Walgreen makes Times Square return as it revamps

CHICAGO (Reuters) - Walgreen Co has more than 6,500 drugstores across the United States, but only one of them can help the chain reach billions of people, even if they never step inside.

The newest Walgreens store is nestled behind flashing electronic billboards at One Times Square, best known as the building where the ball drops on New Year's Eve each year as hundreds of millions of television viewers tune in and hundreds of thousands of revelers roar from the streets below.

While Walgreen has scaled back its rapid store expansion, it is still opening hundreds of stores this year. The Times Square flagship store is seen helping to promote the company as it works to return to double-digit earnings-per-share growth.

Since the store opened its doors on November 14, about 75 percent of shoppers have been tourists and about 25 percent have been workers from surrounding office buildings.

"We're extremely pleased with what we're seeing in traffic and sales," said President and Chief Operating Officer Greg Wasson, who toured the three-story store on Wednesday.

Wasson said Walgreen picked the location because it thought a store there would see strong business, but he acknowledged the attractive promotional opportunity.

Walgreen had a store at the same location from the 1930s through 1970, and it appears in the background of a famous 1945 photo showing an American sailor kissing a nurse to celebrate the end of World War Two.

"The branding opportunity is just incredible. Where can you get as many folks passing the Walgreen brand?" Wasson said during a visit to the Reuters Health Summit in New York.

Walgreen is streamlining its stores to make them more welcoming under a strategy unveiled in October, so the new 16,000-square foot store in some ways is a testing ground for new lighting and signs that may be used in other locations.

One concept that may be duplicated elsewhere is a bright, upscale cosmetics area where Walgreen plans to do make-overs.

"I think there is an opportunity to take that look to more of our high-end locations," Wasson said.

NEW YORK EXPANSION

Walgreen has 53 stores in New York City, including the Times Square store, meaning that the market accounts for less than 1 percent of the company's stores. It plans to open at least another 30 New York-area stores within the next three years and is looking to expand in the Northeast in general.

Duane Reade Holdings Inc is the dominant drugstore in Manhattan and has a Times Square store right across the street on Broadway with its own name in lights. But Wasson is not concerned about his rival's close proximity.

"Frankly, when (shoppers) walk into our store there's going to be a heck of a contrast," he said.

In Times Square, Walgreen is stocking souvenirs and lots of U.S. toiletries for international tourists. It may also get a boost in sales by giving them a way to take the goodies home.

"Folks will come in and just load up and buy luggage that we sell as well, and take back" items like vitamins, Wasson said.

Tourists and other shoppers may be surprised to see some items, such as body wash, being locked up in displays. Walgreen is trying to deter thieves who steal the items and then resell them. As in many other stores, pricier products such as teeth whitening kits and Rogaine are also under lock and key.

Walgreen signed a 20-year lease with landlords Sherwood Equities Inc and Jamestown Properties last fall to rent out almost all of the interior of the skinny tower.

Wasson would not say how much the rent is, though he said "if you look at the entire space and compare it to the rest of Manhattan, it's pretty comparable."

Of course in other locations Walgreen does not rent an entire building, as it is doing here. The company's advertising team has to bring in revenue to help foot the bill, he said.

The store's outdoor digital advertising space will not just promote Walgreen. L'Oreal, Johnson & Johnson, Colgate-Palmolive and Kraft will launch advertisements on the street-level signs on Thursday night.

(Reporting by Michele Gershberg and Aarthi Sivaraman in New York and Jessica Wohl in Chicago; Editing by Brian Moss)