0
John Spina - Treasurer
Safe Harbor Language
 Certain statements and projections of future
   results made in this presentation constitute
  forwa...
1Q08 and FY07 Results

1Q08
• Sales up 10.4% to $14.0 billion
• Earnings up 5.5% to $455.5 million

FY07
• Sales up 13.4% ...
GP$ and SG&A$ Growth (%YOY)
  25.0%




  20.0%
                                                                          ...
33 Years of Record Sales and Earnings
  $60,000                                                   $2,500
             Sale...
Sales, Comp, and Earnings Trends

                                      FY03    FY04    FY05   FY06   FY07

       Sales  ...
Rx Comp Sales
                                             (Percent Increase)
   6.0%




   4.0%




   2.0%




   0.0%
...
Flu Trend
 45

 40                               2006 - 2007

 35

 30                               2007 - 2008

 25

 20...
Filling More Scripts
                                      Efficiently & Profitably
                             Prescript...
Outperforming Other Retailers
                      Pre-tax Earnings per Selling Square Foot
             $60
            ...
A Bigger Piece of a Bigger Pie
               Number of Scripts Filled by Community Pharmacies and Mail


                ...
Growing Rx Marketshare
     45.0%
             42.2%                                       Chain/Mass w/o WAG
            ...
The Boomer Wave is Rolling to Shore
                               Population in Millions, by Age Range
                  ...
Population Growth


                                             2006      2020

                   65+ Population        ...
Front-End Comp Sales
                                             (Percent Increase)
    6.0%



    4.0%



    2.0%



 ...
Front End Comp % Increase(Decrease)




                                    -5.0%
                                        ...
Growing Marketshare in
                             the Front of the Store
                          % Increase in Our Top...
Growing Marketshare in
                             the Front of the Store
                          % Increase in Our Top...
Private Label: Goal of 20%




           19
From Any Home,
To Any Walgreens…




            …To Any Home!

       20
Ski Vacation




               21
Printer Cartridge Refills


      • 3,000 stores
      • Drop off at photo counter
      • Up to 60% cheaper than new
    ...
Leveraging Our Front-end




          23
A Decade of Transition

                                     1997       2007
     • Freestanding Stores           1,036   ...
The Best Corners in America




    We Will Control Our
 Corners for Over 50 Years!
                25
Store Growth
                                                                    Store Count - WAG vs. Our Competitors
   ...
Growth of Community
                             Pharmacy by Channel
                % Change, Number of Pharmacies, 2001–...
Growth of Community
                          Pharmacy by Channel
                % Change, Number of Pharmacies, 2001–200...
Where We Are Number One (121 Markets)
  Abilene, TX                                                 Little Rock, AR       ...
Growing Market Presence

• Retail pharmacy acquisitions
  – Rite Aid files (Las Vegas; 27 locations closed)
  – El Amal (P...
Consistent Front-End Productivity
                                           Front-End Sales/Store by Class Year
         ...
Consistent Pharmacy Productivity
                                         Prescriptions/Day/Store by Class Year
          ...
ROIC Improving


                           2003                 2004               2005               2006               ...
Over $2.0 Billion in CapEx
Other


Dis
    trib
         ut   ion
                         Stores
         y
 echnolog
T

...
Net New Stores

  600
                                                                      536
                          ...
Sales Area Square Footage Growth
    16%
                                15.2%


    14%
                                 ...
In-Store Clinics

•   Acquired Take Care Health Systems in May
•   Staffed by certified nurse practitioners
•   Open 7 day...
38
Expand Into Additional Sectors of
             Pharmacy and Healthcare
                      Retail Pharmacy



   Assiste...
Investing in Our Future

• Store Growth
  – 550 total, 475 net
• Leverage the convenient store location
  – Take Care, Pri...
Old, New, and Experienced

                        Age of the Company

                        Median Store Age

         ...
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Transcript of "walgreen Raymond James Institutional Investors Conference "

