Reviewing a year of major strategic progress in transforming Walgreens
(NYSE: WAG) (Nasdaq: WAG) for long-term sustainable growth and value
creation, Chairman James A. Skinner, President and Chief Executive
Officer Gregory D. Wasson and Executive Vice President, Chief Financial
Officer and President, International Wade D. Miquelon today outlined the
company's growth opportunities and strategy at Walgreens Annual
Shareholders Meeting. Addressing nearly 2,000 shareholders in Chicago,
company leadership also discussed the substantial progress Walgreens has
made since announcing its "plan to win" in 2009.
Wasson said, "Our 'plan to win' was a journey to innovate and reinvent
Walgreens for a new era of growth and value creation. Toward that end,
we slowed new store growth to invest more in our existing store base. We
looked at new, innovative retail concepts both in the U.S. and around
the world. We made major acquisitions such as Duane Reade in New York
City and drugstore.com, forged a strategic partnership with Alliance
Boots and began a long-term strategic relationship with
AmerisourceBergen. All of this culminated in a year of solid progress in
fiscal 2013 and a five-year total shareholder return for our stock of
In the last fiscal year, Walgreens reached record sales of $72.2 billion
with an adjusted net earnings increase of 16.3 percent to $3 billion,
while GAAP net earnings increased 15.2 percent to $2.5 billion.
Operating cash flow was $4.3 billion for the year, and free cash flow
reached a record $3.1 billion. The company continued to return
significant cash to shareholders with $1 billion paid in dividends, and
provided a total shareholder return in the last 12 months of 53 percent.
"We are in two dynamic industries - retail and health care - that are
converging as consumers become more involved in shopping for their
health care solutions," said Wasson.
U.S. health care spending is expected to grow from 17 percent of gross
domestic product to 20 percent by 2020, driven by an aging population
and health care reform, which is expected to bring 30 million more
people into the system. At the same time, health care is beginning to
see a shift in payment models from fee-for-service to
pay-for-performance. That's good for Walgreens and community pharmacy,
as the company is well positioned to play a greater role in these
emerging models and expand its role beyond the pharmacy market to the
much larger $2.6 trillion health care market.
On the retail side, consumers continue to look for value and
extraordinary service coming out of the Great Recession, and Walgreens
introduced 2,000 new private brand items last year to meet growing
demand for trusted retail brands. In addition, more opportunity in
categories such as beauty and fresh foods is opening up to Walgreens as
consumers shop across all retail channels. And finally, digital commerce
is expanding rapidly and driving major change in both retail and health
Walgreens is seizing the opportunity created by these trends to lead the
market for decades ahead by focusing on its three strategic growth
drivers: creating a Well Experience, advancing community pharmacy and
establishing an efficient global platform on behalf of its customers and
Creating a Well Experience
Beyond enhancing the physical store, Well Experience also means a highly
engaged employee delivering extraordinary customer care with the right
products and solutions in every community in America. Walgreens has
expanded the number of stores incorporating its Well Experience concepts
from 400 at the start of fiscal 2013 to 600 today.
Walgreens is ensuring it has the right products and solutions by making
it easy for shoppers to get in and out with what they need, elevating
its beauty offering and accelerating the convergence of retail and
health care by pulling together its pharmacy and health care services
with its over-the-counter health and wellness products into more
seamless solutions for customers.
Boosting the Well Experience was last year's launch of the Balance®
Rewards loyalty program, with 74 million active members, making Balance
Rewards one of the most successful launches of a loyalty program in the
history of retail.
In addition, Miquelon noted, "Our front-end comparable store sales have
improved steadily over the last three quarters, and we have outperformed
our largest drugstore competitors."
Advancing Community Pharmacy
Walgreens is advocating a greater role for community pharmacy to offer
unparalleled access to innovative, high-quality, affordable health and
well-being services. The company believes its pharmacists and nurse
practitioners can help fill the gap in primary care, expand health and
wellness and lower overall health care costs by practicing at the top of
Walgreens is well positioned to serve the growing demand for
pharmacy-led health and well-being services by advancing community
pharmacy through three main goals: delivering comprehensive care for its
customers by leveraging its community presence in all 50 states;
providing a differentiated experience that competitors can't easily
match; and building strategic partnerships with physicians, health
insurance companies, hospital systems and large employers.
Miquelon noted Walgreens is focused on serving customers with asthma,
high blood pressure, high cholesterol and diabetes. "These four chronic
disease states alone drive a high percentage of health care costs in the
country, and we now offer a cost effective solution to patients and
payers," he said. Earlier last year, Walgreens Healthcare Clinics began
offering diagnosis and treatment of these four disease states, in
addition to acute care, prevention and wellness, and monitoring and
disease management services.
As Walgreens pursues its goals to advance community pharmacy, it is
ensuring that policymakers are aware of and understand the value
community pharmacy can bring to the health care system.
Establishing an Efficient Global Platform
Through its strategic partnership with Alliance Boots and its strategic,
long-term relationship with AmerisourceBergen, Walgreens is elevating
its growth strategies across the United States and beyond as the global
market for health care solutions grows.
