Walgreens Profile

COMPANY PROFILE

Walgreen Co.

REFERENCE CODE: 677870BB-5E8C-4002-8197-6193F34D8E92
PUBLICATION DATE: 9 Jan 2015
www.marketline.com
COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED OR DISTRIBUTED.

Walgreen Co.
TABLE OF CONTENTS

TABLE OF CONTENTS
Company Overview..............................................................................................3
Key Facts...............................................................................................................3
Business Description...........................................................................................4
History...................................................................................................................5
Key Employees...................................................................................................14
Key Employee Biographies................................................................................15
Major Products and Services............................................................................16
Revenue Analysis...............................................................................................21
SWOT Analysis...................................................................................................22
Top Competitors.................................................................................................27
Company View.....................................................................................................28
Locations and Subsidiaries...............................................................................32

Walgreen Co.
© MarketLine

Page 2

Walgreen Co.
Company Overview

COMPANY OVERVIEW
Walgreen Co. (Walgreen or 'the company') is one of the largest retail pharmacy chains in the US.
The company's product offering includes prescription drugs, non-prescription drugs and general
merchandise. Walgreen is headquartered in Deerfield, Illinois and employed approximately 251,000
people, of whom approximately 76,000 were part-time employees, as of August 31, 2014.
The company recorded revenues of $76,392 million in the financial year ended August 2014 (FY2014),
an increase of 5.8% over FY2013.The operating profit of the company was $4,194 million in FY2014,
an increase of 6.4% over FY2013. The net profit was $1,932 million in FY2014, a decrease of 21.1%
compared to FY2013.

KEY FACTS
Head Office

Walgreen Co.
108 Wilmot Road
Deerfield
Illinois 60015
USA

Phone

1 847 914 2500

Fax
Web Address

http://www.walgreens.com/

Revenue / turnover 76,392.0
(USD Mn)
Financial Year End

August

Employees

251,000

Walgreen Co.
© MarketLine

Page 3

Walgreen Co.
Business Description

BUSINESS DESCRIPTION
Walgreen is a US-based retail drugstore chain. It offers products and services through drugstores,
as well as through mail, by telephone, online and mobile application. As of August 31, 2014, the
company operated 8,309 locations in 50 states, the District of Columbia, Puerto Rico and US Virgin
Islands.
In FY2014, the company operated through a single business segment: retail drugstore.
Walgreen's retail drugstores sell prescription and non-prescription drugs as well as general
merchandise, including household items, convenience and fresh foods, personal care, photofinishing
and beauty care products. The company's pharmacy, health and wellness services include retail,
specialty, infusion and respiratory services, mail service, convenient care clinics and wellness centers.
The company, through its subsidiary Take Care Health Systems, manages in-store convenient care
clinics, with more than 400 locations throughout the US. As of August 31, 2014, Walgreen operated
a net retail selling space of 89 million square feet.
Walgreen procures merchandise from several domestic and foreign suppliers. The retail store
operations are supported by 19 distribution centers, of which 13 sites are company-owned. These
distribution centers operate with nearly 11 million square feet of space. The distribution centers are
equipped with modern systems for order processing control and rapid merchandise delivery to stores.
Apart from these, Walgreen also utilizes public warehouses and third party wholesalers to handle
certain distribution needs. The company operates 34 principal office facilities, of which 13 sites are
owned. These office facilities operate with nearly three million square feet of space. The company
operates two mail service facilities with total space of approximately 237 thousand square feet. The
company also owns 16 strip shopping malls with approximately 500 thousand square feet of space.

Walgreen Co.
© MarketLine

Page 4

Walgreen Co.
History

HISTORY
Charles Walgreen purchased the Chicago drugstore, where he had worked as a pharmacist and
started the Walgreen chain in 1901. By 1916, the company had opened nine stores and it was
incorporated as Walgreen Co. The company's stock was issued to the public in 1927. Walgreen
acquired the Mexican retailer Sanborn's in 1946. In the 1950s, Walgreen built self-service instead
of clerk service stores in the Midwest. By 1953, Walgreen was the largest self-service retailer in the
country. The company entered the Puerto Rican market in 1960.
In 1981, the first Intercom computers were installed in five Walgreen pharmacies in Des Moines,
Iowa. This was the initial step toward making Walgreen the first drugstore chain to connect all its
pharmacy departments via satellite. Walgreen opened its 1,000th store in 1984 at Chicago. A decade
later, the 2,000th store was opened in Cleveland. In 1999, Walgreens.com, a comprehensive online
pharmacy, was launched. In addition, the site provided Mayo Clinic Health Information, a source of
health and wellness information.
Walgreen reached the 3,000-store mark with the opening of its store in Halsted and Monroe, Chicago
in the year 2000. The company became the first drugstore chain to offer prescription labels in multiple
languages in 2002. Walgreen opened its 4,000th store at Coldwater Canyon Avenue and Magnolia
Boulevard in Van Nuys, California in 2003.
The company opened its 5,000th store in Richmond in 2005. In the same year, Walgreen completed
the acquisition of Home Pharmacy of California, one of the largest independent home infusion
companies. Walgreen Specialty Pharmacy, a business unit of Walgreen, completed the purchase
of Schraft's Specialty Pharmacy, a provider of advanced fertility medications and services, in 2005.
In the same year, the company acquired select assets of Cleveland based Medic Drugstores. In
addition, WellCare Health Plans entered into a co-branding alliance with Walgreen Health Initiatives,
a wholly owned subsidiary of Walgreen, for Medicare Part D Prescription Drug Plans.
Walgreen acquired from Bristol-Myers Squibb, the rights to the brand name Theragran-M, a
multivitamin, in the US in 2005. The company also partnered with Beverly Hills cosmetic surgeon
Dr. Jan Adams and launched the Dr. Jan Adams Women of Color Total Skin Care System. In the
same year, the company entered into a joint venture with Senior Healthcare Partners to extend its
pharmacy services to senior living facilities.
In 2006, Walgreen allowed ImaginIt, a Denver based clean energy solutions company, to own and
operate solar electric systems at 96 of its stores and two distribution centers in California and 16
stores in New Jersey. In the same year, the company built a new distribution center in Windsor,
Connecticut. Take Care Health, an operator of retail based healthcare, opened 10 Health Corner
Clinics in Walgreen drugstores at Kansas City in 2006.
The company acquired CV Medical Solutions in 2006. In the same year, the company completed
the acquisition of Medmark Specialty Pharmacy Solutions. Walgreen completed its merger with

