DEERFIELD, Ill. Speculation has been spreading throughout the industry for some time, and now it’s official: Walgreens has reached an agreement to acquire Manhattan-based retailer Duane Reade in a cash deal valued at nearly $1.1 billion.
The transaction, which is subject to regulatory approvals, will include all 257 Duane Reade stores located in the New York City metro area, as well as the corporate office and two distribution centers. Walgreens expects the deal to close in its current fiscal year, which ends Aug. 31.
For the latest 12-month period ended Dec. 26, 2009, Duane Reade generated unaudited net sales of $1.8 billion.
“Duane Reade is a compelling strategic acquisition that will immediately provide Walgreens with a leading position in the largest drug store market in the United States,” stated Walgreens president and CEO Greg Wasson. “In addition, Duane Reade’s recent initiatives in urban retailing, customer loyalty and private brand products support and accelerate Walgreens strategy to enhance the customer experience in our network of more than 7,100 stores across the country.”
Walgreens currently operates 70 stores in the New York City metro area.
Walgreens expects to retain Duane Reade’s stores, pharmacy and distribution center employees and many members of Duane Reade’s senor management team. Over time, consolidation of core functions at the corporate offices will occur.
According to Walgreens executives, Duane Reade, which was founded in 1960 and is part of New York City’s fabric with its convenient locations and convenience items, will continue to operate its under its brand name after the deal closes. While New Yorkers may not see much change initially, Walgreens said that decisions would be made over time as to how best harmonize the Walgreens and Duane Reade brands.
“We are pleased that Walgreens shares our commitment to finding new and innovative ways to serve local communities, and we look forward to seeing our customers benefit from Walgreens’ unparalleled pharmacy and operational expertise as we continue with our ongoing transformation,” stated John Lederer, a former Loblaw executive who joined Duane Reade as chairman and CEO in April 2008.
Since taking the helm at Duane Reade, Lederer, and his new management team, has set in motion a significant brand transformation strategy aimed at improving pharmacy, fixing the customer experience and developing a relative, urban drug store box.
The transformation, based upon extensive market research, involves rebranding its stores with new signage, a new logo and a new brand mantra: “Duane Reade equals New York living made easy.” The mantra’s goal: to articulate its desire to become the destination of choice for beauty, wellness and convenience needs. These core offerings are being supported by a new concept segmentation that is sub-branded: “How I look, how I feel and what I need now.”
Improvements include new store designs with wide aisles and contemporary decor; a pharmacy featuring lower service counters; in-store health care clinics; and a store-within-a-store prestige beauty concept called “Look Boutique,” which elevates the merchandising of cosmetics and skin care products and features many prestige brands.
To date, Duane Reade has opened or converted 30 stores to the new format and has plans for up to 30 more new or remodeled stores in 2010. The continued roll out of “Look Boutique” is also planned for a growing number of stores across the network.
In addition, Duane Reade recently launched a new expanded customer loyalty program, dubbed FlexRewards, and a new private label offering under the DR Delish name.