Walgreens (WAG) Provides Update on 'Rewiring for Growth' Initiative; to Cut 1,000 Employees from Headcount

January 8, 2009 9:06 AM EST
Walgreens (NYSE: WAG) today announced it is offering early retirement and severance programs to employees in corporate and field management positions as part of its Rewiring for Growth initiative.

Approximately 1,000 positions (about 9% of those currently employed in corporate and field management) will be eliminated by the combination of voluntary and involuntary programs in fiscal 2009. These programs will not impact store personnel.

Rewiring for Growth is one of the company’s key strategic initiatives designed to leverage the value of its core businesses - to earn “more from the core” for its shareholders.

To reduce overhead, including the number of people employed in corporate and support roles, Walgreens is enabling eligible employees to voluntarily resign or retire from the company with both severance pay and benefits coverage based on years of service and retirement eligibility. This program is being offered in advance of a supplemental involuntary separation program that will begin in February. The company intends to reduce to the extent possible the number of involuntary separations by offering a more favorable voluntary program first. Under the voluntary program, eligible employees can receive more weeks of severance pay and continuation of retiree medical benefits if they meet certain age and service requirements.

Gregory Wasson, Walgreens' President, said, "Our Rewiring effort is finding ways for Walgreens to be more effective and efficient so that our growth strategy can move forward"

In its entirety, Rewiring for Growth targets $1 billion in annual savings by fiscal 2011. The company will achieve savings through:
  • strategic sourcing on indirect spend (all goods not for resale),
  • reduction in overhead and labor,
  • and the POWER project, which is designed to enhance patient-pharmacist interaction while reducing costs.
Walgreens expects to incur costs of $300-$400 million over FY09 and FY10 as it implements Rewiring for Growth. 50% of the project’s benefits are expected to accrue beginning in FY10, with the full $1 billion in targeted annual savings beginning in FY11.

Walgreen Co. operates a chain of drugstores in the United States.

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