Keeping perfectly in line with its strategy of long-term growth and value creation, Walgreen Company (WAG), recently, came up with its second ‘Well Experience’ flagship store in the Empire State Building, NYC. Earlier this month, Walgreens opened its first ‘Well Experience’ store in Washington, D.C. The company expects the launch of the third store of this kind in Boston by next month. The company is optimistic about this strategic step and believes that these select locations will strengthen Walgreens’ brand name in important markets.
According to Walgreens, this New York store will be full of innovative features including an advanced pharmacy allowing better interaction between pharmacists and patients, a health guide to assist the customers, healthcare services including immunizations and health tests as well as a private consultation rooms and Express Rx kiosks. In addition, there will be a boutique beauty department and many more.
Apart from this ‘Well Experience’ store roll out, Walgreen has taken a number of strategic steps for long-term growth. The company recently disclosed a 10-year comprehensive primary distribution agreement with AmerisourceBergen (ABC) for branded and generic products. In addition, the company will partner AmerisourceBergen on worldwide supply chain opportunities. In addition, the contract between these two stalwarts will enhance equity alignment of Walgreens, allowing both the companies to participate in a joint value creation.
Furthermore, Walgreens is working well with its community pharmacy transformation strategy. As a part of the national healthcare reform, in the last reported quarter the company along with three physician teams formed an accountable care organization.
Notably, as a part of the important strategic steps by Walgreens, the company introduced a customer loyalty program – Balance Rewards in Sep 2012. This program is currently gaining traction and has recorded more than 60 million registrations to date. Even amid a challenging macroeconomic scenario, we are encouraged with the performance of Balance Rewards and expect this to improve customer traffic further in the coming quarters.
However, the company is susceptible to macroeconomic headwinds. It also faces increased competition and tough industry conditions. The tussle to gain market share with CVS Caremark Corporation (CVS) is another cause of concern. Therefore, we prefer to remain on the sidelines and keep track of the ongoing developments.
Walgreens currently carries a Zacks Rank #3 (Hold). While we remain on the sidelines for the company, another medical device stock such as Cyberonics (CYBX) carries a Zacks Rank #1 (Strong Buy) and warrants a look.
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