CHICAGO Walgreen Co WAG.N stuck to its historic strategy and picked an insider, President Greg Wasson, as its next chief executive, after taking months to look at external candidates for the first time.
The drugstore chain said that Wasson, 50, its president and chief operating officer, will take over the CEO post on February 1 while remaining president. For now, the COO post will go unfilled. Alan McNally, 63, who had been serving as chairman and acting CEO, will remain chairman.
The news is somewhat unexpected since Walgreen had hired a search firm and looked at several outsiders for the post for the first time. Some had suggested that Walgreen needed to bring in someone from outside to shake things up.
But the 108-year old company decided that once again, a pharmacist who has moved up through its ranks was the right man for the job.
"We're going to move forward, and move forward aggressively," Wasson told Reuters in an interview. "I think the blend that we put together as a management team right now absolutely will accomplish what others have probably looked for in an outside CEO."
Walgreen has brought in outsiders over the past few months for other leadership roles, including Chief Financial Officer Wade Miquelon from Tyson Foods (TSN.N) and Chief Marketing Officer Kim Feil from Sara Lee SLE.N.
Walgreen's former chairman and CEO, Jeffrey Rein, abruptly left in October after a failed attempt to buy Longs Drug Stores and just before Walgreen unveiled a major overhaul. Rival CVS Caremark (CVS.N) bought Longs in October.
Wasson, who also becomes a member of the board, has been the public voice of the company over the past few months and was seen as the internal front-runner for the CEO post.
James DiFilippo, managing partner of the retail practice at CTPartners, said his firm had heard that a couple of people from outside Walgreen passed on the opportunity.
DiFilippo said late last week that he heard that one retail CEO and one consumer industry CEO, each from companies with at least $20 billion in annual revenue, turned down the position.
Walgreen had revenue of $59 billion in 2008.
NEED NEW PERSPECTIVE?
During Walgreen's annual meeting two weeks ago, a shareholder advocated bringing in a CEO with a new perspective.
"I think this is the biggest challenge that Walgreens faces," he said to Wasson and other executives. "You have to go outside the company and get someone with broad entrepreneurial instincts. That's the only way you're going to make it."
Pali Research analyst Robert Summers said last month that given the changes going on and new ideas needed at Walgreen, a fresh perspective would be the right decision.
"We believe the company would be best served by selecting an outsider to fill the empty CEO role and we would be greatly disappointed if Greg Wasson is selected," Summers wrote in a December 18 research note. "Simply put, Walgreen cannot just 'grow' their way out of current issues."
McNally and two other board members led the search for a permanent CEO along with search firm Russell Reynolds.
But filling the CEO post is just one aspect of Walgreen's effort to revamp its business.
The company unveiled its "Rewiring for Growth" plan at an analyst meeting in October, just weeks after Rein's departure. Under the program, Walgreen aims to save $1 billion per year by fiscal 2011.
The changes at Walgreen come as its main rival, CVS, digests its purchase of Longs and as smaller player Rite Aid Corp (RAD.N) strives to improve operations at stores it bought in 2007. Drugstores also face increased competition from Wal-Mart Stores Inc (WMT.N), supermarkets and others that now offer low-priced generic medications and, in some cases, give them away for free.
As part of its plan, Walgreen is slashing about 1,000 corporate and field management jobs as it works on trimming costs and improving its operations. Walgreen is offering early retirement and severance programs first, before using involuntary layoffs.
It is also opening fewer stores. The company, which once opened more than one store per day on average, has trimmed its store opening plans twice in the past six months as consumers spend less on everything from medications to makeup. By 2011, its store opening rate will be just 2.5 percent to 3 percent, down from its 2008 rate of about 9 percent.
(Editing by Phil Berlowitz)