On October 10, Jeffrey Rein unexpectedly “retired” as Chairman, Chief Executive Officer and a director of Walgreens (Which makes people like me wonder…WTF?
Well, I recently stumbled across a very intriguing blog called Investor Relations Musings. It’s written by John Palizza, a fomer Walgreens insider who was the principal investor relations contact for 15 of his 23 years working at the company. Mr. Palizza states that he left Walgreens in 1999 due to a disagreement with Mr. Rein.
In a post last week, Mr. Palizza openly asked and answered the question that many of us are thinking: Why Not Just Tell Us Why You Fired Him?
The whole post is worth reading, but here is Mr. Palizza’s bottom line on the strategic tension inside Walgreens:
“There seems to be two competing long-term strategies at Walgreens over the past nine months – one that was committed to growth at any price, and one that recognized the limits to growth and sought slower growth with higher returns. When the original acquisition talks with Longs did not pan out earlier this year, it would appear that the Board of Directors endorsed a view towards slower growth.
Then, within sixty days of announcing this new strategy, something changed – my guess is that Walgreens’ CEO bought into some new arguments by investment bankers that they could get the Longs deal done – and they decided to publicly pursue Longs. While technically, the acquisition bid is not at odds with the slowing of “organic” growth previously announced, investors were confused.
Finally, when Walgreens’ CEO couldn’t get the deal done, the Board axed him for both zigging when they had publicly said they were going to zag and failing to be a strong enough leader to get the job done.”
I’ve been similarly confused by Walgreens actions over the past few months. Last Thursday’s Drug Channels post Will the economy hurt drug stores? (answer: probably not) was inspired in part by Mr. Rein’s comments on Walgreens’ September 30 earning call. He said:
"We are facing a continuation of the slowest-growing prescription drug market in 47 years, according to IMS Health. We believe the biggest impact has been the very tough economy." Source
Leave a comment below and tell me what you think happened at Walgreens. Or if you prefer, just tell me who will win the World Series.
I agree with the walgreens IR guy, although I bet that the diversification bets will pay off over time. Walgreens is insulating itself from the ongoing decline in pharmacy margins. Anyone else notice their stock is at a 10 year low?
ReplyDeletePhillies vs. Red Sox. Sox in 6
It seems obvious that the break was not harmonious and it has to be relalted to the reasons expressed in the blog. Shame since I always thought they were well run and "one of the good guys".
ReplyDeleteSorry, Rays in 6. Previous comment must have missed the game last night. Sorry Red Hose fans.
-A
Almost fell out of my chair at “Dude, WTF?” Actually laughed out loud.
ReplyDeleteNow THAT is using some high-powered consulting buzzwords. Hilarious! You are one cool dude, dude.
To the person who said that WAG stock is at a 10 year low...must have not been watching the way the stock market is going.
ReplyDeleteWalgreens rewiring is almost like the "change we need" kind of concept. We are living in a very complicated economy. Economics formula that were used years ago will have a different factors of integration.
ReplyDeleteI personally don't see any magical outcome to the bottom line for CVS because of the Longs Drugs acquisition. Acquisition in 90's were much smarter than 00's.
Long term, WAG stock always a smart quote.
Now ask why Kevin Walgreen left.
ReplyDeleteWalgreens "rewiring" is based on a bunch of outside consultants being thrown money to stamp Walgreens with the same "solution" they provide to any company that wants a canned answer: cut payroll.
Does Walgreens need to trim the redundancies and needless positions at corporate? Of course. But the people they are "rewiring" are not the unecessary ones. Those directors who have overfluffed their departments and surrounded themselves with yes-men are still going to be around, and will still be driving Walgreens downward in quality and in leadership.
The Walgreens born from Mr. Walgreen's vision and Dan Jorndt's leadership was fantastic. May it rest in peace.
I'm a 20 year employee. We have been visited at the store, distribution center and corp office levels by an outside company to check our "efficency levels". Also a new payrate/scale model has been developed for all employees. We also have changed out all telcom equipment and have opened central fill facilites that now fill most meds. They have elimated 200+ RX tech positions throughout Fl. alone. I think WAG is setting things up in order to sell. Anyone know?
ReplyDeleteTo sell? Are you kidding me? Don't you think it has more to do with the fact that they had an IDEA that Obama/Dems were going to come to power and the chance for a nationalized healthcare option was in the works, so just maybe they're hedging their bets and becoming ruthlessly efficient? Power was in the works for over 4yrs now and I doubt it has anything to do with selling the company! If anything its trying to cut costs by any means necessary, something that seems like quite the win/win strategy as of right now....
ReplyDeleteI wish kevin would call me he was my boss for many years in this economy I wish he was on my side in his new endevors
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