Walgreens opens 11th Springfield area store

Publicly traded Walgreen Co. (NYSE, Nasdaq: WAG) posted a 30.5 percent rise in quarterly profit Jan. 3 as net earnings rose to $332.7 million, or 32 cents per diluted share, for the first quarter 2005 ended Nov. 30. First quarter sales rose 13.4 percent to a record $9.9 billion. Sales at stores open at least a year – an industry gauge of performance – rose 9.4 percent.

The company opened a $1.3 million store Jan. 13 at 1955 S. National, the site where Cotter’s Pharmacy had operated since 1952.

Mark Rana, pharmacy supervisor at the company’s district office in Tulsa, Okla., said the corporation’s goal is to open 7,000 stores nationwide by 2010. “Right now we’re at a little over 4,600” stores, he said.

Walgreens stores aren’t just popping up in Springfield. “We’re opening about 450 new stores this year around the country,” Walgreens spokesman Michael Polzin said from the corporate office in Deerfield, Ill.

Polzin attributes the company’s growth to an aging population. “The baby boom generation is getting into that age group where you start to use prescriptions more and more, and that’s really driving the need for pharmacy services,” he said. “That’s really a long-term trend that we’re going to see for a number of decades to come.”

Another reason for growth, Polzin said, is the pharmaceutical industry. “The drug manufacturers are coming out every year with more medications to treat more illnesses.”

Leasing vs. buying

About three-quarters of Walgreens stores are leased from developers, Polzin said.

“Either we discover a spot or, working with local real estate people, we may learn of a position for a store,” he said. “We do over 100 pages of research on each location, and we’re looking at things like demographics, population density, how the area is currently being served, traffic counts.”

Determining which stores will be leased and which will be purchased is a financial decision, Polzin said. “If it makes sense to purchase it up front, we’ll do that,” he said. “If we think it makes more financial sense to sign a long-term lease – and typically you’re talking about roughly a 20-year lease – we’ll do that.”

Bencor LLC built the Walgreens in Republic and is building the store at the corner of Fremont Ave. and Republic Road. Bencor co-owner and in-house lawyer Jon Gorski anticipates completing the store in June. “Once we turn the store over to Walgreens, they come in and they fixture the inside of the store, stock it with merchandise.” he said.

Gorski said that the developer will buy the land and build the building, and Walgreens will lease it from the developer. “But that’s not always the case,” Gorski said. “Probably a third of our stores now are stores in which Walgreens actually buys the land and we build the store, and then they reimburse us for the improvements. (That way) Walgreens will be the actual owner of it.” Gorski declined to comment on how much the corporation would pay a developer to lease or purchase a building.

Gorski said that his company has built more than 100 Walgreens stores across the country. He would not disclose how much it costs his company to build a store.

Polzin said Walgreen Co. typically invests $3 million to $4 million in a new store for the building cost, shelving, equipment and inventory.

Web presence

In addition to brick-and-mortar expansion, Polzin said Walgreens’ Web presence is growing. “We have an entire store online,” he said. Also available online are items that aren’t available at stores, such as wheelchairs, lift chairs and defibrillators.

Despite the online growth, Polzin said it’s still a relatively small percentage overall. “In our last fiscal year in 2004, we had over 8 million prescriptions ordered through our Web site. It sounds like a lot and it is, but the total number of prescriptions we filled last year was 443 million,” he said.