POSTED: 1:30 a.m. HST, Mar 25, 2011
NEW YORK » Drugstore operator Walgreen Co. said yesterday it will spend about $429 million to buy online retailer drugstore.com in a deal that gives it access to 3 million online customers.
The largest U.S. drugstore operator will give drugstore.com shareholders $3.80 in cash for each of their shares — more than double the $1.79 closing price of drugstore.com’s stock on Wednesday. The stock jumped $2.03 yesterday to close at $3.82.
The acquisition will add about 60,000 products to Walgreen’s online offerings, and the Deerfield, Ill., company said it will significantly speed up its online strategy. Drugstore.com is one of the largest online health and beauty retailers, and Walgreen has said those products are an important part of its strategy. Drugstore.com’s websites include Beauty.com, SkinStore.com and VisionDirect.com.
Despite its name, it does not have a pharmacy business, as it sold that division in July.
Walgreen launched a mobile phone app in 2010 that allows customers to order refills of their prescriptions by scanning the bar code on their medications. The app is available for free. The company says more than 1 million customers use its text alert service, which sends text messages to let them know their prescription is ready for pickup. Walgreen started the text alert feature last March. Drugstore.com’s Beauty.com business launched an iPhone app a year ago.
Competitor CVS Caremark Corp. has several apps that can help customers find nearby stores, get a prescription refilled, transfer prescription information or schedule flu shots.
Scotia Capital analyst Patricia A. Baker said it is imperative for retailers like Walgreen to develop an online presence going forward. “People are shifting their behaviors,” she said. “The brick-and-mortar store’s not going to die, but it’s certainly going to be augmented by the convenience of being able to shop for stuff online.”
The business trade publication Internet Retailer says drugstore.com is the third-largest online health and beauty retailer and the 46th-largest online retailer overall. Drugstore.com has not reported a profit in the last decade despite its growing sales, although the company said it expects a profit in 2011. In 2010 its revenue grew 24 percent to $456.5 million, and it expects more than $750 million in annual revenue by 2013.
Drugstore chains like Walgreen and CVS Caremark don’t disclose how much business they do online. However, Internet Retailer said Walgreen is the 68th-largest online retailer.
The company runs about 7,700 stores around the country.
Sona Chawla, Walgreen’s president of e-commerce, said Walgreen wants to give customers options and does not consider its online business separate from business at its retail stores.