Walgreens misses Q3 profit estimate, withdraws guidance
Deerfield Park, Ill. – A 16% year-over-year jump in third quarter profit still missed Wall Street estimates, causing Walgreen Co. to withdraw previously issued fiscal 2016 guidance. During the third quarter of fiscal 2015, Walgreen reported net earnings of $722 million, up 16% from $624 million in the same period the previous fiscal year.
Although lower taxes helped boost Walgreens’ profits, pressure on pharmacy gross profit margins and a 0.7% decrease in same-store traffic prevented them from meeting expectations. Net sales increased 6% to $19.4 billion from $18.3 billion. Same-store sales grew 4.8%.
Walgreens is continuing in its efforts to purchase U.K. drugstore retailer Alliance Boots, which it currently holds a 45% stake in, by the end of 2015. However, Walgreens withdrew a previously issued fiscal year 2016 forecast based on combined performance of the two companies. The retailer plans to issue an update on the acquisition and fiscal year 2016 expectations in July or August of this year.
“We continued to see improving top-line growth in the third quarter driven by increased daily living sales and strong increases in both prescriptions filled and our pharmacy market share,” said Walgreens president and CEO Greg Wasson. “At the same time, we are experiencing increased pressure on pharmacy gross profit margins. We maintained solid expense control in the third quarter to offset some of this pressure while understanding that there is more to be done. We will be accelerating our optimization efforts, including taking additional steps to lower expenses companywide. In addition, our joint venture with Alliance Boots continues to generate significant benefits.”
Walmart shakes up merchandising organization
More than a dozen of Walmart’s top merchants are in new roles following a realignment of responsibilities that chief merchandising and marketing officer Duncan Mac Naughton said is designed to recognize customers’ needs and serve them more efficiently.
The changes affected executives throughout the merchandising organization and included areas such as consumables, food, general merchandise, softlines, health and wellness, shopper insights and merchandising operations. In an internal memo obtained by Retailing Today, Mac Naughton said he was pleased to announce, “a few changes which will help accelerate our growth and efficiency as a world-class merchant organization. Additionally, these moves provide a more specialized service to our customers, while also creating better alignment and a greater visibility across our business.”
Among the most significant moves was the elevation of Scott Huff to the role of EVP of merchandising operations from his prior position as SVP of consumables. In his new role, Huff is responsible for merchandising execution, replenishment, store layout, supplier diversity, planning, pricing, modular development and joint business planning. Working closely with Huff will be Scott Pleiman who was named SVP of planning, pricing, modular development and joint business planning.
Assuming Huff’s prior responsibilities as SVP of consumables, but in an EVP capacity is Michelle Gloeckler. She was named EVP of consumables and U.S. manufacturing after previously serving as SVP of home and overseeing the retailer’s expanding domestic sourcing initiative.
Another key EVP move involved John Aden to the newly created role of EVP of sales innovation. He is tasked with identifying new and disruptive service and product offerings, according to Mac Naughton. Aden had previously served as EVP of merchandise services and EVP of general merchandise prior to that.
Walmart’s Global Customer and Insights and Analytics group, led by EVP Cindy Davis, appointed Matt Kistler to the new role of SVP of Walmart U.S. consumer insights. He will report to Davis and Walmart U.S. chief marketing officer Stephen Quinn.
Other key changes included the following:
- In the grocery area, Ashley Buchanan was appointed SVP of dry grocery after previously leading Walmart’s sizable snacks and beverage division and prior to that Walmart’s innovations team. Promoted to Buchanan’s role was Latriece Watkins who was named SVP of snacks and beverages after previously serving as VP of adult beverages, a category that experienced dramatic growth under her leadership. Reporting to Watkins in a new role as VP of adult beverages is Silvia Azrai Kawas. The group will report to Jack Sinclair, Walmart’s EVP of food.
- In the softline area, the promotion of Gloecker resulted in the promotion of Marybeth Cornwell to the role of SVP reporting to Andy Barron, EVP of softlines for Walmart U.S. Cornwell previously served as SVP of home and apparel for Sam’s Club. In a related softlines move, Deanah Baker was named SVP of apparel and ladieswear, intimates, jewelry and accessories. Diana Marshall was named VP of baby, a huge business at Walmart, after previously holding merchandising roles in the housewares, home, hardware and paint businesses.
- In the hardlines and health and wellness areas, Walmart named former Lowe’s and Hechinger Co., merchant to the role of VP of hardware and paint. In health and wellness, Mark Phillips was named VP of pharmaceutical merchandising after previously serving as senior director of merchandising for small formats.
The changes come as Walmart strives to restore same store sales growth at its U.S. stores during the back half of the year after a challenging first quarter and difficult 2013.
Rite Aid brings wellness to Beverly Hills
Camp Hill, Pa. – Rite Aid is bringing some glitz, as well as health consciousness, to its newly reopened Beverly Hills store. On June 23, Rite Aid re-opened its Beverly Hills store with a major remodel that features its new wellness store design, as well as dining options.
"Since first introducing our wellness store design in 2011, we’ve worked tirelessly to ensure our stores provide the products and clinical pharmacy services to deliver on our mission of helping our customers achieve their individual wellness goals," said Ken Martindale, president and CEO of Rite Aid Corp. "Our North Canon Drive store is the latest example our ever-evolving Wellness Store format, featuring our most successful merchandising concepts, as well as new innovations, resulting in a one-of-a-kind shopping experience to the Beverly Hills community."
The scope of the Beverly Hills project included a total remodel and enlargement of the pharmacy; a reconfigured check-out area; the redesign of several key departments, including beauty and over-the-counter medicines and first aid; and the addition of a Fresh Day Café and patio area, where customers can enjoy Coffee Bean & Tea Leaf beverages, fresh baked goods, sandwiches and Rite Aid’s Thrifty ice cream.
The expanded beauty department now offers several new prestige cosmetic and skin care lines. Also new to the store is a Rite Aid Beauty Advisor who is specially trained to assist shoppers with all beauty brands Rite Aid carries through demonstrations and education.
While developing the design, significant consideration was given to the pharmacy department, the core of the company’s business. Upon entering the store, there is a direct path to the pharmacy, which has been cleared of merchandise and has an eye-catching design. Additionally, there is a private consultation room adjacent to the pharmacy, where Rite Aid pharmacists can have conversations with patients, administer immunizations and offer other clinical pharmacy services. Nearby, the Wellness Ambassador station; Wellness Ambassadors work closely with Rite Aid pharmacists to provide customers with access to information about over-the-counter medications, vitamins and supplements and Rite Aid programs and services.
"The Beverly Hills store is a great example of how we are aggressively evolving the Wellness store format to identify concepts that perform and can be broadly applied to future remodels and test new concepts, like our Fresh Day Café," Martindale said. "Going forward, we will continue to push the envelope in leveraging our Wellness stores to launch and expand innovative merchandising concepts, with the ultimate goal of delivering a more personal and engaging customer experience."
First introduced in 2011, Rite Aid’s wellness store format provides products, resources and information to help its customers and their families live healthier lives. To date, Rite Aid has continuously modified and enhanced the design of more than 1,300 stores nationwide. The company anticipates remodeling another 450 stores to feature its Wellness store format by the end of fiscal 2015.