Walgreens 2012 Annual Report Download - page 5

2012 Walgreens Annual Report 3
Sales
In billions of dollars
75
60
45
30
15
0
1211100908
2.5
3.0
2.0
1.5
1.0
.5
0
1211100908
Expenses
Adjusted Selling, General and Administrative
expense growth in percent*
10
8
6
4
2
0
1211100908
Earnings
Adjusted Net Earnings in billions of dollars*
* This is a non-GAAP measure. See Reconciliation
of Non-GAAP Financial Measures on page 44.
* This is a non-GAAP measure. See Reconciliation
of Non-GAAP Financial Measures on page 44.
with below-market rates and minimal predictability for the services
we provide would have been much greater than any short-term impact
to our earnings.
In July, however, we announced with Express Scripts that we had reached
a multiyear agreement that works for both parties. This agreement is
consistent with our Company’s principles, and is good for our shareholders,
our employees and the patients and communities we serve. In the meantime,
we strengthened relationships with many other pharmacy and healthcare
partners that value the choice, cost-effectiveness, convenience and service
that Walgreens provides to its patients.
For the fiscal year, Walgreens maintained total sales at $71.6 billion,
achieved profits of $2.1 billion, controlled selling, general and adminis-
trative costs, and generated record operating cash flow of $4.4 billion.
Overall, we returned $1.9 billion to shareholders through dividends
and share repurchases for the year. Over the past five years, Walgreens
dividend achieved a compound annual growth rate of nearly 24 percent,
compared with 3 percent for the Dow Jones Industrial Average and
1 percent for the S&P 500.
Progress on core growth strategies and initiatives
In fiscal 2012, we escalated the pace and progress of our transformation
by substantially advancing and executing each of our five key growth
strategies and new initiatives.
Transform the traditional drugstore:
Walgreens continued to redefine and revolutionize the drugstore experience.
As today’s busy and budget-stretched consumer seeks quality and conve-
nience as well as value, Walgreens is positioned to give them what they
want, when they want it, and where they want it. That is why our vision
of “My Walgreens” is much more than a drugstore, but a retail health
and daily living destination, one that provides convenient multichannel
access to goods and services with best-in-class customer experience.
To that end, this year we completed our three-year plan to refresh Walgreens
stores with our “customer-centric retailing” initiative across the chain
that enhances the store’s look and feel and the shopper’s experience,
leading to higher customer satisfaction and increased sales.
Raising the bar even higher, we ramped up the rollout of our groundbreaking
“Well Experience” pilot stores and store formats in select markets. These
stores bring together new urban retail design concepts, enhanced product
assortments, innovations in our pharmacies and health clinics, improved
customer engagement and new e-commerce technologies from our
multichannel strategy. All position Walgreens to step out of the traditional
drugstore format to create a new and unique customer experience.
Designed around customer needs, Well Experience stores include several
drugstore innovations. Pharmacists are located in front of the pharmacy,
out from behind the counter, offering greater and more personal patient
interaction and consultation. Nurse practitioners are located adjacent to
the pharmacies, providing broader healthcare services, from vaccinations
and health testing to non-emergency medical treatment. Well Experience
stores also feature our expanded fresh food selections, as well as enhanced
beauty departments with an array of prestige and niche cosmetic,
skincare and haircare brands not typically found in drugstores.
Through 2012, we have now opened or converted nearly 350 Walgreens
locations with our Well Experience format, including a market-wide
transformation of all 68 Walgreens stores in the Indianapolis area, and
four expansive new upscale “flagship” stores in Chicago, New York City,
Las Vegas and Puerto Rico. These 20,000-plus square foot stores
feature everything from sushi bars, juice and smoothie bars and
cafes to manicure stations. Customers walk in, look around, and say,
“Wow – this is Walgreens?”
As we reinvent the drugstore experience, Walgreens continued to expand
our selection of private-label health and daily living brands that deliver
real value to consumers. One of our newest private brands, Nice!™, which
launched in 2011, offers more than 400 high-quality grocery and
household products at prices up to 30 percent below other national
brands, and joins our Good & Delish™ and Pet Shoppe™ brands.
Walgreens stores also offer prepared meals for immediate consumption
by on-the-go consumers, expanded grocery items for quick, convenient
pickup, and a growing selection of fresh produce and healthy food
choices that are crucial to underserved “food desert” communities
lacking convenient nutritional options.
By serving as a “food oasis” in many of our communities, Walgreens has
been recognized by First Lady Michelle Obama through her Let’s Move
initiative for helping to fight the childhood obesity epidemic. This is one
way Walgreens is able to do good while doing good business.
The Walgreens–Alliance Boots partnership will accelerate our strategy
to transform the traditional drugstore. Not only will Walgreens offer
Alliance Boots global health and beauty brands, including the broadly
popular No7™ and Botanics™ brands, but we will also have access to
the impressive Alliance Boots product development laboratories based
in Nottingham, England, to bring even more unique health and beauty
products to the market, our shelves and consumers around the world.
Then, as fiscal 2013 opened, Walgreens launched a groundbreaking
customer loyalty program called Balance™ Rewards that offers
easy enrollment, instant points and endless rewards. It even rewards
customers for healthy behavior such as getting flu shots and exercise.
Balance Rewards will take our Well Experience to a new level.
Customers can enroll easily at the store counter, online, or with
a mobile device, redeem points instantly for nearly all store or