Walgreens 2008 Annual Report Download - page 7

2008 Walgreens Annual Report Page 5
The challenges
Industry-wide, prescriptions are growing at the slowest pace in
47 years, according to IMS Health. Several factors drove this
slowdown in 2008, including the switch of the allergy drug Zyrtec
from prescription to over-the-counter status, fewer new drug
introductions and safety concerns over newer medications.
The good news is that we continue to gain prescription market
share and now fill 17.6 percent of all retail prescriptions in
the country, up from 16.8 percent last fiscal year.
According to a July survey by the National Association of
Insurance Commissioners, 22 percent of Americans are
reducing doctor visits and 11 percent are scaling back on
medication use. While the drugstore business historically has
been recession resistant, no retailer is immune to the impact
of rising unemployment, inflation and wealth erosion on
millions of cash- and credit-strapped consumers.
When it comes to the holidays, we believe we’re well-positioned.
Few people “cancel” Christmas and other major holidays, but
they do “buy down.” We’ve performed well in past recessions
as people seek value in our lower priced toys, electronics
and seasonal décor. We also bought carefully for 2008 as we
anticipated a prudent consumer. Overall, we remain cautious
in our outlook for fiscal 2009.
Looking ahead
We’re working within Walgreens and through our industry
groups to mitigate proposed reductions in prescription
reimbursement. Aggressive cuts in Medicaid prescription
payments for those on state aid can reduce access for patients
who need care the most.
Over the longer term, we foresee strong demand for our health
and wellness offerings as baby boomers age. Prescriptions are
projected to represent just 10.3 percent of American health care
spending in 2008, and are one of the most important factors in
preventing far costlier care in hospitals and emergency rooms.
Employers, insurance companies and government have an
enormous stake in keeping people on their medication and
out of high-cost care.
Our Board of Directors has formed a special committee that is
currently conducting a nationwide search for a permanent
CEO. The committee is considering both internal and external
candidates. Meanwhile, we thank retired CEO Jeff Rein for his
outstanding contributions to the company over the past 26
years. From his days as an assistant manager to his years in top
management, Jeff worked tirelessly to make Walgreens better
for shareholders, customers and employees. His respect for
individuals is a lesson – and a gift – which he has left to so
many here at Walgreens.
In closing, thank you to our investors for your commitment and
support. And a special thanks to our 237,000 employees who are
the face of Walgreens to millions of customers every day.
Sincerely,
Alan G. McNally
Chairman and acting Chief Executive Officer
Gregory D. Wasson
President and Chief Operating Officer
November 17, 2008
Room to grow
Brandon Mayberry, management trainee
in Dallas, is training to become a store
manager. “My goal is to have my own
store by next year,” says Mayberry, who
joined Walgreens in 2003. The company
promoted nearly 900 trainees to store
manager in fiscal 2008. The top growth
areas for hiring store employees in 2008
were New York, Puerto Rico, California,
Texas and Georgia.