Where Sears Fails, Walgreen Prospers
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At the end of last year, after the holiday madness had subsided, Sears (NASDAQ: SHLD) announced that it would be closing a combination of 120 Kmart and Sears retail locations. Amidst these changes, the mouthpiece for Sears claimed the company was not in financial trouble, or on the verge of extinction.
Around the same time period, Walgreen (NYSE: WAG) was involved in their own corporate PR war, battling to retain patients as the New Year would begin, and their contract with the world’s largest PBM, Express Scripts would end. There was a lot of talk by analysts and investors alike that Walgreens would be putting billions of dollars of revenue at risk by not agreeing to the ESI terms, and not filling for ESI members. Now, it is becoming more evident that Walgreens is ready to move on and prosper without Express Scripts.
Monday, Walgreens announced that it is planning to purchase prescription files and inventories from 33 Kmart stores. These Kmart stores are all part of the planned closures there were previously announced by Sears. Kmart’s pharmacies have been a valuable asset for Sears and Kmart, helping to drive in-store sales, and increasing revenue through profitable prescriptions. It is these strategic advantages that Walgreens is hoping to capitalize on from purchasing Kmart’s pharmacy assets.
It seems that in a post Express Scripts world, Walgreen’s new strategy is to acquire new patients and grow their revenue though the acquisitions. Acquiring the assets of Kmart is an excellent strategy for Walgreens. For many years, and especially in the last few years, the pharmacy business has been the lifeblood of many Kmart’s around the country.
While it is highly unlikely that the acquisition of Kmart’s pharmacy will offset the amount of revenue that was provided by Express Scripts, this move shows investors and critics alike that Walgreens is not content with standing on the sidelines and losing revenue or marketshare.
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