January 8, 2009 / 2:46 PM / in 10 years

Walgreen to cut 1,000 jobs outside its drugstores

CHICAGO (Reuters) - Walgreen Co WAG.N plans to cut about 1,000 jobs outside its drugstores, its first major staff reduction, as it works on trimming costs and improving its operations in a recession.

A customer drives away from the Walgreens in Westminster, Colorado October 30, 2008. The company said it plans to cut about 1,000 nonstore jobs as it works on reducing costs and improving its drugstore operations. REUTERS/Rick Wilking

Walgreen is offering early retirement and severance programs to its corporate staff and those in field management jobs such as district managers and district pharmacy supervisors.

The cuts are part of a “Rewiring for Growth” plan that Walgreen unveiled at an analyst meeting in October. Under the program, the company aims to save $1 billion per year by fiscal 2011.

Another part of its strategy is to open fewer stores. Walgreen has trimmed its store opening plans twice in the past six months as consumers spend less on everything from medications to makeup.

“They had a model which worked very well for them for a long period of time and they’re now experiencing a lot of change,” said Morningstar analyst Mitchell Corwin.

Shares of Walgreen fell 2 percent to $26.51.

The changes at Walgreen come as its main rival, CVS Caremark Corp (CVS.N), digests its purchase of Longs Drug Stores, 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 discount chains like 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.

CEO SEARCH

Walgreen said about 1,000 positions, or about 9 percent of the 11,000 jobs in the corporate and field areas, will be cut. After offering voluntary separation packages, an involuntary program will start in February, it said.

Walgreen has about 237,000 employees overall, including some 203,000 store employees and 23,000 other workers, such as those at distribution centers, who are not part of the job cut plan.

Walgreen, which holds its annual meeting next week, still has one major job to fill as it searches for a permanent CEO.

Former Chairman and CEO Jeffrey Rein abruptly left the company in October and Alan McNally was named chairman and acting CEO.

President and Chief Operating Officer Greg Wasson has been the public voice of the company over the past few months and is considered a front-runner for the CEO post. Still, some analysts expect Walgreen to bring in an outsider as its new CEO to show how it is evolving.

The company has said it will make an announcement about its CEO search early this year.

“They have a pretty solid leadership team right now, but you have to have someone at the top really providing the focus and to really articulate where this company is going to be three to five years from now,” Corwin said.

Reporting by Jessica Wohl; editing by John Wallace

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