benefit managers, and government clinics, gives Walgreen Co. a new area in which to grow.
“In the past several years, we’ve developed a broad set of quality, affordable and accessible pharmacy, health and wellness services unmatched in our industry,” said Wasson. “We are integrating Walgreens 70,000 healthcare providers, on the front lines of healthcare across the organization, with a unified sales team offering these services to payors as a single, seamless integrated solution.”
Seasonal Inventory Management