Walgreen Co.
© MarketLine

Page 5

Walgreen Co.
History

Happy Harry's pharmacy chain and acquired C&M Pharmacy in 2006. Walgreen and Joslin Diabetes
Center, the global leader in diabetes research, entered into an alliance to improve health outcomes
for Americans with diabetes. In the same year, the company launched Zeno, a medical device used
to treat acne. Later in 2006, inkjet printer cartridge refills were made available in 1,500 Walgreen's
photofinishing counters across the US.
The company acquired Bradley's Center Pharmacy and OneFannin Pharmacy in Houston in 2006.
Both pharmacies specialize in fertility therapies. In the same year, Walgreen launched the new
fashion jewelry line, The Pure Allure Crystal Collection, made with Swarovski crystal. Also in 2006,
Take Care Health, an operator of convenient care clinics, in collaboration with Walgreen, opened
four Health Corner Clinics inside Chicago area. In addition, RediClinic, the largest provider of retail
health screening services in the US, started 16 Atlanta area Health Corner Clinics in Walgreen
drugstores.
Walgreen announced a new stock repurchase program of up to $1 billion in 2007, which the company
intended to execute over the next four years. In the same year, the company entered into an
agreement to acquire selected assets of pharmacy and medical specialty product provider,
Familymeds Group, for approximately $60 million in addition to certain real estate leases.
Later in 2007, the company completed the acquisition of Take Care Health Systems in the US. In
the same year, Walgreen opened its 12th full-service distribution center in Anderson, South Carolina.
The distribution center was built to support the company's expansion throughout the Southeast US
region.
Walgreen completed the acquisition of OptionCare, a provider of specialty pharmacy and home
infusion services from a network of more than 100 pharmacies in 34 states of the US, in 2007. The
acquisition positioned Walgreen as the largest home infusion therapy provider in the US. Through
the acquisition, Walgreen became the fourth-largest specialty pharmacy provider in the US. In the
same year, Walgreen acquired TabSafe Prescription Services, the pharmacy services division of
TabSafe Medical Services. The deal expanded the company's ability to provide pharmacy services
to senior-living communities in Tampa, Florida. In the course of acquisition, the company gained
access to a new market, Atlanta.
In 2008, Walgreen entered into an agreement with DHL, an express delivery and logistics company,
to offer shipping services in all of its stores. During the year, the company acquired 20 drugstores
in Puerto Rico from Farmacias El Amal, a family-owned chain of 61 drugstores.
Casual Gear, a new apparel line featuring casual basics for men and women, was introduced in the
company's stores in 2008. In the same year, Walgreen Specialty Pharmacy, a wholly owned subsidiary
of Walgreen, launched a HIV-focused website, HIV.Walgreens.com, to expand the availability of
HIV/AIDS information to patients and caregivers.
Further in 2008, the company acquired I-trax, the parent company of CHD Meridian Healthcare and
a provider of integrated workplace health and productivity management solutions; and privately-held
Whole Health Management, an operator of on-site and near-site employer sponsored clinics, health

Walgreen Co.
© MarketLine

Page 6

Walgreen Co.
History

and wellness centers, and pharmacies in the US. In the same year, Walgreen partnered with Google
to provide Walgreen pharmacy patients access to their prescription history through Google health.
In the same year, the company resolved federal and state investigations related disputes over
Medicaid reimbursements for three drugs the company dispensed at its pharmacies.
The company acquired CuraScript Infusion Pharmacy based in Louisville, a wholly-owned subsidiary
of Express Scripts, in 2008. Walgreen's OptionCare entered into a joint venture with Mednow, a
home infusion, respiratory and medical equipment services company and an affiliate of Catholic
Health Initiatives. Also in 2008, Health Initiatives won First Medical Pharmacy Benefit contract to
provide claims processing, specialty pharmacy services, network management and a suite of clinical
programs designed to meet the needs of First Medical and its members.
Later in 2008, Take Care Health Systems, a wholly-owned subsidiary of Walgreen, opened four
Take Care Clinics at Walgreen drugstores in Indianapolis, two stores in Louisville and four stores in
Phoenix. In the same year, Premera companies awarded a contract to Walgreen to provide specialty
pharmacy services to its 1.7 million health plan members. Longs Drug Stores Corp declined the offer
made by Walgreen to acquire its outstanding shares in the company during the year and the Board
of Directors of Longs voted in favor of CVS Health's (formerly CVS Caremark) proposed acquisition
bid.
Walgreen acquired McKesson Corporation's specialty pharmacy during 2008. The acquisition further
strengthened Walgreen's position as the fourth-largest specialty pharmacy in the country. In the
same year, Walgreen recalled 173 teddy bears with chocolate bars sold in stores since late September
2008. Certain samples of the chocolate provided with the teddy bears were contaminated with
melamine.
In the beginning of 2009, Walgreen, as part of its 'Rewiring for Growth' initiative, announced that it
would offer early retirement and severance programs to employees in corporate and field management
positions. In the same year, the company announced that it would launch an employer centric
pharmacy, health and wellness program, 'Complete Care and Well-Being'.The program was designed
to reduce healthcare and prescription costs for employers across the country. Further in the year,
Walgreen signed an agreement to purchase 12 Rite Aid locations, including seven in San Francisco
and five in eastern Idaho.
Drug Fair entered into an agreement with a subsidiary of Walgreen to sell all of its assets associated
with 32 of its stores, in 2009. Earlier, Drug Fair and its parent company, CDI Group, had filed voluntary
petitions for reorganization under Chapter 11 of the US Bankruptcy Code in the US Bankruptcy
Court. Also in 2009, Walgreen opened a new distribution center in Windsor, Connecticut. The
company acquired the home infusion operations of Air Products Healthcare and its respiratory therapy
and home medical equipment operations in western Pennsylvania and Chicago in 2009, through its
subsidiary Option Care Enterprises.
In 2009, Walgreen entered into a joint venture with Vanderbilt Medical Center, a Nashville-based
comprehensive healthcare facility and a major patient referral center for the mid-South. The joint

Walgreen Co.
© MarketLine

Page 7

Walgreen Co.
History

venture, located in Brentwood, Tennessee, operates under the Vanderbilt Home Care name, and
is affiliated with Walgreen Infusion and Respiratory Services.
In early 2010, Walgreen acquired the pharmacy business and certain other assets of 25 Synder's
stores in Minnesota. The company was also awarded accreditation from URAC, a healthcare
accrediting organization that establishes quality standards for the healthcare industry, in the specialty
pharmacy segment. Subsequently in 2010, Walgreen acquired three El Amal pharmacies in Puerto
Rico and also completed the acquisition of the assets of 12 Eaton Apothecary pharmacies in the
Boston area from D.A.W, a subsidiary of Nyer Medical Group. Walgreen also acquired certain assets,
specifically prescription files, from SpecialtyScripts, a subsidiary of Cardinal Health. The company
also entered into an agreement with USA Drug to acquire the prescription files and certain other
assets of 17 Ike's and Super-D drugstores in the Memphis area.
Further in 2010, Option Care Enterprises, Walgreen's subsidiary, won a $223,150 federal contract
from the US Department of Veterans Affairs' Medical Center in Oklahoma for providing medical
services. In the same year, the company acquired Duane Reade Holdings, including 258 Duane
Reade stores in the New York City metropolitan area, as well as Duane Reade's corporate office
and two distribution centers.
Later in 2010, Walgreen launched an expanded food selection in 10 Chicago stores to address areas
that lack access to basic foods necessary to maintain a healthy diet. The company redesigned its
stores to include more than 750 new food items including fresh fruits and vegetables, frozen meats
and fish, pasta, rice, beans, eggs, whole grain cereals and other healthy meal components.
Walgreen advanced the use of technology by launching several new features including 'Prescription
Text Alerts', which notify customers via text message when their prescriptions are ready, in 2010.
The company also re-launched its iPhone application and the mobile site m.walgreens.com. Later
in the year, Walgreen and Omnicare announced a transaction in which Omnicare will acquire
substantially all of the assets of Walgreen long-term care pharmacy business. In exchange, Walgreen
will acquire substantially all of the assets of Omnicare's home infusion business. In the same year,
Walgreen also entered into a definitive agreement with Graymark Healthcare to acquire Graymark
Healthcare's assets of 18 ApothecaryRx pharmacies located in Colorado, Oklahoma, Minnesota,
Missouri and Illinois.
In 2011, Take Care Health Systems and Ochsner Health System partnered to harness the benefits
of clinical collaboration and improve patient access to convenient and affordable health care options
in the greater New Orleans region. In the same year, Walgreen entered into a definitive agreement
to acquire substantially all of the assets of 10 Carle RxExpress pharmacies in east central Illinois
from The Carle Foundation.
Walgreen completed the acquisition of drugstore.com in mid-2011. The acquisition included all
websites directly owned and operated by drugstore.com, as well as its corporate office and customer
service and distribution center operations. Around the same time, Walgreen and Northwestern
Memorial Physicians Group (NMPG) of Chicago announced a new coordinated healthcare program
aimed to improve patient care and reduce healthcare costs. The program was implemented for

