Well at WalgreensGet Stay Live2013

Well at Walgreens
Get Stay Live
2013 Annual Report
• Walgreens is the nation’s largest drugstore chain, with fiscal 2013 net
sales of $72.2 billion and net earnings of $2.5 billion. The company
has 248,000 employees, and 8,582 locations.
• Cash flow from operations for fiscal 2013 was $4.3 billion, with
record free cash flow of $3.1 billion.*
• The company continued to return significant cash to shareholders,
with $1.0 billion in dividends.
• Walgreens stabilized its commercial book of pharmacy business
through multiyear agreements reached with Express Scripts Inc.,
Caremark and other leading commercial payers.
• Walgreens strengthened its position to create the first global pharmacy-led,
health and well-being enterprise by forging a game-changing strategic
relationship with AmerisourceBergen.
• Walgreens continued the expansion of its Well Experience pilot format,
reaching more than 500 stores opened or converted across the chain
by the end of fiscal 2013. In addition, the company now has 12 flagship
stores, with new locations opened in Boston, Chicago, Los Angeles,
New York City, San Francisco, Washington, D.C., and Philadelphia.
• Walgreens introduced its Healthcare Clinic at select Walgreens
as the new branding for nearly 400 in-store retail clinics, replacing
the former Take Care Clinic name that has stood since the brand’s
inception in 2004.
• Walgreens and the Blue Cross and Blue Shield Association launched
a national campaign to educate consumers about the new healthcare
reform law and provide them with key information so they can decide
how best to participate in new insurance options as a result of the
Affordable Care Act.
• Walgreens HIV/AIDS program and Centers of Excellence were honored
by Profiles in Diversity Journal as No. 2 in its top 10 international list
for its Innovations in Diversity Award.
• Walgreens was named to Fortune magazine’s World’s Most Admired
Companies list for the 20th consecutive year, and was ranked 37th
overall in revenue on the Fortune 500 list of largest U.S.-based
companies. The company was ranked 120th overall in revenue on
the Fortune Global 500 largest companies list.
2013 Milestones
At Walgreens, everything our company does is
designed to help people get, stay and live well.
To do this, Walgreens is focused on three
key strategies: Create a Well Experience,
Transform the Role of Community Pharmacy
and Establish an Efficient Global Platform.
By focusing efforts on these strategies,
Walgreens is building on its successful history
while reinventing the traditional drugstore model.
Well at Walgreens
About the Cover
Francesca Eulo is a regular fixture at her Walgreens
in Tamarac, Florida. Since becoming the primary
caregiver for her father, Raymond, three years ago,
Francesca stops by her Walgreens once or twice
each week to pick up his medications.
* This is a non-GAAP measure. See Reconciliation of Non-GAAP Financial Measures on page 46.
2013 2012 Increase
Net Sales $72,217 $ 71,633 0.8%
Net Earnings $ 2,450 $ 2,127 15.2%
Adjusted Net Earnings (1) $ 2,982 $ 2,565 16.3%
Net Earnings per Common Share (diluted) $ 2.56 $ 2.42 5.7%
Adjusted Net Earnings per Common Share (diluted) (1) $ 3.12 $ 2.93 6.5%
Shareholders’ Equity $19,454 $ 18,236 6.7%
Return on Average Shareholders’ Equity 13.0% 12.9%
Closing Stock Price per Common Share $ 48.07 $ 35.76
Total Market Value of Common Stock $45,503 $ 33,759
Dividends Declared per Common Share $ 1.14 $ .95
Average Shares Outstanding (diluted) 955 880
(1) This is a non-GAAP measure. See Reconciliation of Non-GAAP Financial Measures on page 46.
2013 2012 2011 2010 2009
Locations Openings
New Locations 198 212 261 388 602
Acquisitions 152 54 36 282 89
Closings 153 91 133 120 129
Net Openings 197 175 164 550 562
Locations (1) 8,582 8,385 8,210 8,046 7,496
Sales Area (2) 88,802 87,049 85,619 83,719 78,782
Product Class Sales Prescription Drugs 63% 63% 65% 65% 65%
Non-prescription Drugs 10% 12% 10% 10% 10%
General Merchandise 27% 25% 25% 25% 25%
(1) Includes drugstores, worksite health and wellness centers, infusion and respiratory services facilities, specialty pharmacies and mail service facilities.
