Walgreens 2011 Annual Report Download - page 4

Fiscal 2011 was a year of strong performance for Walgreens. We achieved
our 37th consecutive year of record sales despite a challenging economy.
Our focus on delivering exceptional value and service, fueled by our culture
of operational excellence and innovation, produced record profits,
our strongest increase in net income in a decade and our largest
growth in earnings per share in more than 15 years.
We made substantial progress in the transformation of the Company,
putting Walgreens in a strong position for future success by executing –
and advancing – our bold strategy for near- and long-term growth.
Three years ago, we launched our “Plan to Win” – one of the most
important strategic and operational transformations in our 110-year history.
The plan focused on leveraging our “center of gravity” – the best store
network in America; enhancing the customer experience; and achieving
major cost reduction and productivity gain. Our goals were to become
America’s most trusted and convenient provider of consumer goods
and services and pharmacy, health and wellness solutions, and to
return the Company to strong double-digit growth in earnings per
share, increasing return on invested capital and top-tier shareholder
return just as soon as we possibly could.
In fiscal 2011, as we completed key initiatives and progressed in our
Plan to Win, we also seized the opportunity to crystallize and advance
our vision and strategies, and set our sights even higher – to become
“My Walgreens” for everyone in America, the first choice for health
and daily living across the nation, and a central part of people’s lives
and the communities where they live and work.
Our vision of My Walgreens is more than a drugstore – we are becoming
a retail health and daily living destination, providing convenient,
multi-channel access to goods and services with best-in-class customer
experience. Our pharmacies – on the front lines of health care in America
– serve as a centerpiece in improving patients’ overall health, and
improving access to care and lowering costs through an expanded scope
of community-based health and wellness solutions.
The core, fundamental strengths of our Company, developed over more
than a century – the best, most convenient store network in America,
our trusted and iconic brand, and our strong balance sheet and financial
flexibility – serve as the bedrock of our ongoing transformation.
Strong performance through innovation and operating excellence
As we advanced our strategic vision, the Company recorded strong
results across a broad spectrum of measures in fiscal 2011.
Disciplined focus on our core business strategy helped set new records
in fiscal 2011 – sales of $72.2 billion, gross profit of $20.5 billion and
earnings per diluted share of $2.94, which included a $0.30 per diluted
share after-tax gain on the sale of our pharmacy benefit management
business. In addition, our cash flow from operations was $3.6 billion.
All of these contributed to a dividend increase of 28.6 percent in
July and cash returned to shareholders through dividends and share
repurchases of $2.4 billion in fiscal 2011. Our capital allocation strategy
was reflected in the purchase of drugstore.com and our decision to sell
our pharmacy benefit management business.
Our Company continued to achieve important milestones in our trans-
formation strategy, building on our historic strengths and sharpening
our focus on our core business to deliver even better performance in
our more than 7,700 stores:
• As we integrated the Duane Reade drugstore chain in New York
City, we began building many of its unique “urban retailing” and
store design concepts into Walgreens stores across the country.
In turn, we powered Duane Reade’s pharmacy operations with the
best of Walgreens systems and expertise.
• We have converted more than 5,000 stores and opened more than
500 new stores with our “Customer Centric Retailing” (CCR) initiative
launched in 2009. With this program, which enhances the store’s
“look and feel” and the shopper’s experience, we have reported higher
customer satisfaction and increased sales. Openings and conversions
to the new format reached a peak of 140 stores per week, totaling more
than 3,700 stores last year alone.
• We greatly expanded our answer to “food deserts” – underserved
communities lacking ready access to fresh, healthy foods – with a plan
to offer convenient access to an expanded selection of fruits, vegetables
and other staples at 1,000 Walgreens stores across the country, building
on our successful 12-store pilot in Chicago.
Gregory D. Wasson (left)
President and
Chief Executive Officer
Alan G. McNally
Chairman of the Board
Letter to Shareholders
Page 2 2011 Walgreens Annual Report