Walgreen Co.
© MarketLine

Page 8

Walgreen Co.
History

Walgreen and Northwestern Memorial employees with NMPG as their primary care provider.Walgreen
also introduced a Web Pickup service, allowing customers to order online and pick up the same
order from neighborhood stores within an hour. The service was rolled out throughout the Chicago
area.
Later in 2011, Walgreen surpassed one million fans on Facebook. The company also integrated its
network of more than 7,700 drugstores through mobile platforms like Foursquare and Facebook
Places. In the same year, the company announced the conversion or opening of about 1,000 Food
Oasis stores over the next five years. This announcement was in conjunction with efforts by First
Lady Michelle Obama and the Partnership for a Healthier America against childhood obesity epidemic
and to provide better food options and easily available healthcare to under-served communities.
Take Care Health Systems introduced a new feature on their website (www.takecarehealth.com),
through which patients can access information such as estimated wait times, quality of care and
cost of services at Take Care Clinics across the country.
Walgreen launched its private brand, Nice, across the country in 2011. This brand included more
than 400 grocery and household items priced up to 30% below other national brands.
Walgreen, along with the US Department of Health and Human Services (HHS), the Centers for
Disease Control and Prevention (CDC) and the Centers for Medicare and Medicaid Services (CMS)
announced the effort to fight heart disease with Million Hearts Initiative in Washington, District of
Columbia in 2011. This initiative is to prevent one million heart attacks and strokes over the next
five years by finding ways to reduce the number of people who need treatment and improve the
quality of treatment for those who need it. Walgreen with its 26,000 health care providers would
support the Million Hearts prevention goal by providing blood pressure testing, at no charge, in
consultation with a Walgreen pharmacist or Take Care Health providers. Later in 2011, Walgreen
introduced Refill Reminder Text Alerts, a mobile feature which delivers text messages informing
patients about when the existing prescription is due for refill.
In early 2012, Walgreen opened its new two story flagship store at the corner of State and Randolph
on Chicago's State Street. During the same time, Take Care Health Systems introduced the option
of scheduling appointments online or through touch screen kiosks in the clinic. In addition, the website
takecarehealth.com provides information on the cost of services offered along with patient satisfaction
scores and market-specific quality related scores. Walgreen acquired the prescription files and
inventory from 33 Kmart pharmacies in 16 states in 2012. The company transferred the pharmacy
patient files to nearby Walgreen pharmacies.
Walgreen and location based social networking site Foursquare introduced a mobile coupon program
throughout the country in 2012. Consumers who check-in to any Walgreen store in the country
through foursquare on their smartphone will instantly receive a unique coupon which can be scanned
and is redeemable in the store, with no texting, reply or other steps required. The company also
introduced other mobile features like Pill Reminder and Transfer by Scan. The Pill Reminder mobile
feature is exclusively for iPhone users, and can be used to track medication schedules and receive
alerts on basis of nine different reminder options like daily, hourly, weekly and other customizable
selections. The Transfer by Scan mobile feature is used by the iPhone and Android users to transfer

Walgreen Co.
© MarketLine

Page 9

Walgreen Co.
History

prescription from another pharmacy to Walgreen with two simple steps. In the same year, Walgreen
announced the usage of Surescripts' Clinical Interoperability to electronically deliver patient data to
the primary care providers.
Also in 2012, Take Care Health Systems and Tufts Health Plan opened BeWell Center, a workplace
health center offering wellness and preventive care, symptom care, and laboratory services to Tufts
Health Plan employees and contractors. Walgreen launched a new online 'Find Your Pharmacist'
tool in 2012, allowing customers to select a pharmacist by matching their healthcare needs.
In the same year, the company added six medications to its oral oncology cycle management program
at Walgreen Specialty Pharmacy. Around the same time, the company completed the acquisition of
certain assets of BioScrip's community specialty pharmacies and centralized specialty and mail
service pharmacy businesses.
The company announced an extended, multi-year agreement with OptumRx, a pharmacy benefit
manager in the US, in 2012. The agreement provides continued, long-term access to Walgreen's
pharmacy services at more than 7,800 locations nationwide for members of prescription drug benefit
plans managed by OptumRx. In the same year, Walgreen and Alliance Boots, a health and beauty
retailer in Europe, entered into a strategic transaction, under which Walgreen would invest
approximately $6.7 billion in cash and stock (comprised of $4 billion in cash and 83.4 million shares)
in exchange for a 45% equity ownership stake in Alliance Boots. The company would have the option
to proceed to a full combination by acquiring the remaining 55% of Alliance Boots in approximately
three years.
Further in 2012, Walgreen signed a multi-year pharmacy network agreement with Express Scripts
that includes rates and terms under which Walgreen would participate in Express Scripts' retail
pharmacy network available to new and existing clients.
The company acquired a regional drugstore chain in the mid-South region of the US from Stephen
L. LaFrance Holdings and members of the LaFrance family in 2012. The transaction included 144
stores that operate under the USA Drug, Super D Drug, May's Drug, Med-X and Drug Warehouse
names located in Arkansas, Kansas, Mississippi, Missouri, New Jersey, Oklahoma and Tennessee.
The acquisition also included corporate offices, a distribution center located in Pine Bluff, Arkansas,
and a wholesale and private brand business.
Walgreen launched the 'Taylor Swift Store at Walgreens’, offering a wide range of products from
Taylor Swift's branded merchandise line, in 2012. In the same year, Walgreen set up a new company,
jointly owned with Alliance Boots, as part of their strategic partnership's synergy program. The new
company, called Walgreens Boots Alliance Development GmbH, is based in Bern, Switzerland.
The company launched the 'Ology' brand of healthy home products, later in 2012. The Ology branded
products include baby care (lotion and 2-in-1 body wash), laundry (liquid detergent and fabric
softener), cleaners (glass cleaner and all-purpose cleaner) and personal care (adult shampoo and
conditioner). These branded products also include light bulbs and paper products that are 100%
tree-free and made from readily renewable resources.

