Some investors are showing concern that the “sustainable goods” initiative launched by Walgreen Company (NYSE:WAG) may not be a great investment for the drug store chain or its shareholders.
At last week’s annual meeting in Chicago, an activist shareholder from the National Center for Public Policy Research questioned if selling lower priced, higher quality goods should be central to the drug store’s strategy, rather than marketing more expensive products labeled as “sustainable” or “green.” I agree that that is an excellent question to ask, and suggest that investors refrain from buying shares of Walgreen until CEO Greg Wasson can provide a solid answer to the query.
Walgreen’s shares closed at $39.10, up $0.53, or 1.37%, on Friday, Jan. 11. The company has a market cap of $36.95 billion, and on Jan. 4 reported that its December sales were $6.71 billion, a decrease of 4.0% from $6.99 billion for the same month in fiscal 2012. Calendar 2012 sales were $70.51 billion, a decrease of 3.7% from $73.19 billion in 2011. Fiscal 2013 year-to-date sales for the first four months of this year were $24.03 billion, down 4.4% from $25.15 billion in the comparable period in fiscal 2012.
At the Walgreen stockholders meeting last Wednesday, Justin Danhof, an attorney of the shareholder activist group the National Center for Public Policy Research, asked Walgreens CEO Wasson, “Consider a hypothetical shopping cart containing a hundred dollars worth of commonly purchased retail items. How much more would you personally be willing to pay if all of those products were labeled as ‘sustainable?’”
Opportunity? Or Cost?
Wasson replied that corporate sustainability and social responsibility programs, like the one launched at Walgreen, were an “opportunity” that the retailer could avail itself of “without driving costs up.” He did not, however, directly answer the question posed by Danhof.
Danhof claimed Wasson’s answer was somewhat “incoherent,” and said the company should just “focus on delivering goods with low prices.”