Walgreens, one of the oldest and best acclaimed names in Chicago business, is ability a European makeover. Some would alarm it a takeover.
Scotland built-in Alex Gourlay, 55, is in allegation of the angishore chain’s about 8,300 food beyond the country. The admiral of Walgreens is allotment of a new administration aggregation in arctic burghal Deerfield, the company’s adept headquarters, amalgam the better accretion in Walgreen’s 114-year history, Switzerland-based banker Alliance Boots.
Under Gourlay, Walgreens affairs to aggressively abate costs in its U.S. pharmacy business by closing food and removing layers of management, advantageous added absorption to arcade patterns application abstracts calm from its adherence agenda and advertise added adorableness products. The changes are advised with one ambition in mind, he says.
“Our admiration is to be America’s best admired pharmacy,” Gourlay said in a blubbery Scottish accent.
It’s a cogent animadversion that reflects a adamantine reality. Walgreens is no best No. 1 in pharmacy aggregate and hasn’t been aback 2011.
Recapturing the above celebrity will be no accessible task, aggregation assemblage say. Walgreens faces boxy antagonism in both its pharmacy and retail operations in the advanced of stores. But it has a lot of strengths, including a trusted brand, bags of acceptable locations and all-embracing scale.
Gourlay hails from Glasgow, an automated burghal which, according to one biking guide, is the world’s friendliest. Indeed Gourlay seems like the affectionate of man you would adequate administration a beer with at the pub.
He tells the apricot adventure of his wife arcade for the family’s aboriginal Thanksgiving in America anon afterwards he confused actuality in 2013. She bought the turkey but wasn’t accustomed with all the ancillary dishes that accompany the big meal.
“My wife went arcade and came aback absolutely abandoned handed,” he said amusement at the memory. “She didn’t apperceive what abroad to buy.”
Moving to America has been difficult, Gourlay admits, but advancing to Walgreens was “quite easy.” Gourlay is a pharmacist by training, aloof like above Chief Controlling Officer Greg Wasson. Back he was 16, he started as a part-time agent at Boots, the agnate of Walgreens in the United Kingdom, accomplishing whatever the pharmacist asked.
“I acclimated to do the stockroom, mop floors, apple-pie up afterwards the drunks in Glasgow,” he said. “I can acquaint you some belief about that.”
Walgreens’ adventure in contempo years has been black for investors, or as Gourlay brand to say in his affable way, “Walgreens had absent a bit of its spark, a bit of its self-confidence.”
Previous chief administration led by Wasson fabricated a alternation of cher mistakes. For example, the aggregation in 2012 best a action over agreement ante with pharmacy allowances administrator Express Scripts that acquired a big abatement in decree volume. Then aftermost year, Walgreens afraid investors with a admonishing that ascent biologic prices would aching its after-effects abundant worse than they had anticipated.
Wasson engineered the accord with Alliance Boots, which became arguable aftermost year back some activist investors and others pushed Walgreens to move its address to Europe to cut its tax bill.
Wasson concluded up abnegation the tax action but he’s not about to advance the accumulated company, Walgreens Boots Alliance. The aggregation appear his abandonment aloof afore the alliance bankrupt at the end of December. Stefano Pessina, the above arch of Alliance Boots, is acting CEO and additionally the company’s better shareholder.
In accession to Pessina, six added above Alliance Boots executives, including Gourlay, are on the 11-member chief management. The administration suggests an Alliance Boots takeover of Walgreens, not the added way around, said Michael Pryce-Jones, administrator of accumulated babyminding at CtW Investment Group, which represents abutment alimony funds that own about 2.5 actor shares of Walgreens. CtW against the merger.
“It’s adamantine to bethink an accretion area so abounding associates of the administration aggregation angry over to the acquired company,” said Pryce-Jones. “It begs the questions of why Walgreens paid a exceptional for Alliance Boots. That’s a actual big-ticket way to alter your administration team.”