Walgreen Co.
© MarketLine

Page 10

Walgreen Co.
History

Walgreen acquired a significant ownership stake in Cystic Fibrosis Foundation Pharmacy, the parent
company of Cystic Fibrosis Services, in late 2012. Following the transaction, Walgreen and the CF
Foundation became the joint owners of two businesses: CF Services, a specialty pharmacy for CF
patients and their families; and Pharma Dynamics, a provider of new product launch support and
call center services for drug manufacturers. During the same time, Walgreens Infusion Services was
selected as a contracted provider of a new injectable medication, Gattex, for short bowel syndrome.
The company opened a worksite health center on the BMW Manufacturing's campus in Spartanburg,
South Carolina in 2013. The 25,000 square feet facility, managed by Walgreens Employer Solutions
Group, will provide BMW associates, dependents and eligible retirees a wide range of health services,
including primary and occupational care. In the same year, Take Care Health Systems and Community
Health Network announced a clinical collaboration that will facilitate more coordinated health care
services.
Walgreen and Alliance Boots entered into a long-term partnership with AmerisourceBergen, a
pharmaceutical services company, in 2013. This partnership will enable Walgreen, Alliance Boots
and AmerisourceBergen to collaborate on programs to improve service levels and efficiencies, while
reducing costs and increasing patient access to pharmaceuticals. Walgreen and Alliance Boots will
also have rights to acquire minority equity position in AmerisourceBergen. During the same time,
the company selected OMD to be its new media planning and buying agency of record. OMD will
be responsible for the US and Puerto Rico activity related to traditional, multicultural, digital and
mobile media planning and buying. Further in 2013, Walgreen opened its New York City-based
flagship store located in the Empire State Building.
Further in 2013, Walgreen extended its agreement as a network pharmacy provider in the CVS
Health (formerly CVS Caremark) pharmacy benefit management (PBM) national retail network. In
the same year, Walgreen and Chicago-based solar developer SoCore Energy announced that they
will build more than 200 new solar installations at Walgreen drugstores throughout California,
Connecticut, Delaware, Massachusetts, New Jersey and New York. This latest expansion will bring
the number of completed solar installations at Walgreen stores to more than 350. Also in 2013, the
company began selling No7 Men skincare products, created by Boots, at Walgreen and Duane
Reade drugstores. Later in 2013, Walgreen launched its app for mobile phone devices across the
Windows Phone 8 platform.
In the same year, Walgreen expanded vaccine availability at all of its 204 locations across Indiana.
Earlier in the year, a bill was passed in the state authorizing pharmacists to provide all adolescent
and adult immunizations recommended by the Centers for Disease Control and Prevention (CDC)
with a prescription. In the same year, Mark Hill Salon Professional products were launched at
Walgreen and Duane Reade stores. Further in 2013, Walgreen introduced its 'Healthcare Clinic' at
select Walgreen stores as the new branding for the more than 370 in-store retail clinics, replacing
the former Take Care Clinic name.
Community Health Network began its clinical collaboration with the Healthcare Clinic at select
Walgreen locations in 2013, to offer seamless healthcare in a convenient and accessible manner in
Indiana. In the same year, Walgreen and Orlando Health, a not-for-profit health care organization,

Walgreen Co.
© MarketLine

Page 11

Walgreen Co.
History

announced a clinical collaboration that will provide coordinated and expanded health care services,
while improving patient access to convenient and affordable care throughout Central Florida. Also
in the same year, AmerisourceBergen launched the previously announced 10-year relationship to
distribute pharmaceuticals to more than 8,100 Walgreen locations across the country. Theranos and
Walgreen announced a long-term partnership, under which Walgreen stores will operate Theranos
Wellness Centers to offer Theranos' new lab testing service.
The company acquired certain assets of Kerr Drug's retail drugstores and specialty pharmacy
business in 2013. The acquisition included Kerr Drug’s retail drugstores, specialty pharmacy business
and a distribution center.
Later in 2013, Walgreen launched Balance Financial, a full suite of integrated financial services
which are built around its new Balance Financial Prepaid MasterCard. In the same year, the company
opened its first net zero energy retail store in Evanston, Illinois.
In January 2014, the company expanded its relationship with Inovalon, a technology company, to
implement its patient assessment tool and technology platform to support improvements in care,
quality and risk score accuracy programs across more than 400 Healthcare Clinic at select Walgreen
locations.
In the following month, Walgreen and the Accreditation Association for Ambulatory Health Care
(AAAHC) announced that more than 50 primary care worksite health centers managed by Take
Care Employer Solutions (a division of the company that provides workplace health solutions),
received medical home accreditation. In March 2014, Walgreen, along with Lebhar-Friedman
Publishing, launched a beauty publication, named Discover Beauty Within. This quarterly publication
will be available at all Walgreen locations, except in Puerto Rico, and Duane Reade drugstores.
Walgreen signed a definitive agreement with Water Street Healthcare Partners (Water Street), a
strategic investor focused exclusively on the health care industry, in April 2014. According to the
agreement, Water Street will acquire a majority interest in Take Care Employer Solutions. In the
same month, the company expanded its travel health services to include immunizations and
consultations.
In August 2014, Walgreen entered the Dallas-Fort Worth market, thereby expanding its network of
Healthcare Clinic retail locations.
In the following month, the company announced that Walgreens Boots Alliance, the anticipated new
holding company for the combined Walgreen and Alliance Boots enterprise, filed a Registration
Statement on Form S-4 with the Securities and Exchange Commission (SEC). This includes
preliminary proxy statement/prospectus related to the company’s acquisition of the remaining 55%
of Alliance Boots and the reorganization of Walgreen into a holding company structure.
In October 2014, Walgreen partnered with WebMD Health Corp. to improve health and wellness in
America by providing WebMD’s virtual wellness-coaching programs directly to Walgreen customers.

Walgreen Co.
© MarketLine

Page 12

Walgreen Co.
History

In the same month, the company announced the availability of Apple Pay at Walgreen and Duane
Reade drugstores across the US.
The company acquired the remaining 55% equity ownership stake in Alliance Boots in December
2014. With this acquisition, Walgreen and Alliance Boots completed the second step of their strategic
partnership. The new entity, Walgreens Boots Alliance, will trade on the NASDAQ stock exchange
under the symbol WBA. Under a reorganization merger agreement, Walgreen became a wholly-owned
subsidiary of Walgreens Boots Alliance and its common stock was converted automatically into
shares of Walgreens Boots Alliance common stock. The new global enterprise combines Walgreen,
one of the largest drugstore chains in the US; Boots, a market leader in European retail pharmacy;
and Alliance Healthcare, one of the leading international wholesalers and distributors.

Walgreen Co.
© MarketLine

Page 13

Walgreen Co.
Key Employees

KEY EMPLOYEES
Name

Job Title

Board

Alexander W. Gourlay

President

Senior Management

Walgreen Co.
© MarketLine

Page 14

Walgreen Co.
Key Employee Biographies

KEY EMPLOYEE BIOGRAPHIES
Alexander W. Gourlay
Board: Senior Management
Job Title: President
Since: 2014
Age: 54
Mr. Gourlay has been the President at Walgreen since 2014. He is also an Executive Vice President
at Walgreens Boots Alliance. Previously, he served as an Executive Vice President and the President
of Customer Experience and Daily Living at Walgreen. Before joining the company in 2013, Mr.
Gourlay was the Chief Executive Officer of the Health and Beauty Division at Alliance Boots from
2009 to 2013. Prior to 2009, he served as the Managing Director of Boots UK and as a member of
the Alliance Boots Group operating committee following the acquisition of Alliance Boots by AB
Acquisitions in 2007. Mr. Gourlay also served as the Healthcare Director at Boots the Chemists,
having previously held senior management positions in store operations and human resources.

