News

Walgreens outlines strategy to analysts

November 4, 2010

Walgreen Co. announced that it will update its strategy to be America's first choice for health and daily living needs, and review the substantial progress in its transformation started in 2008 at its analyst day conference Nov. 4 in Chicago.

The company also planned to share with the investment community the growth opportunities it has as the country works to control health care costs through greater focus on the prevention and management of chronic disease.

"As patients gain greater access to health care information and take more responsibility for making health care decisions, they are increasingly becoming shoppers of health care," Walgreens president and CEO Greg Wasson said. "That's why we're evolving from a retail drugstore to a retail health and daily living store, putting us squarely at the intersection of two great industries — retail and health care.

"No one is better positioned to execute this strategy, as every day we provide nearly 6 million people with convenient access to health and daily living goods and services in communities across the country. Two years into one of the greatest strategic and operational transformations in our history, Walgreens is laser-focused on executing the key initiatives that will bring our strategy to life while creating shareholder value."

To meet the needs of its patients and customers, Walgreens says it is accelerating its "plan to win" through its three core strategies: leveraging what it says is the best store network in America; enhancing the customer experience; and achieving major cost reduction and productivity gains.

With more than 7,600 drugstores already located across the country, Walgreens has strengthened its store network with more drugstore acquisitions in the last two years than at any time in its history. As a result, the company has top-two drugstore market share in 226 metropolitan areas, including the nation's largest drugstore market, New York City.

"A store base like ours doesn't happen overnight. It has been decades in the making," said Mark Wagner, Walgreens president of community management. "With nearly two-thirds of the U.S. population living within three miles of a Walgreens, we are truly 'My Walgreens' to millions of Americans, their first choice for health and daily living needs."

As part of its efforts to enhance the customer experience, Walgreens says it is pushing the transformation of the community pharmacy to improve the health of patients at a lower cost.

"We are freeing up our pharmacists for the important work of patient care through our efforts to take administrative tasks out of the retail pharmacy and redesign workflows," said Kermit Crawford, Walgreens president of pharmacy services. "We also are expanding our scope of services to ensure our highly-trained pharmacists are viewed as a key link in the prevention and screening of chronic disease."

To achieve its third strategy of achieving major cost reduction and productivity gains, the Walgreens Rewiring for Growth initiative is on track to meet its goal of $1 billion in savings in fiscal 2011.

"Just as important, we are embedding continuous process improvement and innovation into the fabric of our company," said Wade Miquelon, Walgreens executive vice president and chief financial officer.

Throughout today's conference, Walgreens senior leadership will highlight several milestones and future plans for growth:

• Walgreens has slowed the pace of new store openings from 9 percent growth in 2008 to 4.2 percent in 2010. Going forward, the company expects growth of between 2.5 and 3 percent in fiscal 2011, which it says will still result in more store openings than any of its drugstore competitors.
• Even while slowing store openings, Walgreens retail pharmacy market share has grown from 18.2 percent in 2008 to 19.5 percent today. The company filled a record 778 million prescriptions in fiscal 2010, up 15 percent since 2008.
• Since launching its Customer Centric Retailing initiative in 2008, the company will have converted more than 2,000 stores to the format by the end of calendar 2010 and plans to finish the rollout of a total of 5,500 stores by the end of calendar year 2011.

Walgreens has grown into a multichannel retailer in the last two years with the re-launch of Walgreens.com and a more than 50 percent increase in traffic to the site since 2008. The company also launched the addition of smart phone apps and a new mobile website, and offers text messaging to alert pharmacy customers when their prescription is ready for pickup. The company has created a significant retail network of certified immunizers, with more than 27,000 pharmacists and clinicians providing flu shots and other immunizations.

Walgreens' flu shot program has grown from providing 1.2 million flu shots in 2008 to more than 7 million last year. The company anticipates providing even more flu shots during the current flu season.

Walgreens also says it is the top provider of infusion pharmacy services in the country and is expanding its offering with its announcement in September to acquire substantially all of the assets of Omnicare Inc.'s home infusion business. The company also says it is broadening and deepening its relationships with health care payers.

Earlier this year, Walgreens realigned its health care services across the entire company and restructured its client service and sales organization to provide payers with a seamless pharmacy, health and wellness solution.

Since its last Analyst Day conference in 2008, Walgreens says the recent recession and the transformation of America's health care system have substantially changed the landscape in which the company operates. The Walgreens leadership team planned to discuss how the company is adapting its business to meet the new needs of customers, patients and payers by fine-tuning its merchandising and expanding its line of private brand products; and offering health screenings, immunizations and services to prevent and manage chronic diseases as payers look to Walgreens to deliver more health care solutions

"Everything we outline today is designed to meet the needs of customers, patients and payers, and create value for our shareholders," Wasson said.

In the past two years, Walgreens has returned more than $2.6 billion to shareholders in the forms of dividends and share repurchases. Last month, Walgreens announced a new $1 billion share repurchase program through the end of calendar 2012.