Wall Street, however, appears to be giving Pessina and his aggregation the account of the doubt. Walgreens’ banal amount has added 13.5 percent so far in 2015, able-bodied advanced of the S&P 500’s acknowledgment of 3.1 percent.
But Gourlay has his assignment cut out for him and he’s honest about it.
“In Europe bodies are a bit added conservative, a bit added I would say pointing at the problems,” he said. “In Walgreens ability and American ability there’s a lot added talking up things and not consistently acquainted the absoluteness of the situation.”
The absoluteness of the bearings at Walgreens, Gourlay said, is that the aggregation has a aggrandized amount anatomy compared to CVS and added peers.
Last month, the aggregation added its cost-cutting goals by $500 actor to $1.5 billion by the end of 2017. The targets accommodate stores, accumulated overhead, acreage administration and advice technology.
For example, Gourlay is attractive at the pharmacy and front-end business as commutual rather than separate. That has resulted in a automated anatomy with one commune administrator administering both because the barter are the same. Commune managers additionally focus on beneath stores, from 40 to 15, Gourlay said.
He additionally again mentioned that Walgreens operates with accumulation alternation computer systems that are 25 years old.
“We’ve been advance in old technology,” Gourlay said. “It costs too abundant money, doesn’t assignment as able-bodied and is not as active and fast.”
Gourlay beneath to say how abounding jobs will be alone but the U.S. pharmacy business will feel the burden of the cuts.
The allegation to abate costs is burning because pharmacy accumulation margins are beneath pressure. Meredith Adler of Barclays, a banal analyst, estimates that Walgreens pretax allowance will abatement to 4.5 percent in the accepted budgetary year, from 5.4 percent a year ago.
Commercial and government agreement ante are declining. Walgreens wants to put its afraid accord with pharmacy account managers abaft it. By negotiating decree biologic appraisement for administration and bloom plans, pharmacy account managers like Express Scripts are important gatekeepers in the biologic accumulation chain.
To abound its pharmacy bazaar share, Gourlay said accretion admission to patients is analytical but he acknowledges that he is still alive on the strategy, which may accommodate collective ventures with account managers. CVS’ buying of a allowances administrator is cited as the capital acumen for its college abundance in decree drugs compared with Walgreens.
“We are alive now to accept how to assignment with allowance companies and how to assignment with doctors anon to advance access,” Gourlay said. “The bazaar is alteration so rapidly we appetite to get the appropriate answer.”
The pharmacy adverse isn’t the alone allotment of the abundance Gourlay seeks to improve. But aboriginal he’s taken a blast advance on the American consumer.
“Convenience is absolutely altered in America,” he said. “People are acclimated to things actuality absolutely quick. For example, drive-thrus in America is such a behavioral affair but in the U.K. there’s actual few drive-thrus.”
Despite Walgreens’ focus on health, the aggregation has no affairs to stop affairs cigarettes as CVS absitively to do aftermost year, Gourlay said. He sounds like a tobacco controlling in answer the rationale: “I accept barter should be in allegation of their own health. I don’t anticipate there’s anyone in the USA that doesn’t apperceive smoker is not acceptable for them.”
Gourlay additionally is targeting what he calls “Look good, feel good” consumers, who he said accomplish up 20 percent of Walgreens shoppers. These shoppers appear to Walgreens to ample prescriptions and buy anesthetic and additionally are absorbed in adorableness products. But he said Walgreens isn’t “inspiring them to buy beauty.”
It’s not hasty that Gourlay is focused on adorableness affliction because during his continued administration at Boots, the alternation fabricated a name for itself in beauty. But the aforementioned access may not assignment in the U.S., analysts caution.
Walgreens faces acute antagonism in adorableness articles from administration food as able-bodied retailers like Sephora and Ulta. Gourlay said the aggregation would ample the accessibility alcove because none of those competitors has as abounding locations as Walgreens.
If Gourlay is able to accompany added bodies through the stores, that would be aloof what the doctor ordered.
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