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Fourth Quarter 2008 Conference Call
                                September 29, 2008




© Copyright 2008 Walgreen Co.
Fourth Quarter 2008 Agenda

•     Introduction/ Safe Harbor     Rick Hans
                                    Divisional VP - IR & Finance

•     Q4 & Fiscal Year Highlights   Jeff Rein
                                    Chairman, CEO

•     Q4 & Fiscal Year Financials   Wade Miquelon
                                    CFO

•     Growth Strategy Update        Greg Wasson
                                    President, COO

•     Summary                       Jeff Rein

•     Questions & Answers           All


                                                                   2
© Copyright 2008 Walgreen Co.
Safe Harbor

• Certain statements and projections of future
  results made in this presentation constitute
  forward-looking information that is based on
  current market, competitive and regulatory
  expectations that involve risk and uncertainty.
• Please see our Form 10-K for a discussion of
  factors as they relate to forward-looking
  statements dated August 31, 2007.


                                                    3
© Copyright 2008 Walgreen Co.
Q4 & Fiscal Year Highlights

                                         Jeff Rein




                                                              4
© Copyright 2008 Walgreen Co.
Another Record Year

• 34th consecutive year of record sales and
  earnings
   – A record matched by only one other
     Fortune 500 company
• Sales increased 9.8% to $59.0 billion
• Net earnings grew 5.7% to $2.2 billion
• EPS reached $2.17 on a fully diluted basis



                                               5
© Copyright 2008 Walgreen Co.
Fourth Quarter Highlights

• Sales increased 8.8% to $14.6 billion
• Net earnings grew 11.7% to $443 million
• EPS reached $0.45 on a fully diluted basis




                                               6
© Copyright 2008 Walgreen Co.
Consistently Beating The Industry
                                         WAG Script Growth Vs. Industry
12.0%

10.0%

 8.0%

 6.0%

 4.0%

 2.0%

 0.0%

-2.0%

-4.0%
                   Q3-07             Q4-07         Q1-08         Q2-08       Q3-08            Q4-08

                                WAG Total Retail Script Growth           IMS w/o WAG
                                                                                                      7
© Copyright 2008 Walgreen Co.
                                                                                Source: IMS Data
FY 2008 Initiatives

      Moderated our organic growth plan for retail
      store expansion to provide more operational and
      financial flexibility
      Acquired worksite health centers to expand our
      points of care beyond Take Care Clinics
      Implemented disciplined and sustainable SGA
      expense control
         • Initiated corporate-wide program to reduce costs
      Expanded our leadership team with new talent

                                                              8
© Copyright 2008 Walgreen Co.
Q4 & Fiscal Year Financial Review

                                Wade Miquelon




                                                         9
© Copyright 2008 Walgreen Co.
Fourth Quarter Financials
                                                                       Percentage Change
                                                                       Three Months Ended
                                              August 31, 2008            August 31, 2007            August 31, 2006
Net Sales                                           8.8%                      10.3%                     16.0%
Net Earnings                                       11.7%                       -3.8%                    25.3%
Comparable Drugstore Sales                          2.6%                       6.3%                      9.7%
Comparable Front-End Sales                          3.7%                       6.1%                      5.2%
Prescription Sales                                  7.9%                      10.5%                     18.0%
Comparable Prescription Sales                       2.0%                       6.5%                     12.3%
Comparable Prescriptions (Units)                   -0.1%                       4.0%                      7.1%



                                                                          Percent to Sales
                                                                        Three Months Ended

                                               August 31, 2008            August 31, 2007           August 31, 2006
Gross Margin                                        27.6%                      28.0%                    27.6%
Selling, General and Administrative                 22.8%                      23.5%                    22.5%
Expenses


                                                                                                                  10
                                   *Fiscal 2008 fourth quarter includes a LIFO provision of $24.9
© Copyright 2008 Walgreen Co.
                                   million versus a $32.0 million provision in the previous year.
Controlling SG&A
    Year-Over-Year % Increase
25.0%



20.0%
                                                                                                  Gross Profit

15.0%
                                                                                                                  SG&A

10.0%



 5.0%
                                                Without the vacation accrual credit, SG&A expenses would have increased 8.0 percent


 0.0%
             3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08




                                                                                                                                      11
                                  Note: SG&A data adjusted for Hurricane Katrina in the fourth quarter 2005
© Copyright 2008 Walgreen Co.
                                  Source: Company Data
Percent Increase in SG&A Dollars:
Two-Year Stacked

