Walgreens 2005 Annual Report Download - page 4

Hurricane Katrina collided with the close of
Walgreens 2005 fiscal year, walloping our strong
Louisiana and Mississippi Gulf Coast markets. On its
heels was Rita, which disrupted business throughout
southeast Texas and Louisiana for several days and
raised havoc in a few small Walgreen markets.
We begin our annual report message with
hurricanes because we believe you, as a shareholder,
should understand the firepower our people mustered
in the face of both Katrina and Rita to meet the
greatest operational challenge in our 104-year history.
Our goals were two: take care of our people and serve
the emergency healthcare needs of thousands of
patients. Other pages of this report explain how we
succeeded in both…and why The Wall Street Journal
reported in September that, “Walgreen has become
a de facto emergency health provider…stepping into
the breach of a major medical crisis.”
We are often asked how we achieve the consistent
success reflected in results for 2005, our 31st
consecutive year of record sales and earnings. Our
answer never wavers. It’s the talent, tenaciousness and
determination of our people, something that passes
from generation to generation of Walgreen employees
and something not easily replicated by competitors.
This sounds gratuitous, but is absolute fact. At no
time is such an advantage more harshly tested –
nor solidly proven – than in crisis situations. What we
accomplished – and continue to accomplish – in the
devastated hurricane areas is a microcosm of the retail
success we achieve chainwide, year after year.
What was Katrina’s financial impact on Walgreens?
Dave Bernauer: Our fourth quarter earnings per share
were flat due in large part to a $54.7 million pre-tax
charge for lost inventory, lease obligations and property
and equipment damage associated with Katrina. The
storm initially closed 74 stores, although about half
reopened within two weeks. At the end of October,
28 New Orleans stores remained closed.
A bright spot in this disaster was the strong
performance of our pharmacy systems under stress.
Our stores were familiar beacons for people evacuated
to strange towns, and our pharmacies electronically
accessed tens of thousands of prescription records to
meet emergency needs. Katrina pushed a full-fledged
test of a new workload balancing system under pilot
at the time of the storm. With permission from state
boards of pharmacy, we sent prescription background
work from overwhelmed stores in Louisiana, Mississippi
and Texas to Walgreen stores in non-Katrina states.
This allowed us to meet two to four times the usual
prescription demand in evacuee areas.
Questions and Answers for Shareholders
November 14, 2005
22005 Annual Report
David W. Bernauer (left)
Chairman and Chief Executive Officer
Jeffrey A. Rein (right)
President and Chief Operating Officer