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  • henleywm henleywm Jan 20, 2013 12:24 PM Flag

    If you bought CVS in 2007

    The expansion model of organic growth was a smart one for a rapidly growing Walgreens. It allowed them to acquire the most advantageous locations and build to their own specs. That's how they constantly generated higher sales per square foot and higher margins than other chains. It also created efficiencies in operations. Now that Walgreen has over 8000 drugstores, there are fewer opportunities to grow organically in the continental 48. Also lower interest rates of late have made acquisition and debt a more practical means of expansion. CVS and Tom Ryan were perhaps intuitive in their rapid expansion via acquisition, but more likely it was just luck that interest rates dropped in time to keep them from drowning in their debt. As Walgreen and Jakks Boots combine their think tanks for international expansion we are likely to return to an environment of high interest rates. They will be well positioned for organic growth in some markets and acquisition in others. As for the convenience clinic acquisitions, it is rather simplistic to suggest that Walgreen simply copied CVS. Tom Ryan made rapid and in retrospect some good decisions. The fact that CVS announced first does not mean that Walgreen was not involved in research and negotiations at the same time or sooner than CVS. These two companies are in the same retail space so it is inevitable that they will make some of the same types of expansions. When that happens it does not mean that either of them "copycats" the other.