Walgreen eliminating 1,000 jobs as part of restructuring plan

Drugstore giant Walgreen Co. announced its first layoffs ever Tuesday with plans to slash 1,000 jobs by midyear.

The job cuts, about 9 percent of the work force, at the Deerfield-based company, will be in the corporate and district offices and will not include store employees, said spokesman Michael Polzin.

Targeted workers will have the option to resign or retire with severance pay and benefits based on their tenure. Beginning in February, involuntary layoffs will begin.

"This is the first time we've done something like this," Polzin said.

The job reductions are part of the company's cost-cutting plan designed to save Walgreen $1 billion by fiscal 2011. The cuts are part of the "Rewiring for Growth" plan that started in late summer.

"The cuts will help us through a tough economic time," Polzin said.

While Walgreen has seen growth in the number of new stores and sales, the recession has slowed consumer spending, hurting retailers across the board. Drug sales is one area that has been hit.

"Pharmacy sales everywhere have declined, in part because of the massive shift in generic drugs," said George Rosenbaum, president of Leo J. Shapiro Assoc. Chicago market research firm. In addition, he said that during hard economic times, people postpone visits to the physician and try to treat themselves with over-the-counter medicines.

A positive aspect for Walgreen is that its stores are seeing an upswing in traffic for general merchandise.

"People are shopping closer to home," Rosenbaum said.

The number of Take Care Health Systems found in about 300 stores will continue to grow. The walk-in centers are staffed by board-certified nurse practitioners who treat common illnesses such as strep throat, ear and sinus infections, pink eye and poison ivy.

"We will continue to open the clinics. Those are going good," Polzin said.

Analysts expect that the company will continue to open new stores as well and that it will remain a viable player.

"Walgreen is strong. The cut back is a sign of strength. It reflects the pressure on the pharmacy," Rosenbaum said.

The company has 237,000 employees and operates about 6,600 drugstores.

Walgreen shares fell 19 cents Thursday to close at $26.84. Shares have traded between $39 and $21.28 in the past 12 months.