Keynote speaker Gregory D. Wasson, Walgreens’ new chief executive officer and a director of the company, is putting the chain’s spotlight on beauty.

Walgreens, which generated sales of $59 billion overall in its last fiscal year, is slowing store growth from 8 percent yearly to 2.5 percent through 2011, to free up capital to put back into its existing stores. One plan Wasson has for the cash: a “reinvention” of the stores’ beauty department in a number of its doors, with a format inspired by a test-market effort it has been running in its Times Square location. The three-level, 16,000-square-foot store includes a 320-square-foot L’Oréal Paris boutique that includes slide-out shelves, product testers, floor-to-ceiling visuals, streaming video and L’Oréal-trained beauty advisers.

This story first appeared in the March 6, 2009 issue of WWD. Subscribe Today.

The upscale presentation includes tastefully designed displays offering Affordable Essentials, which began in December, and a baby item display area launched shortly thereafter. “We’ve already seen sales for Essentials rise 3 percent,” he added. “And when we started doing the baby display, 41 percent of shoppers added a baby item to their baskets.

“We’re looking at how we can redesign signature categories,” said Wasson. “Our beauty departments are one-size-fits-all now, and we think there is an opportunity to have an expanded focus on beauty in certain locations.” Somewhere between 500 and 2,000 of Walgreens’ 6,600 stores could fit that bill, he said. “We don’t need more brick-and-mortar stores — we need to refocus what we already have,” he said.

The idea was sparked by a higher-end selection of seven beauty brands, called the European Beauty Collection, that the retailer rolled out in 2006 in about 1,000 of its doors. “We had too many lines, and it wasn’t as easy to shop as if we’d chosen three or four,” he said. “But select stores did very well and made me realize there was opportunity in beauty that we weren’t tapping.” Wasson also hopes to expand the roles of the 25,000 beauty advisers the chain employs nationwide. “We have already made an investment in the advisers — we can shift the focus,” he said. “We have an opportunity to become a health-and-wellness destination with some of our plans, and that is a tremendous opportunity for our beauty staff to play even more of an advisory role.”

Wasson will find the extra space by paring back nonessential categories, such as alarm clocks. “That’s a noncore item; we don’t need to offer 15 sku’s of alarm clocks,” he said, adding that most customers looking for clocks are either tourists or people who broke their old one.

To create a more modern look, display unit profiles will be lowered.

“In times like this, I’m glad I’m selling toothpaste,” Wasson said of the demand for necessities in the midst of the economy’s woes. “We’re somewhat recession resistant, but we’re definitely seeing shifts in sales of necessary things versus wants. We had a great December, but we saw a huge surge right at the end. People were waiting until the last minute to spend, holding onto their money as long as possible. We will see a definite change in consumer behavior, and we’re looking to take advantage of that as much as we can.”

“It will likely be mid-2010 before we see any real type of uptick,” said Wasson. “Every retailer out there is wise to look for ways to manage costs. I don’t think it makes sense to cut inventory willy-nilly, but people are being incredibly cautious about their spending.” He added that the company has already identified more than $1 billion in cost savings.