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) -- Last fall,



announced it was scaling back store openings even though sales were rising. Walgreen operates one of the nation's largest drugstore chains, battling to dominate the space with industry behemoth

CVS Caremark

(CVS) - Get CVS Health Corporation Report



saw higher selling, general and administrative costs related to the record opening of 212 stores in the third quarter of 2008. Seeing that the battlefield had changed significantly, Walgreen made a strategic shift to reduce store openings, and it launched a campaign to focus on making its current stores better.

The company announced plans to reduce future store openings to 4% to 4.5% in 2010 and 3% to 3.5% in 2011 to save an estimated $500 million in capital expenditures.

For the past year, Walgreen has cut costs and made its current fleet of stores more user friendly. The company lowered shelves to make the aisles appear less cluttered and scaled back the number of items stocked; it also scaled back on "impulse buy" items. Walgreen used to strike me as a store that MacGyver would love, stocking everything needed to build a bomb, including paper clips, tube socks, a ballpoint pen, rubber bands, nasal spray and a car air freshener. Not anymore.

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"Consumers are concerned with rising unemployment, keeping their homes and paying down their credit cards," Walgreen CEO Gregory Wasson told analysts during a conference call Tuesday. Wasson said customers are "focused on value, and they're buying needs versus wants." He's clearly a commanding officer in touch with the situation on the front lines.

I recently saw an example of its focus on the customer. In my weekly trip to


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to stock up on enough paper towels to supply the USS Abraham Lincoln and enough wine for a squadron of naval aviators, I decided to move my family's prescriptions to their pharmacy.

Within two weeks, I received a check in the mail from Walgreen for $25, valid if I brought my prescriptions back. Along with the check were a couple of coupons, including one for a free bottle of aspirin, no purchase necessary. Being a trader, I naturally want to see if there's an arbitrage opportunity, hoping that Costco matches the offer after I leave.

Walgreen said it expects to increase its number of stores (excluding acquisitions) between 4.5% and 5% in the current fiscal year, and by 2.5% to 3% in the following years. With a solid leader at the helm, executing a well-thought out strategy, I'm bullish on Walgreen and will use options to capitalize on this outlook. In this type of market, I like to sell bull put spreads, and it appears that Walgreen may have found some support around the $34 level.

I'm looking at selling the January 10 35/30 bull put spread for 90 cents, which is also the maximum gain. A bull put spread involves selling a higher strike put while also buying a lower strike put as a hedge, as a way to help offset the call purchase. Using ATM (at-the-money) implied volatility of 25.81%, there's a 65.07% probability of Walgreen finishing above 35 by January expiry and a 71.35% probability of finishing above $34.10, the break-even for this spread.

Firing line: A business that doesn't wait until it's too late to make a strategic shift is one that is set up for success.

-- Written by Matthew Buckley in Chicago


Matthew "Whiz" Buckley is the Managing Partner of

Check6 LLC

, a business-consulting firm specializing in leadership development, risk management, and strategic planning for Fortune 500 companies and related organizations. Whiz flew the F-18 Hornet for the U.S. Navy. He's a graduate of TOPGUN, has close to 400 carrier landings, and flew 44 combat sorties over Iraq. He transitioned to the business world after he was scheduled to fly his first flight as an airline pilot on 9/11. Instead, he ended up flying combat air patrol over the U.S. He rose rapidly though corporate America, starting as Managing Director of Strategy at a Wall Street firm, to CEO of a financial media company. He is an internationally recognized speaker and combined his unprecedented experiences in the military and corporate America in the writing of From Sea Level to C Level.