Shopping at Walgreen for leggings and lattes.

In my last post, I posed the question: What’s next for Walgreen? In-store surgery? Boy, was I on the wrong track. While the nation’s #1 drugstore chain won’t be installing in-store operating theatres anytime soon (that I’m aware of), it will be opening apparel departments in most of its 6,000-plus stores tomorrow, April 1. This is no April Fools hoax! The drugstore chain’s first line of private-label clothing — called Casual Gear — will include clothing basics, such as hoodies, Capri pants, socks, and T-shirts, priced at $7 to $15. While Walgreen already sells some basic apparel, including T-shirts, bras, flip flops, and slippers, those goods aren’t exclusive to Walgreen.

The new Casual Gear line is made exclusively for the company by Wonderbrand LLC, a San Francisco-based firm formed by underwear maverick Nick Graham, the founder of the popular Joe Boxer line sold in Kmart stores.

Walgreen’s foray into the world of “low fashion” is unpretentious, and the company hasn’t done much to promote the launch. But the low-profile debut is at odds with Walgreen’s overall private-label strategy, which has been aggressive. No stranger to private-label goods, Walgreen offers its own brand of everything from over-the-counter medications, including aspirin and cough syrup, to personal care products like whitening strips for teeth and eyeglass wipes. Indeed, Walgreen’s own-brand business has grown from about 12% of general merchandise sales in 2000 to 20% today.

The reason Walgreen and other retailers — supermarkets come to mind — love private label goods is that they foster customer loyalty and, more importantly, return a higher profit margin to the retailer. So Walgreen takes its store-brand business very seriously. It recently upgraded the packaging and logo for Walgreen-brand products under the new “W” brand and — in another blow to struggling Starbucks — is even testing in-store beverage bars, called Café W, at some 200 locations.

While leggings and lattes may seem like a departure for a pharmacy chain, they fit right in with Walgreen’s strategy to drive sales and customer traffic.