  1. 1. John Spina - Treasurer
  2. 2. Safe Harbor Language 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 risks and uncertainties. Please see our Form 10K for a discussion of factors as they relate to forward looking statements dated August 31, 2007. 2
  3. 3. 1Q08 and FY07 Results 1Q08 • Sales up 10.4% to $14.0 billion • Earnings up 5.5% to $455.5 million FY07 • Sales up 13.4% to $53.8 billion • Earnings up 16.6% to $2.0 billion 3
  4. 4. GP$ and SG&A$ Growth (%YOY) 25.0% 20.0% 16.7% SG&A* 15.0% 14.3% Gross Profit 10.0% 5.0% 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 *Adjusted for Hurricane Katrina in 4Q05 4 Source: Company Data
  5. 5. 33 Years of Record Sales and Earnings $60,000 $2,500 Sales CAGR: 12.8% Earnings CAGR: 18.5% Stock CAGR: 21.1% $50,000 $2,000 $40,000 $1,500 $30,000 $1,000 $20,000 $500 $10,000 $0 $0 2000-2001 1980-1982 1990-1991 5 Source: Company Data
  6. 6. Sales, Comp, and Earnings Trends FY03 FY04 FY05 FY06 FY07 Sales 13.3% 15.4% 12.5% 12.3% 13.4% Rx Comp 13.2% 14.0% 9.8% 9.2% 9.5% Script Comp 6.4% 7.3% 6.7% 4.5% 5.7% FE Comp 1.7% 6.1% 5.5% 5.3% 5.8% Earnings 15.6% 15.9% 15.5% 12.3% 16.6% *Options expensed beginning in FY06 6 Source: Company Data
  7. 7. Rx Comp Sales (Percent Increase) 6.0% 4.0% 2.0% 0.0% Dec. Jan. Nov. Feb. WAG CVS RAD Source: Walgreens, CVS and Rite Aid Press Releases 7
  8. 8. Flu Trend 45 40 2006 - 2007 35 30 2007 - 2008 25 20 15 10 5 0 S O N D J F M A M J J A 8 Source: SDI FAN
  9. 9. Filling More Scripts Efficiently & Profitably Prescriptions Per Day by Channel 300 250 200 150 100 50 0 Ind. Mass Food Chain WAG w/o WAG Source: IMS Health (Data based on Calendar 2007 ) 9
  10. 10. Outperforming Other Retailers Pre-tax Earnings per Selling Square Foot $60 $50 $40 $30 $20 $10 $0 Food Chain w/o Wal-Mart WAG WAG Source: SEC Filings 10
  11. 11. A Bigger Piece of a Bigger Pie Number of Scripts Filled by Community Pharmacies and Mail Mail Mail WAG 5% WAG 7% 16% 11% Food Food 14% 14% Mass Chain Mass Chain 10% w/o WAG 11% w/o WAG 36% 31% Independent Independent 23% 21% 2001 – 3.0 Billion 2006 – 3.4 Billion Source: NACDS and IMS 11
  12. 12. Growing Rx Marketshare 45.0% 42.2% Chain/Mass w/o WAG 41.6% 41.4% 41.2% 40.7% Chain/Mass w/o WAG 40.0% 35.0% 30.0% -50 Bps 25.0% Independents +80 Bps 24.1% 23.7% 23.1% 22.8% 22.7% 20.0% Walgreens 15.5% 14.7% 14.8% 14.4% 15.0% 16.3% 13.8% 13.9% 13.7% 13.3% 13.0% Food Stores WAG 10.0% Mail 6.9% 6.7% 6.5% 5.9% 7.0% 5.0% 4 4 4 4 5 5 5 5 6 6 6 6 7 7 7 7 8 8 8 8 10 20 30 40 10 20 30 40 10 20 30 40 10 20 30 40 10 20 30 40 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 12 Source: IMS and Company Data
  13. 13. The Boomer Wave is Rolling to Shore Population in Millions, by Age Range Drug Spend per Year 25 $887 20 15 $612 10 $298 5 $97 0 Under 25 25-45 45-65 Over 65 13 Source: U.S. Census Bureau and BLS
  14. 14. Population Growth 2006 2020 65+ Population 37,260 54,632 (in millions) % of Total Population 12.4% 16.3% Growth - 46.6% 14 Source: U.S. Census Bureau
  15. 15. Front-End Comp Sales (Percent Increase) 6.0% 4.0% 2.0% 0.0% -2.0% Jan. Nov. Feb. Dec. WAG CVS RAD Source: Walgreens, CVS and Rite Aid Press Releases 15
  16. 16. Front End Comp % Increase(Decrease) -5.0% 0.0% 5.0% 10.0% 15.0% Source: Company Data Mar/Apr-03 Jul-03 Oct-03 Jan-04 May-04 Aug-04 Nov-04 Feb-05 16 Jun-05 Sep-05 Dec-05 Mar/Apr-06 Jul-06 Front End Comp Sales Oct-06 Jan-07 May-07 Aug-07 Nov-07 Feb-08
  17. 17. Growing Marketshare in the Front of the Store % Increase in Our Top 60 Categories 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Food Drug Mass WMT WAG 2 Weeks Ending 1/26/08 17 Source: ACNielsen
