Walgreen working on store changes

By Jessica Wohl

CHICAGO (Reuters) - Walgreen Co (WAG.N), under pressure to define its strategy after a failed acquisition bid, is working on changes to its drugstore format and has hired consultants Booz Allen Hamilton, the company told Reuters on Tuesday.

Booz Allen consultants have been working at the company's Deerfield, Illinois headquarters, a Walgreen spokesman said. He declined to discuss details, but said the company would unveil plans to improve store operations during an October 30 analyst day.

The company said on Tuesday it would buy McKesson Corp.'s (MKC.N) specialty pharmacy business for an undisclosed sum, a move that helps expand its health services into areas such as oncology, multiple sclerosis and reproductive health.

Walgreen could also introduce a loyalty card, spruce up its stores or do more to promote its lower-priced generic plan to help boost traffic and sales as rival CVS Caremark (CVS.N) ratchets up competition, analysts said.

CVS has raised the stakes for Walgreen with its entry into pharmacy benefits in March 2007, when it bought Caremark. Just this month, CVS won out over Walgreen in its acquisition of Longs Drug Stores Corp LDG.N.

Walgreen Chief Executive Jeffrey Rein abruptly left the company on October 10, two days after it withdrew an unsolicited bid that was repeatedly rebuffed by Longs.

Edward Jones analyst Stephanie Hoff, who has a buy rating on Walgreen, wants the company to say how it will navigate a current slowdown in prescription trends, drive traffic into its stores and keep an eye on costs.

"What we'd like to hear is really just a focus on better blocking and tackling," she said. "If they could address those issues, and address them compellingly, I think there's a lot of room for the stock to move higher."

Walgreen unexpectedly posted its first quarterly profit decline in almost 10 years last October and has since tried to address investor concerns more directly, planning its first major analyst meeting for the end of this month.

"We will be talking about our store plans and changes we're looking at making," the Walgreen spokesman said of the October 30 meeting.

Meanwhile, the pharmacy industry as a whole is grappling with Wal-Mart Stores Inc (WMT.N) and others offering cheap generic drugs and in-store health services. An economic slowdown has U.S. consumers filling fewer prescriptions to save money.

Walgreen shares have shed about 35 percent since the start of the year, compared with a 27 percent drop for CVS.

MARKETING MOVES

Among other changes, Walgreen added a chief marketing officer, Kim Feil, in late September. She is among those slated to speak at the upcoming meeting. Alan McNally was named chairman and acting CEO and the company's board is looking internally and externally for a permanent CEO.

Some say Walgreen could give details of a loyalty card, a plan it has been considering.