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Blue Ridge Capital lowers stake in Walgreen

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Blue Ridge Capital and Walgreen

Blue Ridge Capital reduced its holdings in Walgreen (WAG), as disclosed in the 13F filings of the hedge fund. The total holding was lowered to 4.85 million shares in 3Q14 from 5.91 million shares in 2Q14.

The position in Walgreen accounted for 3.40% of the fund’s overall 3Q portfolio, down from 4.81% of the total portfolio in 2Q14.

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Overview of Walgreen

The Walgreen Company (WAG) is the largest retail drugstore firm in the US. The firm operates more than 8,000 stores in all 50 states. WAG was founded in 1901 in Chicago and has its headquarters in Deerfield, Illinois.

Walgreen provides access to consumer goods and services, plus pharmacy, photo studio, health, and wellness services through its retail drugstores, Walgreen Health Services division, and Walgreen Health and Wellness division. In addition to this, WAG runs several online stores, such as Beauty.com, Drugstore.com, and VisionDirect.com.

In 2013, Walgreen opened the nation’s first net zero energy store and is targeting energy production equal to or greater than its energy consumption. The Evanston, Illinois, store operates two wind turbines, around 850 solar panels, and a geothermal system that operates 550 feet underground.

Issues faced by Walgreen

The main concern for Walgreen is the investor pressure faced by the company due to claims filed by its former CFO, Wade Miquelon, in his lawsuit. Miquelon sued the firm, alleging that he was incorrectly portrayed as being “personally responsible” for errors that forecast the company’s earnings.

This defamation suit filed by a former top management employee and shareholder suggests a rough and critical path for the firm. This should affect the firm’s growth and progress in the near future, as the company is still coming to terms with lower-than-estimated earnings, activist hedge funds, and a major deal.

Further, Walgreen is facing trouble keeping advertised special products in stock, plus ensuring they are clearly labeled. This issue could undermine its new customer loyalty program. Adequately stocked shelves and clearly marked products are fundamentally important in building customer loyalty.

In addition to this, Walgreen is also grappling with issues relating to fair and transparent pricing, where shoppers must pay a higher price in certain stores. The discrepancy in prices between two stores can be up to 55%.

Blue Ridge’s notable positions traded in 3Q14

In 3Q14, Blue Ridge Capital added a new position, Alibaba Group Holding (BABA), and increased its position in Yandex (YNDX), LinkedIn (LNKD), and SiriusXM. Its top sell was Citigroup (C). Top decreased positions were in American International Group (AIG), Walgreen (WAG), and Cheniere Energy (LNG).

The next article will cover Blue Ridge Capital’s position in Cheniere Energy.

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