  18. 18. Growing Marketshare in the Front of the Store % Increase in Our Top 60 Categories 8.0 6.0 4.0 2.0 0.0 -2.0 -4.0 Food Drug Mass WMT WAG w/o WAG 2 Weeks Ending 1/26/08 18 Source: ACNielsen
  19. 19. Private Label: Goal of 20% 19
  20. 20. From Any Home, To Any Walgreens… …To Any Home! 20
  21. 21. Ski Vacation 21
  22. 22. Printer Cartridge Refills • 3,000 stores • Drop off at photo counter • Up to 60% cheaper than new cartridges • 100% satisfaction guarantee • Environmentally friendly Source: Company Data 22
  23. 23. Leveraging Our Front-end 23
  24. 24. A Decade of Transition 1997 2007 • Freestanding Stores 1,036 5,058 • 24-Hour Pharmacies 427 1,648 • One Hour Photo 1,438 5,709 • Drive-thru Rx 880 5,016 2,358 • Total Stores 5,997 24 Source: Company Data
  25. 25. The Best Corners in America We Will Control Our Corners for Over 50 Years! 25
  26. 26. Store Growth Store Count - WAG vs. Our Competitors CVS 6,500 6,245 6,237 6,000 WAG 5,500 5,054 5,000 RAD 4,500 4,000 3,500 3,000 Eckerd 2,500 Jean Coutu 2,000 1,500 Oct-99 Jun-00 Oct-00 Jun-01 Oct-01 Jun-02 Oct-02 Jun-03 Oct-03 Jun-04 Oct-04 Jun-05 Oct-05 Jun-06 Oct-06 Jun-07 Oct-07 Feb-00 Feb-01 Feb-02 Feb-03 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 26 Sources: Walgreens, CVS, Rite Aid, Eckerd and Jean Coutu Press Releases
  27. 27. Growth of Community Pharmacy by Channel % Change, Number of Pharmacies, 2001–2006 56,948 17,482 10,163 5,586 7,438 21,865 50% 40% 30% 20% 10% 0% -10% Chain Ind. Mass Total Food WAG 27 Source: NACDS
  28. 28. Growth of Community Pharmacy by Channel % Change, Number of Pharmacies, 2001–2006 56,948 17,482 10,163 5,586 7,438 16,279 50% 40% Fortune (September, 1935): 30% “There are 58,400 drug stores in 20% the U.S.” 10% 0% -10% Chain Ind. Mass Total Food WAG w/o WAG 28 Source: NACDS
  29. 29. Where We Are Number One (121 Markets) Abilene, TX Little Rock, AR Rockford, IL Fort Collins, CO Albuquerque, NM Louisville, KY Salt Lake City, UT Fort Lauderdale, FL Amarillo, TX Lubbock, TX San Angelo, TX Fort Wayne, IN Appleton, WI Madison, WI San Antonio, TX Ft. Walton Beach, FL Austin, TX Memphis, TN San Francisco, CA Galveston, TX Baton Rouge, LA Merced, CA Santa Fe, NM Gary-Hammond, IN Beaumont, TX Miami, FL Sarasota, FL Grand Rapids, MI Benton Harbor, MI Milwaukee, WI Seattle, WA Greeley, CO Bloomington-Normal, IL Minneapolis, MN Sheboygan, WI Green Bay, WI Boulder-Longmont, CO Mobile, AL Sioux City, IA Greenville, NC Brazoria, TX Muncie, IN Spokane, WA Hamilton, OH Bryan-College Station, TX Naples, FL Springfield, IL Houston, TX Casper, WY Nashville, TN Springfield, MO Huntsville, AL Cape-Coral-Fort Myers, FL New Orleans, LA St. Cloud, MN Jackson, MS Chicago, IL Oakland, CA St. Joseph, MO Jackson, TN Cincinnati, OH Ocala, FL St. Louis, MO Jacksonville, FL Clarksville, TN - Hopkinsville, KY Odessa-Midland, TX Tacoma, WA Janesville, WI Colorado Springs, CO Oklahoma City, OK Tampa-St. Petersburg, FL Jonesboro, AR Columbus, GA Olympia, WA Texarkana, TX Kalamazoo, MI Dallas-Fort Worth, TX Omaha, NE Topeka, KS Kankakee, IL Dayton, OH Orlando, FL Tucson, AZ Kenosha, WI Decatur, IL Palm Bay-Melbourne-Titusville, FL Victoria, TX Knoxville, TN Deltona-Daytona Beach, FL Peoria, IL West Palm Beach, FL La Crosse, WI Denver, CO Phoenix, AZ Wichita Falls, TX Lafayette, LA Des Moines, IA Pocatello, ID Wichita, KS Lake Charles, LA Dothan, AL Port St. Lucie-Ft. Pierce, FL Wilmington, DE Lakeland, FL Dover, DE Portland, OR Yuba City, CA Las Cruces, NM Duluth-Superior, MN Pueblo, CO Yuma, AZ Las Vegas, NV Eau Claire, WI Punta Gorda, FL Lawrence, KS El Paso, TX Racine, WI Lawton, OK Enid, OK Rock Island, IL – Davenport, IA Lincoln, NE 29 ource: Company Data