"The greater scale and global reach of all three companies will create
new global opportunities," said Wasson. "We can streamline the world's
pharmaceutical supply and distribution, reduce costs and increase access
to pharmaceuticals, make it easier for manufacturers to bring new
products to the market, and bring the benefits of global sourcing and
best practices to serve community pharmacies across the U.S. and around
To build this global platform, Walgreens and Alliance Boots already are
sharing best practices and capabilities, including executive talent and
products like Boots No7. Walgreens and Alliance Boots also are creating
substantial synergies through their joint venture and a platform for
growth beyond the U.S. and Europe to serve new and emerging markets.
Miquelon said, "In fiscal year 2013, our combined synergies with
Alliance Boots totaled $154 million, ahead of our initial expectation of
$100 million to $150 million in synergies."
Wasson concluded, "Building from our 'plan to win' that we launched five
years ago, I'm confident that today we are positioned for growth. That
confidence comes from the progress we've made over the last five years
and, most of all, from the soul of our company - our people. They are
the ones who truly help people get, stay and live well through their
personal relationships with our customers, patients and the communities
During shareholder voting at the meeting, the following nominees were
presented for election to Walgreens board of directors:
Chairman Jim Skinner added, "I'd like to thank our shareholders and
owners for believing in Walgreens today and our limitless promise for
tomorrow. We look forward to moving ahead together as we redefine
Walgreens for a new generation as a place, in your community, that
always strives to help people get, stay and live well."
Ten of the 13 board members are independent, consistent with the
requirement in the company's governance guidelines that a majority of
its board be independent.
Preliminary voting results were announced at the meeting. The final
voting results on all agenda items will be disclosed in a Current Report
on Form 8-K to be filed by Walgreens with the Securities and Exchange
Commission after certification by the inspector of elections.
As the nation's largest drugstore chain with fiscal 2013 sales of $72
billion, Walgreens (www.walgreens.com)
vision is to be the first choice in health and daily living for everyone
in America, and beyond. Each day, Walgreens provides more than 6 million
customers the most convenient, multichannel access to consumer goods and
services and trusted, cost-effective pharmacy, health and wellness
services and advice in communities across America. Walgreens scope of
pharmacy services includes retail, specialty, infusion, medical facility
and mail service, along with respiratory services. These services
improve health outcomes and lower costs for payers including employers,
managed care organizations, health systems, pharmacy benefit managers
and the public sector. The company operates 8,200 drugstores in all 50
states, the District of Columbia, Puerto Rico and the U.S. Virgin
Islands. Take Care Health Systems is a Walgreens subsidiary that is the
largest and most comprehensive manager of worksite health and wellness
centers and in-store convenient care clinics, with more than 750
locations throughout the country.
Cautionary Note Regarding Forward-Looking Statements: Statements
in this document that are not historical are forward-looking statements
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Words such as "expect," "likely,"
"outlook," "forecast," "would," "could," "should," "can," "will,"
"project," "intend," "plan," "goal," "target," "continue," "sustain,"
"on track," "believe," "seek," "estimate," "anticipate," "may,"
"possible," "assume," and variations of such words and similar
expressions are intended to identify such forward-looking statements.
These forward-looking statements are not guarantees of future
performance and involve risks, assumptions and uncertainties, including,
but not limited to, those relating to our ability to realize anticipated
synergies and achieve anticipated financial results, changes in vendor,
payer and customer relationships and terms, competition, industry
consolidation and the effects thereof, changes in economic and business
conditions, risks associated with new business and business retention
initiatives and activities, failure to obtain new contracts or
extensions of existing contracts, risks associated with acquisitions,
divestitures, joint ventures and strategic investments, the ability to
realize anticipated results from capital expenditures and cost reduction
initiatives, and outcomes of legal and regulatory matters. These and
other risks, assumptions and uncertainties are described in Item 1A
(Risk Factors) of our most recent Annual Report on Form 10-K, which is
incorporated herein by reference, and in other documents that we file or
furnish with the Securities and Exchange Commission. Should one or more
of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from
those indicated or anticipated by such forward-looking statements.
Accordingly, you are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date they are
made. Except to the extent required by law, Walgreens does not
undertake, and expressly disclaims, any duty or obligation to update
publicly any forward-looking statement after the date of this report,
whether as a result of new information, future events, changes in
assumptions or otherwise.
Please refer to the supplemental information presented below for
reconciliations of the non-GAAP financial measures used in this release
to the most comparable GAAP financial measure and related disclosures.
The following information provides reconciliations of the supplemental
non-GAAP financial measures, as defined under SEC rules, presented in
this press release to the most directly comparable financial measures
calculated and presented in accordance with generally accepted
accounting principles in the United States (GAAP). The company has
provided these non-GAAP financial measures in the press release, which
are not calculated or presented in accordance with GAAP, as supplemental
information and in addition to the financial measures that are
calculated and presented in accordance with GAAP. These supplemental
non-GAAP financial measures are presented because management has
evaluated the company's financial results both including and excluding
the adjusted items and believes that the supplemental non-GAAP financial
measures presented provide additional perspective and insights when
analyzing the core operating performance of the Company's business from
period to period and trends in the company's historical operating
results. These supplemental non-GAAP financial measures should not be
considered superior to, as a substitute for or as an alternative to, and
should be considered in conjunction with, the GAAP financial measures
presented in the press release.
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