Walgreens 2010 Annual Report Download - page 6

We are providing customers with online product research, price comparisons and product availability
at nearby stores. Our Facebook and Twitter sites help us gather ideas and feedback from our customers.
These and other innovative multichannel offerings earned Walgreens the No. 1 spot in the food and drug
category for customer service in a recent survey of 150 top online retailers.
Advancing our growth strategy
Meeting the needs of our patients and consumers, we are accelerating the implementation of our
“plan to win – more from the core” for our shareholders through three primary strategies:
• Leveraging the best store network in America
•Enhancing the customer experience
• Achieving major cost reduction and productivity gain
Continuing to expand the most convenient store network in America, we substantially enhanced our
position in the important northeast region by acquiring Duane Reade and its 258 stores in the New York
City metropolitan market. Working together, our two “brands” are developing best-in-class services in urban
retailing, private brand, beauty and fresh food products as provided in our recently opened Duane Reade
stores in Union Square and other Manhattan locations. In the coming year, we will convert an additional
50 Duane Reade stores to this new urban format.
In early 2011, we will begin converting Duane Reade’s stores to Walgreens pharmacy and other systems.
These changes, taken together, are creating the “next-generation” urban Walgreens, combining our
historic strengths in pharmacy with Duane Reade’s innovative front-end approach.
Enhancing the customer experience
During fiscal 2010, our CCR initiative made significant progress. By the end of this calendar year, we expect
more than 2,000 stores to be converted, with new product assortments and more convenient placements,
improved sightlines and a new in-store décor package. We are encouraged by the performance of these
refreshed stores, which have reported increasing customer satisfaction and improving sales throughout the
year. With CCR gaining momentum, we expect it to contribute importantly to front-end sales growth as
we complete our conversion of 5,500 stores by the end of calendar 2011.
With the “new” consumer focused on value, we are enhancing and expanding our private brand offerings.
Excelling for decades in private brand over-the-counter cough and cold, health and beauty items,
we extended our private brand offerings in August to include Duane Reade’s DR Delish consumables
in Walgreens stores nationwide.
To meet the needs of our patients, we are transforming the role of our community pharmacists. We are
providing greater opportunities for our pharmacists to interact with patients by streamlining their
workload, redesigning our pharmacy layout to promote more face-to-face conversations and expanding
our scope of services. Recent survey results show substantial increases in patient satisfaction with
Walgreens pharmacy services.
One of Walgreens most successful initiatives in fiscal 2010 was our greatly expanded flu shot program.
Our pharmacists and Take Care nurse practitioners and physician assistants provided 5.4 million
seasonal flu shots – more than four times the number the previous year – and another 2 million
H1N1 shots. We led the industry in responding to the public health threat posed by the H1N1 flu
pandemic, and earned the National Influenza Vaccine Summit Excellence Award for contributing
to improved flu vaccination rates in our communities. Our flu shot program this season goes beyond
last year’s precedent-setting effort to extend the vaccine’s availability at Walgreens to “every store,
every clinic, every day.”
Together, our pharmacies, Take Care Clinics, worksite health centers, specialty pharmacy and infusion services,
and hospital pharmacy services offer unmatched solutions for our payer clients. With these services, we are
focused on improving outcomes and demonstrating their value through sophisticated analytical information.
Our restructured client service and sales organization is customizing our programs and capabilities to large
and small employers, health plans, pharmacy benefit managers, health systems and government agencies.
Achieving major cost reduction and productivity gain
Our Rewiring for Growth initiative continues to deliver significant cost savings and greater efficiencies
Company-wide. In fiscal 2010, we achieved a net benefit of more than $600 million from Rewiring for
Growth, exceeding our $500 million goal for the year. We are on track to deliver $1 billion in pre-tax savings
in fiscal 2011.
In addition, we have slowed the pace of new store openings from 7.5 percent in fiscal 2009 to 4.2 percent
in fiscal 2010. We anticipate new store openings of between 2.5 and 3 percent in fiscal 2011.
Page 4 2010 Walgreens Annual Report
Cash Flow from Operations
In billions of dollars
Free Cash Flow
In billions of dollars
Expenses
In percent of growth
* Fiscal 2009 expense growth excluding
restructuring costs was 7.6 percent.
** Fiscal 2010 expense growth excluding
restructuring costs and Duane Reade
costs was 6.5 percent.
Free cash flow represents cash
flows from operations less capital
expenditures.
* **
5
4
3
2
1
0
1009080706
3.0
2.4
1.8
.6
1.2
0
1009080706
20
16
12
8
4
0
1009080706
89579_WAG 006_Layout_Edit_20_R2.indd 4 10/22/10 2:20 PM