DEERFIELD - Breaking with its history to make an unheard-of management cutback, Walgreen Co. announced plans Thursday to eliminate 1,000 salaried positions over the next eight months - about half of them at the drugstore chain's Deerfield headquarters.
Walgreens for many years enjoyed rapid growth through good economic times and bad, and it fostered an atmosphere where jobholders have tended to stay for decades. It has never experienced a large-scale cut to management staffing.
But the move is consistent with other recent actions by Walgreens as the company turns away from the pell-mell expansion that was its core strategy for more than two decades. Consolidation in the drugstore industry has spawned increasingly tough competition for Walgreens while efforts to hold down costs in the nation's health-care system have squeezed pharmacy operators.
As pressure on its profit margins increases, the company has responded by sharply slowing the pace of its store-opening initiative: In calendar 2008, for example, the number of Walgreens stores grew by 9.9 percent, but by its fiscal 2011 ending, the company expects the opening rate will have dropped to 2.5 percent or 3 percent.
The cuts announced Thursday won't involve workers at the company's more than 6,660 stores, officials said.
Walgreens characterized the cutbacks as part of a "Rewiring for Growth" strategy the company unveiled late last year, under which officials are seeking to trim $1 billion from annual costs by the 2011 fiscal year. Walgreens expects the plan to generate $300 million to $400 million in costs over the course of fiscal 2009 and 2010.
By trimming 1,000 corporate and field-management staffers, Walgreens will cut about 9 percent of its roughly 11,000 corporate employees and field managers. About 500 of those cuts will occur at the 5,200-person headquarters. Walgreens has a total workforce of about 237,000.
The reductions will start with a voluntary buyout offer to workers to be followed in February by an "involuntary separation program" as required, Walgreens said.
Walgreens' staff cuts represent "a mind-set change" for the firm, SunTrust Robinson Humphrey analyst David Magee said, adding, "It's probably long overdue."
Posted in Business on Saturday, January 10, 2009 12:00 am Updated: 1:54 pm.
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