Walgreen Co.
© MarketLine

Page 15

Walgreen Co.
Major Products and Services

MAJOR PRODUCTS AND SERVICES
Walgreen is one of the largest retail pharmacy chains in the US. The company's key products and
services include the following:
Products:
Beauty:
Facial skin care products
Hair care products
Makeup products
Perfume and cologne
Bath and body products
Sun care products
Clothing and accessories
Natural and organic beauty products
Personal care:
Oral care
Shaving and grooming
Hair care
Pregnancy and fertility
Home tests and monitoring
Feminine care
Incontinence
Foot care
Eye care
Ear, nose and throat care
Lip care
Massage and relaxation
Bath and body
Deodorant and antiperspirant
Sun care
Natural and organic personal care
Contact lenses:
Color lenses
Daily disposables
Monthly disposables
Multifocal lenses
Toric lenses

Walgreen Co.
© MarketLine

Page 16

Walgreen Co.
Major Products and Services

Vial lenses
Weekly disposables
Medicines and treatments:
Cough, cold and flu
Pain relief and management
Allergy and sinus
Digestive health and nausea
Children's health care
Home tests and monitoring
Stop smoking
Skin ailments
Homeopathic remedies
First aid
Pill organization
Eye care
Ear, nose and throat care
Foot care
Sleep and snoring aids
Supports and braces
Feminine care
Incontinence
Home healthcare solutions:
Lift chairs
Scooters
Wheelchairs and transport chairs
Walkers and rollators
Canes and crutches
Mobility equipment accessories
Bathroom safety
Home tests and monitoring
Daily living aids
Diabetes management
Medical nutrition
Incontinence
Bedding and accessories
Pain relief and management
Mastectomy
Supports and braces
Medical scrubs and clothing
Air care
Vitamins and supplements:

Walgreen Co.
© MarketLine

Page 17

Walgreen Co.
Major Products and Services

Multivitamins
Letter vitamins A-K
Herbs
Calcium and minerals
Supplements
Fish oil, omegas and efas
Probiotics
Children's vitamins and supplements
Homeopathic remedies
Sexual wellness supplements
Pill organization
Grocery:
Candies and gums
Snacks
Beverages
Fresh and ready
Pantry
Refrigerated foods
Frozen foods
Health foods and sports nutrition
Specialty diets
Baby food and formula
Giftable foods
Baby, kids, and toys:
Baby food and formula
Feeding essentials
Diapering
Bath, skin and hair
Childproofing and safety
Children's health care
Children's vitamins and supplements
Baby gear
Nursery
Clothing and accessories
Toys
Party supplies
Just for mom
Pregnancy and fertility
Natural and organic
Household products:

Walgreen Co.
© MarketLine

Page 18

Walgreen Co.
Major Products and Services

Laundry and cleaning
Paper and plastic
Small appliances
Kitchen essentials
School and office supplies
Bed and bath
Party supplies
Candles and home fragrance
Lightbulbs and lighting
Air care
Frames and photo albums
Electronics
Lighters and accessories
Clothing and shoe care
Travel
Scrapbooking
Batteries
Outdoor living
Auto and hardware
Pest control
Diet and fitness products:
Weight management
Sports nutrition
Bars and drinks
Diet foods
Exercise equipment
Yoga and pilates
Fitness accessories
Sports medicine
Seasonal products:
Costumes
Gift cards
Holiday decor
Party supplies
Giftable foods
Services:
Clinical services:
Laboratory monitoring

Walgreen Co.
© MarketLine

Page 19

Walgreen Co.
Major Products and Services

Medication profile review
Nutritional assessments
Patient and caregiver education
Home infusion
Respiratory services
Photofinish
Immunization
Brands:
Walgreen
Nice!
Good & Delish

Walgreen Co.
© MarketLine

Page 20

Walgreen Co.
Revenue Analysis

REVENUE ANALYSIS
Overview
Walgreen recorded revenues of $76,392 million in FY2014, an increase of 5.8% over FY2013. For
FY2014, the US, Guam, Puerto Rico and the US Virgin Islands, the company's only geographic
market, accounted for 100% of the total revenues.
In FY2014, the company operated through one reportable segment, the retail drugstore business.
However, the company has provided a revenue break-up based on product categories: prescription
drugs (64% of the total revenues in FY2014), general merchandise (26%) and non-prescription drugs
(10%).
Revenues by product category
In FY2014, the prescription drugs category recorded revenues of $48,890.9 million, an increase of
7.5% over FY2013.
The general merchandise category recorded revenues of $19,861.9 million in FY2014, an increase
of 1.9% over FY2013.
The non-prescription drugs category recorded revenues of $7,639.2 million in FY2014, an increase
of 5.8% over FY2013.
Revenues by geography
The US, Guam, Puerto Rico and the US Virgin Islands, Walgreen's only geographical market,
accounted for 100% of the total revenues in FY2014. Revenues from the US, Guam, Puerto Rico
and the US Virgin Islands reached $76,392 million in FY2014, an increase of 5.8% over FY2013.

Walgreen Co.
© MarketLine

Page 21

Walgreen Co.
SWOT Analysis

SWOT ANALYSIS
Walgreen is one of the largest retail pharmacy chains in the US. The company has an extensive
store network in the country. Nearly 76% of the US population lives within five miles of a Walgreen
store. An extensive store network increases the company's accessibility to customers and expands
its potential consumer base. However, rising labor wages in the US could increase the operating
costs of the company and have an adverse effect on its margins.
Strengths

Weaknesses

Established drugstore retail network
increases market penetration opportunities
Wide portfolio of pharmacy and healthcare
services increases average spending

Involvement in various legal issues

Opportunities

Threats

Increased popularity of retail clinics due to
accessibility and affordability
Growing trend in private label market
Growing personal care market in the US
Merger with Alliance Boots

Rising labor cost in the US affects the
company's margins
Intense competition and changes in
regulations may affect the profitability and
market share
Nationwide spread of prescription drug
abuse

Strengths

Established drugstore retail network increases market penetration opportunities
Walgreen is one of the largest drugstore chains in the US with an extensive store network. As of
August 2014, approximately 76% of the US population lived within five miles of a Walgreen store
and an average of 6.2 million shoppers visited the company's stores daily in FY2014. Additionally,
Walgreen has the highest number of stores compared to its key competitors, CVS Health and Rite
Aid. As of August 31, 2014, the company operated 8,309 locations in 50 states, the District of
Columbia, Puerto Rico and US Virgin Islands. In comparison, as of December 31, 2013 CVS Health
operated 7,660 retail drugstores. On the other hand, Rite Aid operated 4,587 stores in 31 states
across the US and in the District of Columbia as of March 1, 2014. Strong retail network allows
Walgreen to serve a broad base of customers. In FY2014, the company filled approximately 699
million prescriptions.

Walgreen Co.
© MarketLine

Page 22

Walgreen Co.
SWOT Analysis

Furthermore, Walgreen was ranked among the ‘500 America's largest companies’ and ‘Global 500
largest companies’ list by a business magazine in 2014. Thus, an extensive store network increases
the company's accessibility to customers and expands its potential customer base. Additionally,
greater accessibility positions Walgreen as a preferred store for customers which will be a competitive
advantage.
Wide portfolio of pharmacy and healthcare services increases average spending
Walgreen offers an extensive range of pharmacy and healthcare related services that complement
each other. The company's portfolio of services increases the potential customer base for its retail
business operations. Walgreen offers pharmacy, health and wellness solutions such as retail, specialty
pharmacy, infusion and respiratory services, mail service and convenient care clinics. The company’s
drugstores sell prescription and non-prescription drugs and its pharmacists also provide drug
consultations and administer flu vaccines and other immunizations. Its integrated network of
pharmacies allows easy access for customers to fill their prescriptions at any of its drugstores.
Furthermore, Take Care Health Systems, a wholly-owned subsidiary, manages the Healthcare
Clinics at select Walgreen locations throughout the country. The company also offers specialty
pharmacy services, providing customers a variety of medications, services and programs for managing
complex and chronic health conditions. Furthermore, through its infusion therapy services, the
company offers administration of intravenous (IV) medications for cancer treatments, chronic pain,
heart failure, and other infections and disorders which must be treated by IV. The company also
provides laboratory monitoring, medication profile review, nutritional assessments and patient and
caregiver education services. Walgreen provides these infusion services at home, at the workplace,
in a physician's office or at a Walgreen alternate treatment site, resulting in an expanded customer
base for the company's pharmacy services.
Walgreen's wide portfolio of pharmacy and healthcare services provide the company with an
opportunity to increase the average spend of the customer to drive top line growth.

