Company Intends to Strengthen its Core Business by:
— Leveraging the Best Community-Based Store Network in America
— Enhancing the Customer Experience for Shoppers, Patients and Payors
— Targeting $1 Billion in Annual Cost Reductions by Fiscal 2011
Walgreens (NYSE: WAG) (NASDAQ: WAG) today outlined at its Analyst Day conference in Chicago a series of strategic initiatives to create shareholder value. These include enhancing the customer experience for shoppers and patients; further extending its presence in pharmacy, health and wellness services; broadening and deepening its relationships with employers, managed care organizations and PBMs; and major cost reduction and productivity gain. The company expects that these initiatives will result in increased revenue growth and return the company to strong double-digit EPS growth.
Walgreens Chairman and acting Chief Executive Officer Alan McNally, who introduced the conference, said, “Walgreens has an outstanding leadership team with a diverse set of capabilities. We have achieved 34 consecutive years of record sales and earnings, and during the time have developed our fundamental strengths and outstanding assets. We have the best, most convenient, community-based store network in America and our brand is one of the most recognized and trusted in the country. And we have a strong balance sheet, solid credit ratings and financial flexibility.”
McNally commented, “In these difficult economic times, American families are setting new priorities and making new choices. One choice is to shop close to home to save gas and valuable time. Walgreens has a terrific opportunity to be their neighborhood store – their retailer destination of choice in their community – for more of their necessities of life.”
President and Chief Operating Officer Greg Wasson outlined the company’s strategic initiatives to drive growth. “Walgreens 6,500 retail drugstores remain the centerpiece of our strategy for growth and value creation,” said Wasson. “Our intent is to transform Walgreens into a more efficient and customer-focused company serving the needs of shoppers for consumer goods and services and for patients and payors seeking quality pharmacy, health and wellness services that are accessible and affordable.”
Walgreens highlighted seven key initiatives:
1. Slowing store growth to allow more time to develop the company's management ranks and focus on improving the customer experience, while freeing up capital and enhancing flexibility to invest in Walgreens core business. 2. Re-inventing the customer experience by streamlining merchandise selection and shifting promotional focus toward essential consumer needs. The company is also expanding its private brand products to provide value to customers and higher profit margins to stores, and is focused on growing its e-commerce initiatives. 3. Transforming community pharmacy through a significant new initiative that is expected to reduce the cost of filling prescriptions and increase the time pharmacists spend with patients. The program is currently in 152 stores in Florida and is expected to be in more than 750 Florida stores by the end of fiscal 2009. 4. Expanding Walgreens Health and Wellness division, which now encompasses more than 600 in-store clinics and worksite health centers. Walgreens expects to have more than 800 of these facilities by the end of fiscal 2009. Its in-store Take Care Clinics offer quality and accessible health and wellness services that reduce costs for patients and payors. Its worksite health centers provide employees immediate access to health services and prescriptions at work, while offering new customers and their families the convenience of Walgreens retail stores to fill their ongoing prescriptions and serve everyday shopping needs. 5. Expanding Walgreens leading independent specialty pharmacy business, which now has access to specialty pharmacy and home infusion patients among the 150 million people covered under contracts such as those with Prime Therapeutics and Premera. These patients also benefit from the savings and convenience of having their regular prescriptions filled at Walgreens retail pharmacies. Specialty pharmaceuticals represent more than 80 percent of new medications awaiting FDA approval this year. 6. Becoming a broader, deeper and more valuable provider in both serving the needs of PBMs as clients and working alongside PBMs in serving the broader needs of managed care organizations and employers as clients for Walgreens community-based pharmacy, health and wellness services. 7. "Rewiring for Growth," a major initiative designed to fundamentally reduce costs and improve productivity. The program will align the company's costs, culture and capabilities to its strategy and the realities of the current economic environment. It targets approximately $1 billion in annual cost savings by fiscal 2011 through strategic sourcing of indirect spend, plans to reduce corporate overhead and work throughout the stores, and savings from the initiative to transform community pharmacy. In conjunction with the overall "Rewiring for Growth" effort, Walgreens anticipates incurring total one-time costs of approximately $300 million to $400 million over fiscal 2009 and 2010.
The company also announced that it anticipates approximately $1.8 billion in capital investments for fiscal 2009, versus $2.2 billion in fiscal 2008. This reflects expenditures for new stores, technology and a new distribution center in Connecticut scheduled to open in January 2009.
Wasson concluded, “Our strategy in the current environment is to continue leveraging and enhancing our fundamental competitive advantage – our convenient, community-based store network. We believe Walgreens is well positioned to execute on its strategies for growth and deliver value to its shareholders.”
About Walgreens
Walgreens is the nation’s largest drugstore chain with fiscal 2008 sales of $59 billion. The company operates 6,479 drugstores in 49 states, the District of Columbia and Puerto Rico. Walgreens provides the most convenient access to consumer goods and cost-effective health care services in America through its retail drugstores, Walgreens Health Services division and Walgreens Health and Wellness division. Walgreens Health Services assists pharmacy patients and prescription drug and medical plans through Walgreens Health Initiatives Inc. (a pharmacy benefit manager), Walgreens Mail Service Inc., Walgreens Home Care Inc., Walgreens Specialty Pharmacy LLC and SeniorMed LLC (a pharmacy provider to long-term care facilities). Walgreens Health and Wellness division includes Take Care Health Systems, which is comprised of: Take Care Consumer Solutions, managers of 247 convenient care clinics at Walgreens drugstores, and Take Care Employer Solutions, managers of worksite-based health and wellness services at 364 employer campuses.
This news release may contain forward-looking statements that involve risks and uncertainties. The following factors could cause results to differ materially from management expectations as projected in such forward-looking statements: seasonal variations, competition, risks of new business areas, the availability and cost of real estate and construction, prescription drug reimbursement rates, and changes in federal or state legislation or regulations. Investors are referred to the “Cautionary Note Regarding Forward-Looking Statements” in the Company’s most recent Form 10-K, which Note is incorporated into this news release by reference. The forward-looking statements in this press release are made only as of the date hereof, and unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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