  30. 30. Growing Market Presence • Retail pharmacy acquisitions – Rite Aid files (Las Vegas; 27 locations closed) – El Amal (Puerto Rico; 20 locations acquired) • Industry consolidation – Independents – Fred’s (closing approx. 10% of existing locations) • ROIC Improving • Consistent FE & Rx productivity 30
  31. 31. Consistent Front-End Productivity Front-End Sales/Store by Class Year $2,092 2006 $2,551 $2,076 2005 $2,748 $2,431 $2,030 2004 $3,015 $2,743 $2,411 $2,032 2003 $3,224 $2,958 $2,693 $2,422 $2,002 2002 Average $3,224 $2,985 $2,728 $2,452 $2,045 Year 5 Year 4 Year 3 Year 2 Year 1 Notes: Data based on net new drugstores, excluding acquired stores and stores converting to or from a 24-hour format Class Year is calculated on a Calendar Year basis; includes only stores open at least 12 months as of 10/1/2007 31 ource: Company Data
  32. 32. Consistent Pharmacy Productivity Prescriptions/Day/Store by Class Year 125 2006 181 118 2005 213 177 121 2004 252 226 190 129 2003 266 243 218 184 124 2002 Average 266 247 219 183 123 Year 5 Year 4 Year 3 Year 2 Year 1 Notes: Data based on net new drugstores, excluding acquired stores and stores converting to or from a 24-hour format Class Year is calculated on a Calendar Year basis; includes only stores open at least 12 months as of 10/1/2007 32 ource: Company Data
  33. 33. ROIC Improving 2003 2004 2005 2006 2007 NOPAT $1,465 $1,687 $1,938 $2,154 $2,514 Average Invested $15,221 $17,341 $19,412 $21,501 $23,896 Capital ROIC* 9.6% 9.7% 10.0% 10.0% 10.5% NOPAT = Net Operating Profit After Tax ROIC = Return on Average Invested Capital *Source of methodology: McKinsey & Company, Inc. & Copeland, T., et. al. (2000). Valuation: Measuring and Managing the Value of Companies. New York: Wiley. 33 ource: Company Data
  34. 34. Over $2.0 Billion in CapEx Other Dis trib ut ion Stores y echnolog T 34
  35. 35. Net New Stores 600 536 500+ 500 475 476 400 363 361 372 355 353 344 272 300 191 200 162 100 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08' 09' 2010 Est. Est. 35 ource: Company Data
  36. 36. Sales Area Square Footage Growth 16% 15.2% 14% 13.5% 12.3% 12% 11.6% 9.8% 10% 9.5% 9.2% 8.8% 8.6% 8.7% 8.2% 8.2% 8.0% 8% 6% 4% 2% 0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 08' 09' 2010 Est Est 36 ource: Company Data
  37. 37. In-Store Clinics • Acquired Take Care Health Systems in May • Staffed by certified nurse practitioners • Open 7 days a week • Treat common acute ailments including: colds, flu, ear infections, and pink eye • Open in 15 cities across 12 states • Over 145 currently operating • 400 by December 2008 37
  38. 38. 38
  39. 39. Expand Into Additional Sectors of Pharmacy and Healthcare Retail Pharmacy Assisted Pharmacy Benefit Living Management Mail Service Home Care Clinic Pharmacy Specialty Pharmacy 39
  40. 40. Investing in Our Future • Store Growth – 550 total, 475 net • Leverage the convenient store location – Take Care, Printer Cartridges, DHL, Café W • Leverage pharmacy services – Option Care, Familymeds, Medmark • Acquisitions that strengthen the retail base and healthcare services 40
  41. 41. Old, New, and Experienced Age of the Company Median Store Age Average Manager Tenure Average DM Tenure Average Store Ops VP Tenure 41 Source: Company Data
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