 30%                    27.5%
                                                     25.3%                          24.7%
                                                                                                  23.3% *
 25%

 20%

 15%

 10%

   5%

   0%
                 Q107 + Q108                  Q207 + Q208                     Q307 + Q308       Q407 + Q408

* Without the vacation accrual credit, SG&A expenses would have increased 8.0 percent in Q408
                                                                                                              12
© Copyright 2008 Walgreen Co.
Percent Increase in SG&A Dollars:
Two-Year Stacked

                                28.9%
 30%                                                                27.6%

                                                                                                  23.3% *
 25%

 20%

 15%

 10%

   5%

   0%
                       Q405 + Q406                            Q406 + Q407                       Q407 + Q408

* Without the vacation accrual credit, SG&A expenses would have increased 8.0 percent in Q408
                                                                                                              13
© Copyright 2008 Walgreen Co.
Gross Profit Margin

• Gross profit increased 7.4% to just over
  $4.0 billion
• Margins were hurt by increased promotional
  activity and non-retail businesses, including
  specialty pharmacy
• Generics and private brand products positively
  affected gross profit margin



                                                   14
© Copyright 2008 Walgreen Co.
Financial Takeaways

Tax Rate
• Q408 of 37.0% vs. 35.0% in Q407
Working Capital
• Accounts receivable up 13.0%, driven by third-party sales and slower
  Medicaid payments
• Inventories increased 6.8%, slower than sales
• Accounts payable up 14.9%, due primarily to the timing of payments
Balance Sheet
• Q408 net debt of $977 million vs $651 million in Q407
CapEx
• $2.2 billion in FY 2008
• Lower in FY 2009 with slower organic growth

                                                                   15
© Copyright 2008 Walgreen Co.
Slowing Organic Net New Store Growth

                                                      Net New Stores
 600


 500


 400


 300


 200


 100


      0
             1997      1998     1999   2000   2001   2002   2003   2004   2005   2006   2007   2008 2009E 2010E 2011E


                                                                                                                   16
© Copyright 2008 Walgreen Co.
Challenges Present Opportunities

• Relentless cost control
• Focus on driving strategy
• Robust financial structure




                                   17
Growth Strategy Update
                                    Greg Wasson




                                                         18
© Copyright 2008 Walgreen Co.
Hurricane Ike




                19
The Right Strategies for Growth

      Broadening access to our products and
      services
      Reinventing the shopping experience
      around the customer
      Expanding into related health care services
      Efficient systems and processes


                                               20
© Copyright 2008 Walgreen Co.
Integrated, Cost-Effective Solutions
              Take CareSM
              Health Clinics
                                                       Medical Campuses




Worksite
                                                                   Mail Service
Clinics




                                   Retail Stores




                                                   Specialty Pharmacy
              Home Care
                                                                        21
   © Copyright 2008 Walgreen Co.
The Right Strategies for Growth

      Broadening access to our products and
      services
      Reinventing the shopping experience
      around the customer
      Expanding into related health care services
      Efficient systems and processes


                                               22
© Copyright 2008 Walgreen Co.
Customer-Centric Initiatives


Prescription Savings Club
 > 1 million members
• Offers more overall value than other
  discount programs
• Discounts on more than 5,000 drugs,
  including a 90-day supply of more
  than 400 generics for less than a
  dollar a week



                                         23
© Copyright 2008 Walgreen Co.
The Right Strategies for Growth

      Broadening access to our products and
      services
      Reinventing the shopping experience
      around the customer
      Expanding into related health care services
      Efficient systems and processes


                                               24
© Copyright 2008 Walgreen Co.
Expanding Health Care Services

Take Care Consumer &
  Employer Solutions
•     Providing routine health care at
      Walgreens drugstores and large
      employer worksites
•     Nearly 600 health centers and clinics
      currently and growing to 800
Specialty Pharmacy
•     Largest independent provider
•     New Premera contract
•     Fastest growing segment of pharmacy



                                              25
© Copyright 2008 Walgreen Co.
The Right Strategies for Growth

      Broadening access to our products and
      services
      Reinventing the shopping experience
      around the customer
      Expanding into related health care services
      Efficient systems and processes