Weaknesses

Involvement in various legal issues
The company has been involved in various legal issues in the recent past. For instance, in 2012, a
number of California District Attorneys filed a complaint in the Alameda County Superior Court
alleging certain violations of the state's hazardous waste regulations. This was related to the disposal
of various materials from the company's retail stores.The lawsuit sought injunctive relief, civil penalties
and certain fees and expenses. Also in 2012, the US Drug Enforcement Administration (DEA) served
administrative inspection warrants on six Walgreen retail pharmacies in Florida and removed certain
controlled substance prescription records and other related documents. DEA also served an inspection
warrant and an administrative subpoena for records on the Walgreen distribution center in Jupiter,
Florida. DEA issued a separate administrative subpoena for records from the Walgreen facility in
Orlando, Florida in the same year. Further in 2012, DEA served a suspension order on the Jupiter
distribution center and placed under seal the controlled substance inventory at that facility.

Walgreen Co.
© MarketLine

Page 23

Walgreen Co.
SWOT Analysis

Furthermore, in 2013, the company entered into a settlement and memorandum of agreement with
the US Department of Justice and DEA, through which it settled and resolved all administrative and
civil matters arising out of DEA's concerns relating to the company's distribution and dispensing of
controlled substances. Under the terms of the agreement, Walgreen paid an $80 million settlement
amount, yielded its DEA registrations for six pharmacies in Florida until May 26, 2014, and for its
Jupiter, Florida distribution center until September 13, 2014, and agreed to implement certain remedial
actions.
Involvement in such litigations not only harms the company's brand image but also erodes consumer
confidence in its products. In addition, the damages paid are substantial and are counterproductive.

Opportunities

Increased popularity of retail clinics due to accessibility and affordability
Retail clinics are walk-in clinics located in pharmacies or grocery stores. Growing number of customers
have been using the facilities offered by these retail clinics as these clinics offer several advantages.
Low cost entry points and extended hours of operations compared to hospitals are the key factors
driving the growth of retail clinics. The demand for convenient healthcare at affordable prices is
expected to further drive the growth in this segment. According to industry estimates, the number
of retail clinics in the US is expected to grow from approximately 1,400 in 2012 to 2,700 by 2016.
Walgreen operates retail clinics in several of its pharmacies. The increased demand for retail clinic
services will trigger higher revenues in this segment and will also increase the potential customer
base for the company.
Growing trend in private label market
The private label market in the US is expected to grow at a fast pace. Preference for private labels
has been increasing in the US as consumers have become price conscious and see the quality
difference between private label and branded products narrowing. Even upper-income shoppers are
more willing to buy generic brand, which has traditionally appealed more to shoppers with limited
budgets. According to industry estimates, store brands sales outpaced national brands in 2013 and
grew by more than 2% compared to 2012. In supermarkets, unit and dollar shares increased to
nearly 23% and 19%, respectively, and in drug stores, unit and dollar shares increased to nearly
17% and 16%, respectively. The growth trend for private labels is expected to continue in the coming
years with consumers intending to continue purchasing private labels even after the economy
improves.
Walgreen launched its private brand Nice! across the country in 2011. Another private label brand
Duane Reade's Good & Delish is also offered in Walgreen stores. Thus, through its varied offerings
in the private label category, the company can enhance its appeal to consumer segments that are
increasingly opting for private label goods.

Walgreen Co.
© MarketLine

Page 24

Walgreen Co.
SWOT Analysis

Growing personal care market in the US
The personal care products market in the US experienced a moderate growth in the recent past.
According to MarketLine, the personal products market in the US grew by 1.6% in 2013 to reach a
value of $54,840.1 million. However, the market is estimated to experience a significant growth rate
in the future. By 2018, this market is forecast to have a value of $58,675.8 million, an increase of
7% since 2013. Skincare is the largest segment of the personal products market in the US, accounting
for 17.8% of the market's total value.
Walgreen offers a wide range of personal care products under various categories such as oral care,
hair care, feminine care, foot care, eye care and skin care, among others. Therefore, with the growing
demand for personal care products in the US, the company can improve its sales.
Merger with Alliance Boots
In December 2014, Walgreen acquired the remaining 55% equity ownership stake in Alliance Boots
to create the world’s first global pharmacy-led, health and well-being enterprise. Under a reorganization
merger agreement, Walgreen became a wholly-owned subsidiary of the new entity, named Walgreens
Boots Alliance. The new global enterprise combines Walgreen, one of the largest drugstore chains
in the US; Boots, a market leader in European retail pharmacy; and Alliance Healthcare, one of the
largest international wholesalers and distributors. Together, Walgreens Boots Alliance spans more
than 25 countries, with over 12,800 stores and more than 340 pharmaceutical distribution centers
serving more than 180,000 pharmacies and other points of care. This merger also brings together
a brand portfolio of retail, wholesale, service and product brands, along with the world’s largest
pharmaceutical wholesale and distribution network, and will position Walgreens Boots Alliance as
the world’s largest buyer of pharmaceuticals. In addition, with its equity method investments,
Walgreens Boots Alliance has a retail pharmacy network spanning the US and Europe as well as
key markets in Latin America and Asia, with growth opportunities in many developing and underserved
markets across the world. Therefore, becoming global gives the company an ability to generate
significant and sustainable benefits for local markets and all stakeholders, from consumers and
patients, to pharmacists, suppliers and business partners.

Threats

Rising labor cost in the US affects the company's margins
Labor costs are rising in the US. Tight labor markets, increased overtime, government mandated
increases in minimum wages and a higher proportion of full-time employees are resulting in an
increase in labor costs for employers in the US. The federal minimum wage rate in the US, which
remained at $5.15 per hour since 1998, increased to $5.85 per hour in 2008. It further increased to
$6.55 per hour in 2009 and to $7.25 per hour in 2010. Furthermore, many states and municipalities
in the country have minimum wage rate even higher than $7.25 per hour due to higher cost of living.
The minimum wage rate has increased in the states of Arizona (from $7.8 in 2013 to $8.05 in 2014),

Walgreen Co.
© MarketLine

Page 25

Walgreen Co.
SWOT Analysis

Colorado (from $7.78 in 2013 to $8.23 in 2014), Florida (from $7.79 in 2013 to $8.05 in 2014),
California (from $8 in 2013 to $9 in 2014), Oregon (from $8.95 in 2013 to $9.25 in 2014) and
Washington (from $9.19 in 2013 to $9.47 in 2014) in the recent past. Increasing wage rates and
related costs could affect the company's profitability.
Intense competition and changes in regulations may affect the profitability and market share
The company operates in a highly competitive industry. As a pharmacy retailer, Walgreen competes
with various retailers, including chain and independent drugstores, mail order prescription providers,
grocery stores, convenience stores, mass merchants, Internet pharmacies, warehouse clubs, dollar
stores and other discount merchandisers. It competes on factors like service, convenience, variety
and price. In addition, some of these competitors may offer services and pricing terms that Walgreen
may not be willing or able to offer. This may have an adverse effect on the company's profitability
and market share. Some of the company’s key competitors include CVS Health, Rite Aid, Safeway,
and The Kroger Co. In addition, the company also competes with mass market retailers like Wal-Mart,
which is also expanding its drug retailing operations. Wal-Mart is the world's largest retailer with
more than 11,000 stores in 27 countries; these stores also have a health and wellness department,
offering pharmacy services, optical services and over-the-counter drugs.
Growing competition from Walgreen’s competitors along with their significant resources could have
a major impact on the pricing and margins of their offerings. This may put compounded pressure on
the company’s drug margins and lower its profits. Also, intense competition from drug retailing chains
and mass market retailers could strain the company's margins and affect its profitability.
Nationwide spread of prescription drug abuse
Prescription drug abuse has become one of the fastest growing problems in the US market, particularly
in cities such as Los Angeles, Miami, Chicago and New York. Previously, Marijuana was primarily
used by the first-time drug abusers in the country, but of late, it has been replaced by prescription
drugs. According to the 2013 National Survey on Drug Use and Health published by the Substance
Abuse and Mental Health Services Administration, an estimated 6.5 million persons aged 12 and
over, or 2.5% of the US population, were non-medical users of prescription-type psychotherapeutic
drugs. In addition, stealing legitimate shipments, and recruitment of Medicare beneficiaries who sell
their monthly drug supplies, by illegal traffickers, are some of the routes used to bring prescription
drugs onto the streets. The growing abuse of prescription drugs can affect the sales revenue of drug
retailers such as Walgreen.

