Walgreen has made an announcement yesterday that it shall be making a payment of $618 million for Duane Reade, which is New York City’s largest drugstore chain. If the deal got settled then Walgreen’s total drugstore count will increase by nearly 4%, adding 257 stores in the New York area, where it presently has 70 locations.
Walgreen’s largest drugstore is Duane Reade which has made a shift from the past mistakes of digging money into mostly disappointing purchases related to specialty-pharmacy Option Care. In the past, Walgreen has trusted the rapid organic growth to outstretch the numbers of drugstores.
However for settling in a market like New York it need minimum of 5 years to be profitable according to a research. Walgreen is counting on its Duane Reade deal, that it might increase its earnings in the second year after the deal gets finalized. Further the deal is estimated on the similar prices compared to the previous one for the past drugstore deals with an enterprise which values 11 times last year’s earnings.
According to the research the dearth lies in Duane Reade’s pharmacies, which fill 850 prescriptions a week compared to 1,800. With plenty of experience in hand still isn’t that easy for Walgreen to change consumers’ preference in a stiff competitive environment like New York. So in order to make a name in such kind of market, Walgreen has to pull up its socks.