                                               26
© Copyright 2008 Walgreen Co.
Concluding Comments

                                     Jeff Rein




                                                      27
© Copyright 2008 Walgreen Co.
Questions and Answers




                                                        28
© Copyright 2008 Walgreen Co.
© Copyright 2008 Walgreen Co.
Appendix



© Copyright 2008 Walgreen Co.
Calculation of Adjusted SG&A

                                           4Q04           4Q05         4Q06
             ($s in millions)


             SGA$ under GAAP           $ 2,086.4      $ 2,434.9    $ 2,732.4

             Less: Katrina Expense     $          -   $     54.7   $          -




             Adjusted SGA$             $ 2,086.4      $ 2,380.2    $ 2,732.4




             Adjusted YOY % Increase                       14.1%        14.8%




© Copyright 2008 Walgreen Co.

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Walgreen Co. Fourth Quarter 2008 Earnings

  • 1. Fourth Quarter 2008 Conference Call September 29, 2008 © Copyright 2008 Walgreen Co.
  • 2. Fourth Quarter 2008 Agenda • Introduction/ Safe Harbor Rick Hans Divisional VP - IR & Finance • Q4 & Fiscal Year Highlights Jeff Rein Chairman, CEO • Q4 & Fiscal Year Financials Wade Miquelon CFO • Growth Strategy Update Greg Wasson President, COO • Summary Jeff Rein • Questions & Answers All 2 © Copyright 2008 Walgreen Co.
  • 3. Safe Harbor • Certain statements and projections of future results made in this presentation constitute forward-looking information that is based on current market, competitive and regulatory expectations that involve risk and uncertainty. • Please see our Form 10-K for a discussion of factors as they relate to forward-looking statements dated August 31, 2007. 3 © Copyright 2008 Walgreen Co.
  • 4. Q4 & Fiscal Year Highlights Jeff Rein 4 © Copyright 2008 Walgreen Co.
  • 5. Another Record Year • 34th consecutive year of record sales and earnings – A record matched by only one other Fortune 500 company • Sales increased 9.8% to $59.0 billion • Net earnings grew 5.7% to $2.2 billion • EPS reached $2.17 on a fully diluted basis 5 © Copyright 2008 Walgreen Co.
  • 6. Fourth Quarter Highlights • Sales increased 8.8% to $14.6 billion • Net earnings grew 11.7% to $443 million • EPS reached $0.45 on a fully diluted basis 6 © Copyright 2008 Walgreen Co.
  • 7. Consistently Beating The Industry WAG Script Growth Vs. Industry 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 WAG Total Retail Script Growth IMS w/o WAG 7 © Copyright 2008 Walgreen Co. Source: IMS Data
  • 8. FY 2008 Initiatives Moderated our organic growth plan for retail store expansion to provide more operational and financial flexibility Acquired worksite health centers to expand our points of care beyond Take Care Clinics Implemented disciplined and sustainable SGA expense control • Initiated corporate-wide program to reduce costs Expanded our leadership team with new talent 8 © Copyright 2008 Walgreen Co.
  • 9. Q4 & Fiscal Year Financial Review Wade Miquelon 9 © Copyright 2008 Walgreen Co.
  • 10. Fourth Quarter Financials Percentage Change Three Months Ended August 31, 2008 August 31, 2007 August 31, 2006 Net Sales 8.8% 10.3% 16.0% Net Earnings 11.7% -3.8% 25.3% Comparable Drugstore Sales 2.6% 6.3% 9.7% Comparable Front-End Sales 3.7% 6.1% 5.2% Prescription Sales 7.9% 10.5% 18.0% Comparable Prescription Sales 2.0% 6.5% 12.3% Comparable Prescriptions (Units) -0.1% 4.0% 7.1% Percent to Sales Three Months Ended August 31, 2008 August 31, 2007 August 31, 2006 Gross Margin 27.6% 28.0% 27.6% Selling, General and Administrative 22.8% 23.5% 22.5% Expenses 10 *Fiscal 2008 fourth quarter includes a LIFO provision of $24.9 © Copyright 2008 Walgreen Co. million versus a $32.0 million provision in the previous year.
  • 11. Controlling SG&A Year-Over-Year % Increase 25.0% 20.0% Gross Profit 15.0% SG&A 10.0% 5.0% Without the vacation accrual credit, SG&A expenses would have increased 8.0 percent 0.0% 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 11 Note: SG&A data adjusted for Hurricane Katrina in the fourth quarter 2005 © Copyright 2008 Walgreen Co. Source: Company Data
