Walgreens 2013 Annual Report Download - page 5

Sales
In billions of dollars
75
60
45
30
15
0
1312111009
Our strategy of Creating a Well Experience is to build on our trusted
and historic brand, and our 8,100-plus store network, to step out of the
traditional drugstore format to create a truly differentiated experience
for consumers and patients who want more from their stores.
Well Experience starts with leading-edge store design, new layouts,
enhanced product assortments and state-of-the-art pharmacies, including
bringing the pharmacist out from behind the counter for greater interaction
with patients. More than enhancing the physical store, Well Experience
also means a highly engaged employee delivering a unique and happy
customer experience. To enhance that experience, this year we
launched a concerted employee training program to ensure a winning
company culture with “Well”-inspired people.
Well Experience also offers best-in-class omni-channel access –
harnessing digital, web and mobile applications – to give shoppers the
“three Ws”: What they want. Where they want it. When they want it.
Our newest omni-channel options allow Walgreens smartphone app
users to now print from Instagram, and our app is compatible with
Windows Phone 8.
Altogether this year, we expanded the overall number of Walgreens stores
incorporating our Well Experience concepts from 400 to more than 500.
Boosting the Well Experience across Walgreens, the Balance® Rewards loyalty
program has generated extraordinary customer response. More than
83 million members have enrolled in Balance Rewards in less than a year
since introduction, making ours one of the most successful launches of
a loyalty program in the history of retail.
Millions of Balance Rewards members already have collected enough
points to treat themselves to free rewards. Nearly 80 percent of
members surveyed have told us they are delighted with the simplicity
of the program, how easy it is to sign up and use – in stores, online
or with their mobile phones.
Balance Rewards delivers more than value to customers by giving them
money-saving points on their purchases and for participating in health-
related activities. The program also provides immeasurable value to
Walgreens by giving us exceptional insight into customer shopping habits
and preferences – information we are putting to work to enhance pricing,
promotions, product assortments and services, and to tailor our daily living
strategies to meet individual community needs.
Rounding out the Well Experience, we are also pleased with the strong
momentum of our private brands, including Walgreens, Good & Delish,
Nice!, and many more. The company’s investments in these and other
private brand lines increased private brand penetration to 22.4 percent
in fiscal 2013, up 1.8 percentage points from 20.6 percent in fiscal 2012.
We also continued to magnify and test our Well Experience concepts
with our new, out-of-the-box flagship stores in key locations across the
country. These 20,000-plus square-foot stores, with two or even three
expansive floors, surprise many Walgreens customers with an extensive
collection of innovative offerings, products and services unexpected from
a drugstore such as sushi bars, juice and smoothie bars, cafes, fresh food
and on-the-go meals, and expanded beauty departments and services
including boutiques and manicure stations. This year we opened new
flagship stores in several iconic locations: The Empire State Building
in Manhattan, the historic corner of Sunset and Vine in Hollywood,
California, and in locations in Boston, Chicago, San Francisco,
Washington, D.C., and Philadelphia – for a total of 12 so far.
We are pleased with the performance of our Well Experience stores.
Customer delight, a metric we use to gauge satisfaction, has surpassed
our expectations and goals in monthly surveys. People agree – “This is
not your grandfather’s Walgreens.”
Transforming Community Pharmacy
As we embrace and delight today’s consumer, Walgreens is also pioneering a
far greater role for community pharmacy – seizing new opportunities to serve
the healthcare system as the nation’s needs continue to grow and change.
This past year, Walgreens forged multiyear contracts with predictable
reimbursement rates with the major commercial payers, bringing greater
stability and certainty to our pharmacy business. Walgreens also began
participating as part of the preferred pharmacy network of three of the
top national Medicare Part D plans, giving us a leading role in serving
older Americans.
As our nation ages – about 10,000 people in the U.S. turn 65 every day –
healthcare spending continues growing. For older Americans, 13 percent
of their total living expenses go to healthcare, roughly twice the share for
consumers on the whole, and the need for chronic care is rising.
An aging population demands more pharmacy services. Today, 17 percent
of healthcare spending by older Americans is for medication, and they
fill an average of 30 prescriptions a year. With healthcare spending
estimated to rise by 5 percent a year, drug spending is expected to grow
by roughly $35–45 billion by 2016, according to the IMS Institute for
Healthcare Informatics. With this growth, Forbes magazine recently
named the drugstore business as one of four healthcare businesses
that will see “tailwinds” in the next four years.
Healthcare reform is further driving the demand for affordable, high-quality
healthcare and is estimated to provide another 30 million people with
access to health insurance coverage.
2013 Walgreens Annual Report 3
Expenses
Adjusted Selling, General and Administrative
expense growth in percent*
10
8
6
4
2
0
1312111009
* This is a non-GAAP measure. See Reconciliation
of Non-GAAP Financial Measures on page 46.
2.5
3.0
2.0
1.5
1.0
.5
0
1312111009
Earnings
Adjusted Net Earnings in billions of dollars*
* This is a non-GAAP measure. See Reconciliation
of Non-GAAP Financial Measures on page 46.