(2) In thousands of square feet.
Financial Highlights
For the years ended August 31, 2013 and 2012 (In millions, except per share amounts)
Company Highlights
04 05 06 07 08 09 10 11 12 13
50
40
30
20
10
0
Walgreens Fiscal Year Stock Performance
Fiscal year-end closing price per share in dollars
2013 Walgreens Annual Report 1
Growing Shareholder Value by Helping People
Get, Stay and Live Well
Dear Shareholders:
We are pleased to update you on Walgreens performance this year as
we achieved record sales of $72.2 billion, strong profits of $2.5 billion
and record free cash flow of $3.1 billion.* Most of all, fiscal 2013 was
a year of major strategic progress as we crystalized and advanced the
transformation of our company for long-term sustainable growth and
value creation. We are “Well” positioned for a strong future.
Continuing to meet our long-term goal of delivering top-tier shareholder
returns, Walgreens returned $1.0 billion to shareholders this year through
dividends. Over the past five years, Walgreens dividend has grown at a
compound annual growth rate of nearly 23 percent, compared with 10 percent
for the Dow Jones Industrial Average and 6 percent for the S&P 500.
We believe the best is yet to come, as we took significant steps in 2013 to
continue to reimagine and redefine the drugstore experience in America –
and the world.
The humble Chicago corner drugstore that opened in 1901 grew into
the nation’s largest retail pharmacy chain through unmatched customer
service, relentless innovation, and a nationwide store network on the
best corners in America. Today, we are establishing the first global
pharmacy-led health, beauty and well-being enterprise, seizing opportunities
to lead the market in the decades ahead.
As we think globally and long term, Walgreens is keenly focused locally
every day on the customers and patients in communities across America
who count on us to meet their health and daily living needs. Many families
are still struggling with the weak jobs market. The healthcare system we
rely on is undergoing rapid and fundamental change. While the national
Affordable Care Act is expanding coverage, the cost of care is rising and
demand is challenging supply, affecting people’s financial security and
stressing providers.
While our economy and healthcare system remain challenging, Walgreens
took decisive steps this year to boost our daily living sales and prescription
volumes. Thanks to the focus, determination and spirit of service by
our 248,000 team members, we continue to transform today’s challenges
into opportunities to deliver exceptional value – every day, and for
the long term.
Strategic Growth Drivers Move Forward
The Walgreens strategic transformation, now five years strong, is driven
by our purpose – to help people get, stay and live well – and our vision,
to be the first choice for health and daily living for everyone in America
and beyond. To achieve our purpose and vision, we are focused on three
strategic growth drivers:
• Create a Well Experience by transforming the customer experience
across all touch points, channels and formats.
• Transform the role of community pharmacy by offering unparalleled
access to innovative, high-quality, affordable health and wellness services
within our communities.
• Establish an efficient global platform to create the first global
pharmacy-led health and well-being enterprise with our strategic
partnership with Alliance Boots, the leading international pharmacy-led
health and beauty group, and our long-term strategic relationship with
AmerisourceBergen, one of North America’s largest pharmaceutical
services companies.
We are pleased to update you on our progress this year in advancing these
strategic growth drivers.
Creating a Well Experience
Walgreens is embracing today’s consumers to become their first choice in
health and daily living. Mindful of the Great Recession and recognizing
their unlimited internet options, people are expecting maximum value –
defined by convenience and quality as well as price.
Consumers today are driving the explosive growth of digital and
mobile technologies – by 2015, more than 50 percent of U.S. retail sales
are projected to be web-influenced. Retail channels – store, online,
mobile – are blurring, and consumers today are shopping wherever and
however they can to get what they want.
2 2013 Walgreens Annual Report
Gregory D. Wasson (left)
President and Chief Executive Officer
James A. Skinner
Chairman of the Board
Letter to Shareholders
* This is a non-GAAP measure. See Reconciliation of Non-GAAP Financial Measures on page 46.
Sales
In billions of dollars
75
60
45
30
15
0
09 10 11 12 13
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 Ph