  • 12. Percent Increase in SG&A Dollars: Two-Year Stacked 30% 27.5% 25.3% 24.7% 23.3% * 25% 20% 15% 10% 5% 0% Q107 + Q108 Q207 + Q208 Q307 + Q308 Q407 + Q408 * Without the vacation accrual credit, SG&A expenses would have increased 8.0 percent in Q408 12 © Copyright 2008 Walgreen Co.
  • 13. Percent Increase in SG&A Dollars: Two-Year Stacked 28.9% 30% 27.6% 23.3% * 25% 20% 15% 10% 5% 0% Q405 + Q406 Q406 + Q407 Q407 + Q408 * Without the vacation accrual credit, SG&A expenses would have increased 8.0 percent in Q408 13 © Copyright 2008 Walgreen Co.
  • 14. Gross Profit Margin • Gross profit increased 7.4% to just over $4.0 billion • Margins were hurt by increased promotional activity and non-retail businesses, including specialty pharmacy • Generics and private brand products positively affected gross profit margin 14 © Copyright 2008 Walgreen Co.
  • 15. Financial Takeaways Tax Rate • Q408 of 37.0% vs. 35.0% in Q407 Working Capital • Accounts receivable up 13.0%, driven by third-party sales and slower Medicaid payments • Inventories increased 6.8%, slower than sales • Accounts payable up 14.9%, due primarily to the timing of payments Balance Sheet • Q408 net debt of $977 million vs $651 million in Q407 CapEx • $2.2 billion in FY 2008 • Lower in FY 2009 with slower organic growth 15 © Copyright 2008 Walgreen Co.
  • 16. Slowing Organic Net New Store Growth Net New Stores 600 500 400 300 200 100 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E 2011E 16 © Copyright 2008 Walgreen Co.
  • 17. Challenges Present Opportunities • Relentless cost control • Focus on driving strategy • Robust financial structure 17
  • 18. Growth Strategy Update Greg Wasson 18 © Copyright 2008 Walgreen Co.
  • 20. The Right Strategies for Growth Broadening access to our products and services Reinventing the shopping experience around the customer Expanding into related health care services Efficient systems and processes 20 © Copyright 2008 Walgreen Co.
  • 21. Integrated, Cost-Effective Solutions Take CareSM Health Clinics Medical Campuses Worksite Mail Service Clinics Retail Stores Specialty Pharmacy Home Care 21 © Copyright 2008 Walgreen Co.
  • 22. The Right Strategies for Growth Broadening access to our products and services Reinventing the shopping experience around the customer Expanding into related health care services Efficient systems and processes 22 © Copyright 2008 Walgreen Co.
  • 23. Customer-Centric Initiatives Prescription Savings Club > 1 million members • Offers more overall value than other discount programs • Discounts on more than 5,000 drugs, including a 90-day supply of more than 400 generics for less than a dollar a week 23 © Copyright 2008 Walgreen Co.
  • 24. The Right Strategies for Growth Broadening access to our products and services Reinventing the shopping experience around the customer Expanding into related health care services Efficient systems and processes 24 © Copyright 2008 Walgreen Co.
  • 25. Expanding Health Care Services Take Care Consumer & Employer Solutions • Providing routine health care at Walgreens drugstores and large employer worksites • Nearly 600 health centers and clinics currently and growing to 800 Specialty Pharmacy • Largest independent provider • New Premera contract • Fastest growing segment of pharmacy 25 © Copyright 2008 Walgreen Co.
  • 26. The Right Strategies for Growth Broadening access to our products and services Reinventing the shopping experience around the customer Expanding into related health care services Efficient systems and processes 26 © Copyright 2008 Walgreen Co.
  • 27. Concluding Comments Jeff Rein 27 © Copyright 2008 Walgreen Co.
  • 28. Questions and Answers 28 © Copyright 2008 Walgreen Co.
  • 29. © Copyright 2008 Walgreen Co.
  • 31. Calculation of Adjusted SG&A 4Q04 4Q05 4Q06 ($s in millions) SGA$ under GAAP $ 2,086.4 $ 2,434.9 $ 2,732.4 Less: Katrina Expense $ - $ 54.7 $ - Adjusted SGA$ $ 2,086.4 $ 2,380.2 $ 2,732.4 Adjusted YOY % Increase 14.1% 14.8% © Copyright 2008 Walgreen Co.