Walgreen Co.
© MarketLine

Page 26

Walgreen Co.
Top Competitors

TOP COMPETITORS

The following companies are the major competitors of Walgreen Co.

Safeway Inc.
Target Corporation
Wal-Mart Stores, Inc.
Rite Aid Corporation
The Kroger Co.
CVS Health Corporation

Walgreen Co.
© MarketLine

Page 27

Walgreen Co.
Company View

COMPANY VIEW
An excerpt from the’ Management's Discussion and Analysis of Financial Condition and Results of
Operations’ section is given below. The statement has been taken from the company’s 10-K filing
for FY2014.
RESULTS OF OPERATIONS
Fiscal 2014 net earnings attributable to Walgreen Co. decreased 21.1% to $1.9 billion, or $2.00 per
diluted share, versus net earnings of $2.5 billion, or $2.56 per diluted share, in fiscal 2013. The
decrease was primarily attributable to lower gross margins, a loss related to the Alliance Boots call
option and a higher effective tax rate, partially offset by higher sales, lower selling, general and
administrative expenses as a percentage of sales, increased equity earnings in Alliance Boots and
increased gains on fair market value adjustments related to the AmerisourceBergen warrants.
Included in net earnings and net earnings per diluted share, respectively, were the negative impacts
of an $866 million, or $0.90 per diluted share, loss on the Alliance Boots call option; $238 million,
or $0.25 per diluted share, in acquisitionrelated amortization; $179 million, or $0.18 per diluted share,
of store closure and other optimization costs; $167 million, or $0.17 per diluted share, in Alliance
Boots related tax; $86 million, or $0.09 per diluted share, of LIFO provision; and $54 million, or $0.06
per diluted share, of acquisition-related costs. Net earnings in fiscal 2014 were positively impacted
by $351 million, or $0.36 per diluted share, from the combined fair value adjustments and amortization
related to both our and Alliance Boots warrants to purchase AmerisourceBergen common stock and
$6 million, or $0.01 per diluted share, from the gain on sale of the Take Care Employer Solutions,
LLC business. Included in fiscal 2013 net earnings and net earnings per diluted share, respectively,
were the negative impacts of $241 million, or $0.25 per diluted share, in acquisition-related
amortization; $151 million, or $0.16 per diluted share, of LIFO provision; $124 million, or $0.13 per
diluted share, in Alliance Boots related tax; $60 million, or $0.06 per diluted share, of
acquisition-related costs; $47 million, or $0.05 per diluted share, relating to a legal settlement with
the Drug Enforcement Administration (DEA); $24 million, or $0.03 per diluted share, in costs related
to Hurricane Sandy; and $8 million, or $0.01 per diluted share, in costs related to the completion of
a pharmaceutical distribution contract. Net earnings in fiscal 2013 were positively impacted by $110
million, or $0.12 per diluted share, from the combined fair value adjustments and amortization related
to both our and Alliance Boots warrants to purchase AmerisourceBergen common stock and $13
million, or $0.01 per diluted share, from an additional gain on the 2011 sale of the Walgreens Health
Initiatives, Inc. business relating to a client retention escrow.
Net sales increased by 5.8% to $76.4 billion in fiscal 2014 compared to an increase of 0.8% in 2013
and a decrease of 0.8% in 2012. Net sales growth in fiscal 2014 was attributed to new store sales
and an increase in comparable drugstore sales over the prior year. In fiscal 2013, sales were positively
impacted by our decision to rejoin the Express Scripts pharmacy provider network and the acquisition
of USA Drug and BioScrip assets, both of which were partially offset by lower comparable store
sales. Sales in comparable drugstores increased 4.9% in 2014 compared to decreases of 1.3% and
3.6% in 2013 and 2012, respectively. Comparable drugstores are defined as those that have been
open for at least twelve consecutive months without closure for seven or more consecutive days

Walgreen Co.
© MarketLine

Page 28

Walgreen Co.
Company View

and without a major remodel or a natural disaster in the past twelve months. Relocated and acquired
stores are not included as comparable stores for the first twelve months after the relocation or
acquisition. We operated 8,309 locations (8,207 drugstores) at August 31, 2014, compared to 8,582
locations (8,116 drugstores) at August 31, 2013 and 8,385 locations (7,930 drugstores) at August
31, 2012.
Prescription sales increased 7.9% in 2014 compared to an increase of 0.4% in 2013 and a decrease
of 3.1% in 2012. Comparable drugstore prescription sales increased 6.8% in 2014 compared to
decreases of 1.7% and 6.1% in 2013 and 2012, respectively. The effect of generic drugs, which
have a lower retail price, replacing brand name drugs reduced prescription sales by 1.3% for 2014,
5.3% for 2013, and 3.5% for 2012, while the effect on total sales was 0.7% for 2014, 3.0% for 2013
and 1.9% for 2012. New generic drug introductions have led to an increased proportion of generics
on total net sales. Third party sales, where reimbursement is received from managed care
organizations, the government, employers or private insurers, were 96.5% of prescription sales in
2014, 95.8% of prescription sales in 2013, and 95.6% of prescription sales in 2012. We receive
market-driven reimbursements from third party payers, a number of which typically reset in January.
The total number of prescriptions filled (including immunizations) was approximately 699 million in
2014, 683 million in 2013 and 664 million in 2012. Prescriptions adjusted to 30-day equivalents were
856 million in 2014, 821 million in 2013 and 784 million in 2012.
Front-end sales increased 2.1% in 2014, 1.5% in 2013 and 3.6% in 2012. The increase over the
prior year was due, in part, to new store openings and improved sales related to non-prescription
drugs, convenience and fresh foods, photofinishing products and personal care. Front-end sales
were 35.8% of total sales in fiscal 2014, 37.1% of total sales in fiscal 2013 and 36.8% of total sales
in fiscal 2012. Comparable drugstore front-end sales increased 2.0% in 2014 compared to a decrease
of 0.7% in 2013 and an increase of 0.6% in 2012. The increase in fiscal 2014 comparable front-end
sales was primarily attributable to an increase in basket size partially offset by lower customer traffic.
Gross margin as a percent of sales was 28.2% in 2014, compared to 29.3% in fiscal 2013. Gross
margin in fiscal 2014 was negatively impacted by lower retail pharmacy margins primarily from lower
third-party reimbursement; the increase in Medicare Part D mix and the strategy to continue driving
90-day prescriptions at retail; fewer brand-to-generic drug conversions compared with the prior year
period; generic drug inflation on a subset of generic drugs; and the mix of specialty drugs, which
carry a lower margin percentage. Front-end margins were negatively impacted in the photofinishing,
non-prescription drug and convenience and fresh foods categories. Pharmacy and front-end margin
decreases were partially offset by purchasing synergies realized from the joint venture formed by
Walgreens and Alliance Boots and a lower provision for LIFO in fiscal 2014. Gross margin as a
percent of sales was 29.3% in fiscal 2013 and 28.4% in fiscal 2012. Gross margin in fiscal 2013 was
positively impacted by higher retail pharmacy margins, where the impact of new generics more than
offset lower market driven reimbursements, improved front-end margins primarily from the
non-prescription drug, personal care and beauty care categories and a lower LIFO provision compared
to fiscal 2012.
Gross profit dollars in fiscal 2014 increased 2.1% over the prior year. The increase is primarily
attributed to increased sales and a lower LIFO provision which was partially offset by lower retail

Walgreen Co.
© MarketLine

Page 29

Walgreen Co.
Company View

pharmacy margins. Gross profit dollars in fiscal 2013 increased 3.8% over fiscal 2012, primarily
attributed to higher retail pharmacy margins.
We use the last-in, first-out (LIFO) method of inventory valuation. The LIFO provision is dependent
upon inventory levels, inflation rates and merchandise mix. The effective LIFO inflation rates were
1.5% in 2014, 2.7% in 2013 and 3.3% in 2012, which resulted in charges to cost of sales of $132
million in 2014, $239 million in 2013 and $309 million in 2012. Inflation on prescription inventory was
14.0% in 2014, 10.7% in 2013 and 10.0% in 2012. As a result of declining inventory levels, the fiscal
2014, 2013 and 2012 LIFO provisions were reduced by LIFO liquidations of $187 million and $194
million and $268 million, respectively.
Selling, general and administrative expenses were 23.6% of sales in fiscal 2014, compared to 24.3%
of sales in fiscal 2013. As a percentage of sales, expenses were lower primarily due to lower store
compensation costs, store occupancy costs and headquarters costs, partially offset by costs related
to our store optimization plan. Selling, general and administrative expenses as a percentage of sales
increased to 24.3% in 2013 as compared to 23.6% in 2012. The increase was primarily due to higher
occupancy expense, investments in strategic initiatives and capabilities and store salaries attributable
to new store growth, which were partially offset by lower expenses associated with our investment
in Alliance Boots as compared to 2012.
Selling, general and administrative expense dollars increased $449 million, or 2.6% over fiscal 2013.
The growth is attributable to 1.5% of store closure and other optimization costs, 1.3% of new store
expenses, and 0.5% of comparable store and headquarter expenses.These increases were partially
offset by a reduction in acquisition related costs and acquisition-related amortization, each of which
were lower by 0.1%. In addition, certain nonrecurring costs were incurred in the prior year, each of
which contributed to a lower growth rate in the current year including Hurricane Sandy of 0.2%, legal
costs related to the DEA settlement last year of 0.2% and costs related to the completion of a
pharmaceutical distribution contract of 0.1%. Selling, general and administrative expense dollars in
fiscal 2013 increased 3.9% over fiscal 2012. The increase was attributable to new store expenses
of 2.4%, 0.5% from USA Drug operations, 0.2% of comparable store and headquarter expenses,
0.2% from Hurricane Sandy, 0.2% in acquisition-related amortization, 0.2% in costs related to the
DEA settlement, 0.1% from acquisition-related costs and 0.1% in costs related to the completion of
a pharmaceutical distribution contract.
Earnings in the 45% Alliance Boots equity method investment for fiscal 2014 were $617 million
compared to $344 million last year. Alliance Boots earnings are reported on a three-month lag. The
twelve month period ended August 31, 2013 only included 10 months (August 2012 through May
2013) results of operations of Alliance Boots reflected in the equity earnings in Alliance Boots due
to the timing of this investment. Earnings included amortization expense resulting from the fair value
of certain Alliance Boots assets of $42 million and $57 million in fiscal 2014 and 2013, respectively.
Fiscal 2013 amortization included $23 million related to inventory fair value adjustments.
Interest was a net expense of $156 million in fiscal 2014, $165 million in fiscal 2013 and $88 million
in fiscal 2012. Interest expense for fiscal 2014, 2013 and 2012 was net of $6 million, $7 million, and
$9 million, respectively, which was capitalized to construction projects. The decrease in 2014 interest

Walgreen Co.
© MarketLine

Page 30

Walgreen Co.
Company View

expense was due to the repayment of the $550 million notes that matured in March 2014 and the
$1.3 billion notes that matured in August 2013, partially offset by higher interest charges related to
incremental capital and finance lease obligations. The increase in interest expense from fiscal 2012
to 2013 was due to the $4.0 billion note issuance in September 2012, partially offset by the fixed to
variable interest rate swaps on our $1.0 billion 5.250% notes and the repayment of our $1.3 billion
4.875% notes in August 2013.
Other non-operating expense was $481 million in fiscal 2014 versus income of $120 million last
year. In fiscal 2014, we recorded a loss of $866 million related to the Alliance Boots call option.
Partially offsetting the loss was an increase of $366 million in the fair value of the AmerisourceBergen
warrants and $19 million for the amortization of the deferred credit associated with the initial value
of the warrants. The increase in the fair value of the warrants was primarily attributable to the increase
in the price of AmerisourceBergen's common stock. Other income in fiscal 2013 included an increase
in the fair value of the AmerisourceBergen warrants and amortization of the deferred credit of $111
million and $9 million, respectively.
The effective income tax rate was 42.9% for fiscal 2014, 37.1% for fiscal 2013 and 37.0% for 2012.
The increase in the effective tax rate from fiscal 2013 was primarily attributed to the loss associated
with the Company's option to purchase the remaining equity interest in Alliance Boots, which did not
generate a tax benefit in fiscal 2014, partially offset by the favorable impact of additional foreign
source income taxed at lower rates. The loss will be, in part, a capital loss for tax purposes for which
the Company did not have any capital gains to offset against and has recorded a full valuation
allowance. The capital loss on the Alliance Boots call option is available to be carried forward and
offset against future capital gains through fiscal 2020. The increase in the effective tax rate from
fiscal 2012 compared to fiscal 2013 was primarily attributed to higher non-tax deductible permanent
differences.

Walgreen Co.
© MarketLine

Page 31

Walgreen Co.
Locations and Subsidiaries

LOCATIONS AND SUBSIDIARIES
Head Office
Walgreen Co.
108 Wilmot Road
Deerfield
Illinois 60015
USA
P:1 847 914 2500
http://www.walgreens.com/

Other Locations and Subsidiaries
Walgreens Store
9301 Highway 119
Alabaster
Alabama 35007
USA

Walgreens Store
2000 East Colfax Avenue
Denver
Colorado 80218
USA

Walgreens Store
2285 South Apple Street
Boise
Idaho 83706
USA

Walgreens Store
385 Versailles Road
Frankfort
Kentucky 40601
USA

Walgreens Store
21-23 Stanhope Street
Boston
Massachusetts 02116
USA

Walgreens Store
1096 Highway 33
Hamilton
New Jersey 08690
USA

Walgreens Store
41 Holland Avenue
Albany
New York 12208
USA

Walgreens Store
1162 Harrisburg Pike
Columbus
Ohio 43223
USA

Walgreens Store
1804 Charlotte Avenue
Nashville
Tennessee 37203
USA

Walgreens Store
702 Trosper Road Southwest
Tumwater
Washington 98512
USA

Walgreen Co.
© MarketLine

Page 32

Copyright of Walgreen Co. MarketLine Company Profile is the property of MarketLine, a
Datamonitor business and its content may not be copied or emailed to multiple sites or posted
to a listserv without the copyright holder's express written permission. However, users may
print, download, or email articles for individual use.